Section for reversal of ITC

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This discussion clarifies the reversal of Input Tax Credit (ITC) when a business makes both taxable and exempt supplies. ITC on common inputs, including back-charges, must be reversed proportionally under Section 17(2) of the CGST Act, read with Rule 42. If ITC was wrongly availed due to an incorrect bill in GSTR-2B, it needs reversal under Section 16(2) as eligibility conditions weren't met. Interest may apply if the ITC was already utilized.

Suresh S. Tejwani online

Suresh S. Tejwani online

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02 December 2025 In case we are making both taxable and exempt supplies, whether the ITC on back-charges is required to be reversed under which Section ?

“If a wrong bill appears in GSTR-2B and ITC has been wrongly availed, whether the ITC is required to be reversed under Section?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 December 2025 Yes — when a registered person makes both taxable and exempt supplies, the Input Tax Credit (ITC) on common inputs/services (including back-charges) must be reversed proportionately under Section 17(2) of the CGST Act, read with Rule 42 of the CGST Rules

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 December 2025 If ITC is wrongly availed due to a wrong bill in GSTR-2B, it must be reversed under Section 16(2) of the CGST Act, since the basic eligibility conditions are not satisfied.
• If already utilized → reversal plus interest under Section 50.
• If only availed but not utilized → reversal required, but interest may not apply (as clarified in CBIC circulars and judicial rulings).

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