Reversal of credit under special circumstances [Section 18(4) & (5)] - GST Ready Reckoner - GST

Reversal of credit under special circumstances Where any registered person who has availed of input tax credit, he shall reverse the input tax credit, by way of debit in the electronic credit ledger or electronic cash ledger, in the following special circumstances:- Registered person switching from normal scheme of payment of tax to composition scheme, [Section 18(4) of CGST Act] Where the taxable supplied by him become wholly exempt, [ Section 18(4) of CGST Act ] Cancellation of registration [ Section 29(5) of CGST Act ] Reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof [ Rule 37A ] ITC of additional duty of customs in respect of gold dore bar; [ Rule 44A of CGST rules ] Reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof [ Rule 37A ] Where input tax credit has been availed by a registered person in the return in FORM GSTR-3B for a tax period in respect of such invoice or debit note, the details of which have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1, as amended in FORM GSTR-1A if any (inserted vide NN. 12/2024 dated 10/07/2024) , or using the invoice furnishing facility, but the return in FORM GSTR-3B for the tax period corresponding to the said statement of outward supplies has not been furnished by such supplier till the 30th day of September following the end of financial year in which the input tax credit in respect of such invoice or debit note has been availed, the said amount of input tax credit shall be reversed by the said registered person , while furnishing a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year: Where the said amount of input tax credit is not reversed by the registered person in a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year during which such input tax credit has been availed, such amount shall be payable by the said person along with interest thereon under section 50. Where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter. Rule 44 provides Manner of reversal of credit under special circumstances The Input tax credit to be reversed in following manner, for the purposes of section 18(4) or section 29(5), be determined in the Rule 44 of CGST Rules manner. In case of the amount of input tax credit relates to Inputs held in stock, Inputs contained in semi-finished goods, Input contained in finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs. The reversal amount ,Inputs or capital goods, shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax. Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount , the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in special circumstances above. The details furnished shall be duly certified by a practicing chartered accountant or cost accountant. The amount determined shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC- 03 , where such amount relates to any event specified in clause (a) of section 18(4) and in FORM GSTR-10 , where such amount relates to the cancellation of registration of section 29(5). Clarification on availability Reversal of ITC in respect of warranty replacement of parts and repair services during warranty period. [ Circular No. 195/07/2023-GST dated 17th July 2023 ] Manner of determination of ITC of additional duty of customs in respect of gold dore bar to be reversed- rule 44A of the CGST Rules If credit of CGST in the electronic credit ledger has been taken in terms of section 140 relating to the CENVAT credit carried forward which had accrued on account of payment of the additional duty customs levied under section 3(1) of the customs tarrif act 1975 paid at the time importation of gold dore bar, on the stock of gold dore bar held on 01 July 2017 made out of such imported gold dore bar, then Such credit shall be restricted to 1/6 of such credit and 5/6 of such credit shall be debited from the electronic credit ledger at the time of supply of such gold dore bar or the gold or the gold jewellery therefrom. Where such supply has been already been made , such debit shall be within one week from the date of commencement of these rules. Example:- M/s Goodluck a registered person supplying taxable goods in Gujarat has opted to pay tax on composition scheme under section 10 with effect from 10-04-2020. its provides following information relating to balance of ITC lying as on 31-03-2020, 1) Inputs lying in stock as such valued at Rs. 2,50,000/-(inclusive of CGST 7 SGST @12%). 2) Inputs contained in finished goods where tax invoice is not available to such inputs(The market price of such inputs (inclusive of CGST SGST @12%) on 31-03-2020 is Rs.1,20,000). 3) input tax on capital goods purchased on 25-10-2019 is Rs.75,000. 4) Balance in the electronic credit ledger is Rs. 1,30,000. Calculation of Reversal ITC on 31.03.2020 Particulars CGSST SGST i) Input laying in Stock 2,50,000 x 12/112 = Total GST of Rs.16,785/- 13,392.50 13,392.50 ii) Inputs containing finished goods for which tax invoice is not available 1,20,000 x 12/112 = Total GST 12,857/- 6,428.50 6,428.50 iii) Capital goods Capital goods have been used for 5 months 5 days assumed usefule life 5 year life remaining = 54 month (ignoring part) 75000 x 54/60 = Total GST of Rs. 67,500 33,750 33,750 Total Reversal 53,571 53,571