Itc reverse doubt

This query is : Resolved

Kollipara Sundaraiah (Querist)
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20 November 2023 sir,
A RTP(regular dealer) notice from gst department detailes mentioned below.
As per Section 17(5) read with Rule 42 & 43 of GST Rules, 2017 the following ITC reversals to be
made mandatorily.
S.No. Description of items 2022-23 2023-24
1 Exempted turnover 17607482.79 40757611.29
2 Total turnover 17607482.79 40757611.29
IGST to be reversed 77283
2465
The ITC which is not eligible for reclaim in future periods) shall mandatorily needs to be reversed in
table 4 (B)(1) of GSTR 3B return and the taxpayer is hereby requested to verify the above transactions once
again and reverse the ITC as per the provisions of the CGST/SGST Act as under:
Relevant Statutory Provisions of the GST Act and Rules, 2017:
1. Section 17(5): Blocked credits
2. Rule 38: Claim of credit by a banking company or a financial institution
3. Rule 42: Manner of determination of input tax credit in respect of inputs or input services and
reversal thereof
4. Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal
thereof in certain cases.
Doubt:
Dealer notice received after procedure.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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19 January 2024 What is the exact query here ?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 It appears you have received a notice from the GST department regarding mandatory reversal of Input Tax Credit (ITC) under Section 17(5) of the CGST Act read with Rules 42 and 43 of the GST Rules, 2017. Here’s an explanation and guidance on how to proceed:

### Understanding the Notice:

1. **Reason for Reversal**: The notice states that ITC needs to be reversed because of exempted turnover as per the details provided for the financial years 2022-23 and 2023-24.

2. **Section 17(5) of CGST Act**: This section specifies certain conditions under which ITC cannot be claimed, including where goods or services are used for exempt supplies.

3. **Rules 42 and 43 of GST Rules, 2017**:
- **Rule 42**: Deals with the manner of determination of ITC in respect of inputs or input services and reversal thereof.
- **Rule 43**: Deals with the manner of determination of ITC in respect of capital goods and reversal thereof in certain cases.

### Steps to Respond to the Notice:

1. **Verify the Transactions**: Review the details mentioned in the notice, specifically the exempted turnover figures and the corresponding ITC to be reversed.

2. **Calculate the Reversal Amount**: Based on the exempted turnover figures provided, calculate the amount of ITC that needs to be reversed for each financial year as specified in the notice.

3. **Prepare for Reversal in GSTR-3B**: The notice mentions that the ITC reversal should be done in Table 4(B)(1) of GSTR-3B return. Ensure that you have the necessary details and amounts ready to fill in these sections accurately.

4. **Documentation**: Gather all supporting documents such as sales invoices, GST returns, and any other relevant records that justify the exempted turnover and subsequent ITC reversal.

5. **Respond Timely**: The notice likely specifies a deadline for compliance. Ensure that you respond within the stipulated timeframe to avoid penalties or further consequences.

6. **Consult with a GST Practitioner**: If you are unsure about any aspect of the notice or the calculation of ITC reversal, it may be beneficial to seek advice from a GST practitioner or tax advisor who can assist you in understanding the implications and ensuring compliance.

### Conclusion:

Responding to the RTP notice involves verifying the exempted turnover, calculating the ITC to be reversed, and completing the necessary steps to reverse this ITC in your GSTR-3B returns. Compliance with the GST rules and regulations is crucial to avoid penalties and maintain smooth business operations. If you need further clarification or assistance, consulting with a professional who specializes in GST matters is recommended.

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