ITC REVERSAL ON CAPITAL GOODS

This query is : Resolved

Suresh S. Tejwani (Querist)
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19 May 2026 What happens if ITC on capital goods liable for reversal is not reversed and the ITC continues to be utilised for 5 years, and the remaining ITC is reversed only after completion of the 5-year period?

Further, If ITC on capital goods liable for reversal is reversed only to the extent available in the electronic credit ledger/portal, whether the remaining ITC can be reversed later upon availment/utilisation during the 5-year period applicable to capital goods?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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19 May 2026 Delayed Reversal (After 5 Years): Legally permissible to correct retrospectively, but it will attract a heavy interest penalty of 18% per annum on the utilized amount from the date it was due until the date of payment, along with potential penalties for wrong utilization.

Insufficient Credit Ledger Balance: You cannot wait for future ITC to accumulate to make a reversal. Any shortfall in the Electronic Credit Ledger must be paid out of pocket via the Electronic Cash Ledger in the same tax period's GSTR-3B. Delayed cash payments will also attract interest.

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