Reverse and reclaim the input tax credit?

Any taxpayer other than composite dealer may claim the input tax credit (‘ITC’) on the purchases of goods or services including capital goods.

A taxpayer has to meet the following requirements to claim the ITC:

The taxpayer must have a valid invoice, debit note.
The taxpayer should have received the goods or services. If goods or services received are in parts, then credit will be available on receipt of the last installment.
The vendor must have paid the GST for the sales and have filed a return.
For claiming ITC, a taxpayer has to pay the supplier within 180 days. If failed, a taxpayer has to reverse by adding the same in outward tax.

In-eligible ITC which is not available to the taxpayer:

Purchase of capital goods used for non-business purposes or for making exempted goods.
Blocked credit.

Time limit for claiming ITC:

The time limit for claiming the input tax will be earlier of

November 30 of the next year; or
Date of annual return filing.

How will ITC be matched?

The amount of the input tax credit claimed by the taxpayer will be matched to the vendor’s return. If the amount claimed is equal to or less than the tax paid by the supplier.

Rectification of discrepancy/mismatch in ITC

In case of a duplication claim, the GST department will notify the taxpayer in form MIS-1. On receipt of the notice, the taxpayer has to pay the amount in the next month’s return. Also, the taxpayer has to pay the interest @ 18%.

In case of a higher claim, the GST department will notify the taxpayer and supplier as well to rectify the same.

Where an error is from the supplier’s side, then he has to rectify it by adding the difference in tax liability.
Where an error is from the taxpayer’s side, he has to change the GSTR-2 of that month by deleting or correcting the record.
If no one takes corrective action, the department will add the amount of difference to the taxpayer’s tax liability. The taxpayer has to pay the difference along with interest @ 18%.

Reclaim of ITC

In the case where ITC claimed earlier by the taxpayer was reported as a mismatch for any period. The vendor rectifies the same mistake and post ITC matched. The taxpayer will get the benefit of the amount corrected (if paid a mismatched amount earlier).

The interest paid by the taxpayer will be refunded to the credit ledger.

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