Input tax credit availed but not utilized
This query is : Resolved
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?
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?
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).
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).
23 September 2025
Good luck....
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