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

Transitional input tax credit reclaim through TRAN-1 is not taxable merely because it is credited to profit and loss.
A credit to the profit and loss account arising from reclaimed transitional input tax credit, after its approved availment through TRAN-1, does not by itself constitute a supply liable to GST. GST liability requires a taxable supply, and the accounting entry should be established as an input tax credit reclaim rather than consideration arising from a supply. The clarification states that the credit availed through TRAN-1 received departmental approval.