Reclaim of ITC (through TRAN-1) after reversal

[Raam Srinivasan Swaminathan Kalpathi]

One of the client had on account of a technical glitch in the portal while filing TRAN-1 reversed the eligible ITC in the books of account in 2018. Subsequently, when the GST department provided one more chance to avail the lapsed ITC the client had successfully filed the same in 2022 through TRAN-1 and an acceptance letter was also received from the department.

The reversed ITC was reclaimed in the books of account by way of credit to the statement of profit and loss account. Now, department has issued notice claiming GST on this ITC reclaim. One point is this amount does not amount to supply and outside the purview of the GST department. Is there any other legal issue which I am overlooking? Experts please advise. Thanks

AI Summary

Reclaimed transitional input tax credit raises questions on whether accounting recognition constitutes a taxable supply. Reclaim of transitional input tax credit through TRAN-1 is questioned after eligible credit, reversed because of a portal technical glitch, was subsequently availed through an accepted TRAN-1 filing. The reclaimed credit was recognised by crediting the statement of profit and loss account. The central issue is whether restoration and accounting recognition of previously reversed eligible credit constitutes a taxable supply or remains outside the scope of GST.