Place of Supply in case of Reversal of ITC excess claimed in DRC-03

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A Delhi-based business is seeking guidance on reversing excess IGST ITC claimed. The issue arises because the counterparty hasn't uploaded their bills or paid tax, and the excess ITC has already been partially used to offset local CGST/SGST and inter-state IGST liabilities. The core question is how to determine the correct Place of Supply when filing the DRC-03 to reverse this excess ITC and ensure taxes are paid to the correct states. While there's no direct one-to-one correlation for ITC utilisation, the current approach is to use a FIFO method to offset output liabilities and then pay the remaining short-paid GST based on the identified Place of Supply.

MOHIT

MOHIT (Querist)
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11 August 2021
Hi,

We are in Delhi as claimant of ITC claimed in excess which needs to be reversed now.

Excess ITC claimed in IGST head for which countery party did not uploaded bills in their GSTR-1 and did not pay tax in their GSTR 3B. Suppose IGST ITC was from Haryana.

Now, to reverse such ITC claimed what should be the place of supply - as DRC-03 has to be used to pay short tax paid . In this ITC so claimed wrongly in excess, has already been offset partially for local Delhi CGST and SGST along with IGST on some inter-state sales.

Now while filing DRC-03 to reverse that excess ITC, do we simply select Haryana as Place of Supply or we identify states for palce of supply and head wise GST excess offset by that excess ITC in respective months - to ensure that GST short paid now is paid correctly to respective states whose output tax was erroneously excess offset and hence was short paid at that time.

early response will be appreciated.. Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2021 Pay correctly to respective states whose output tax was erroneously excess offset and hence was short paid at that time.

MOHIT

MOHIT (Querist)
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12 August 2021 Thanks for your reply sir, but is there a circular which suggests how to identify which ITC was used to pay which output liability...since there is no one to one correlation as understand....so as of now we are considering ITC utilised on FIFO basis to offset the output liability in respective months..and accordingly remaining output liability so short paid is being considered to be paid as GST short paid with relavant place of supply

Kindly share your view..Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 August 2021 Yes, your understanding is right there is no one to one correlation.

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