GST Credit Reversal for change in GST Rate.

This query is : Resolved

Sudipta Das (Querist)
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07 February 2025 A travel agency was charging GST @ 18% for Financial Year 2023-24 with ITC . In 2024-25 it shifted to 5% without ITC. Balance remaining in Credit ledger was Rs. 17000 CGST and 850 SGST. It was transfer of electronic credit reversal ledger. The balance is still lying in that ledger. How to permanently reverse the Credit available in the ledger. ?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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12 August 2025 To permanently reverse the ITC balance lying in the Electronic Credit Ledger due to change in GST rate (from 18% with ITC to 5% without ITC), here’s what you should do:

Step-wise procedure for reversal of ITC balance:
Identify the ineligible ITC:
Since the travel agency is now supplying at 5% GST without ITC, the previously accumulated ITC balance (Rs. 17,000 CGST + Rs. 850 SGST) cannot be used and must be reversed.

Reverse the ITC through GSTR-3B:

In the month you want to reverse, include the ineligible ITC amount in the “ITC Reversed” field (Table 4B - "Other ITC Reversed") of GSTR-3B.

This will reduce your ITC balance.

Pay tax or deposit the amount in cash ledger:

If you cannot adjust the reversal against output tax liability, pay the amount in cash by generating a challan through Form GST DRC-03.

You can use the cash ledger to pay this amount.

Use Form DRC-03 for payment (optional if no output tax liability):

Form DRC-03 is used for depositing tax, interest, penalty, fees or any other amount payable under GST.

You can deposit the amount of Rs. 17,850 (CGST + SGST) here to clear the credit reversal.

Show in GSTR-3B till the balance is cleared:
Keep reversing the credit amount in GSTR-3B (if partial reversal is done) till the entire balance is reversed.

Important points:
Interest payment: If reversal is delayed, interest at 18% p.a. may be applicable on the reversed amount from the date ITC was wrongly availed till payment.

No further ITC: After shifting to 5% GST without ITC, no new ITC can be claimed on inputs or input services related to this supply.

Documentation: Maintain proper documentation of reversal for audit.

Summary:
Action Details
ITC to reverse Rs. 17,000 CGST + Rs. 850 SGST
Reverse ITC in GSTR-3B Declare under "Other ITC Reversed"
Payment if no output tax liability Deposit via DRC-03 form
Interest on delayed reversal 18% per annum, if applicable

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