GST ITC on Expenses Reversal FY 2021-22

This query is : Resolved

ARCHANA (Querist)
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17 November 2022 Sir/mam,

I want to reverse GST ITC on Expenses FY 2021-22, I want to reverse in which return GSTR9 FY 21-22 or GSTR3B October month 22 filing in November , Our turnover is below 5 Crores.

Please advise me which return GSTR9 Or GSTR3B to reverse ITC

Thanking you,

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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17 November 2022 You should reverse the ITC in 3B and not in 9 as 9 is only for reporting purpose.

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ARCHANA

ARCHANA (Querist)
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18 November 2022 Thank you sir for your quick reply, one doubt oct month ITC is less then reversal, How to show this reversal

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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26 July 2024 When the Input Tax Credit (ITC) for a particular month (e.g., October) is less than the amount reversed, you need to accurately account for this in your GST returns to ensure proper compliance. Here’s how to handle and show this reversal in your GST returns:

### **1. Understanding ITC Reversal**

ITC reversal occurs when you need to reverse a portion of your claimed ITC due to reasons such as:

- **Ineligible Credits:** ITC on goods or services that are not used for taxable supplies.
- **Non-Payment to Suppliers:** ITC needs to be reversed if payment is not made to the supplier within 180 days.
- **Inputs Used for Exempt Supplies:** ITC needs to be reversed if inputs are used for making exempt supplies.

### **2. Handling ITC Reversal in GST Returns**

**a. Reversing ITC in GSTR-3B**

1. **Identify Reversal Amount:**
- Determine the amount of ITC that needs to be reversed based on the applicable rules (e.g., Rule 37 for non-payment to suppliers).

2. **GSTR-3B Reporting:**
- **Table 4B (ITC Claimed):** Report the ITC claimed for the month.
- **Table 4B (ITC Reversed):** Enter the amount of ITC being reversed in Table 4B of GSTR-3B. This will reduce your net ITC for the month.

**Example:**
- **Total ITC Claimed:** ₹10k
- **ITC Reversed:** ₹2k
- **Net ITC Available:** ₹10k - ₹2k = ₹8k

The ITC reversal of ₹2,000 will be entered in Table 4B (Reversal of ITC) of GSTR-3B, reducing the total ITC available for set-off.

**b. Reversal Details in GSTR-1**

- **Credit Notes and Debit Notes:** If ITC reversal is related to credit notes or debit notes, ensure that they are reported accurately in GSTR-1.

**c. Annual Return (GSTR-9) Reconciliation**

- **GSTR-9:** During the annual reconciliation in GSTR-9, ensure that the total ITC claimed and reversed throughout the year is correctly reported. This helps in reconciling your annual ITC with the actual ITC claimed and reversed during the financial year.

### **3. Documentation and Record-Keeping**

**a. Maintain Records:**
- Keep detailed records of the transactions leading to ITC reversal, including reasons for reversal and calculations.

**b. Supportive Documents:**
- Maintain copies of invoices, payment proofs, and correspondence related to ITC reversal for audit purposes.

### **4. Practical Steps**

1. **Review Your ITC Claims:** Regularly review your ITC claims to ensure they are accurate and compliant with GST rules.
2. **Ensure Proper Reversals:** If you discover that the ITC reversal exceeds your ITC claim for a particular month, ensure that the reversal is properly documented and adjusted in the next month’s return if needed.

### **Summary**

- **Report ITC Reversal in GSTR-3B:** Enter the reversed amount in Table 4B of GSTR-3B.
- **Adjust ITC Claimed:** The reversal will reduce the net ITC available for the month.
- **Maintain Documentation:** Keep detailed records and supportive documents for ITC reversal.

By following these steps, you can ensure that your ITC reversal is handled correctly and reported accurately in your GST returns. For specific issues or complex scenarios, consulting with a GST professional or tax advisor is recommended.