Input tax credit availed but not utilized

This query is : Resolved

Quick Summary

If you've paid GST on purchases and availed Input Tax Credit (ITC) for exports made under a Letter of Undertaking (LUT), you cannot directly reverse the GST or book it as an expense to reduce taxable profit. Instead, you should either claim a refund for the accumulated ITC related to your zero-rated exports or reverse the ITC through your GST returns. Writing off GST as an expense is not compliant with GST law.

Sayantan Chakraborty

Sayantan Chakraborty (Querist)
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18 August 2025 hey there,

I have an export business and O send material under LUT . But at time of purchase I paid GST and availed it ,But there was no scope to utilize it.

Can I do That, (Reverse the GST and Booked Expenses in P/L (GST Write off )and reduce my tax proffit?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 August 2025 When you export under LUT (Letter of Undertaking), you do not pay IGST on exports, and thus you cannot use the input tax credit (ITC) availed on your purchases against any output tax liability because no output tax is paid on such exports. There is a provision to claim a refund of the accumulated ITC related to zero-rated supplies (exports under LUT are zero-rated), but you must follow proper procedures to claim this refund.

In your case, if you paid GST at the time of purchase and availed ITC but did not utilize it due to export under LUT (where you did not pay output IGST), you should not directly reverse the GST or write off ITC as a business expense to reduce taxable profit. The right mechanism is to either:

Claim a refund of the accumulated ITC on zero-rated exports under LUT, or

Reverse the ITC if you are not claiming a refund.

Writing off GST as an expense in the Profit & Loss account without proper reversal or refund claim is not compliant with GST law. ITC reversal or refund claims should be done through the GST returns and refund application processes.

Specifically, exporters under LUT have to ensure that ITC availed is either claimed as a refund on exports or reversed in the electronic credit ledger. Writing it off as an expense for reducing tax profit is not a prescribed practice under GST laws.

Hence, instead of booking GST as a write-off in your P/L, you should:

File for a refund of unutilized ITC (if eligible), or

Reverse ITC in the GST returns (Input Tax Credit reversal).

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 September 2025 Good luck....

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