GST Inspection ITC reversed

Hi J Bilal,

Here’s how to approach the situation after your client’s ITC was reversed during GST inspection:

1. ITC Reversal Impact

• Since the Joint Commissioner reversed ₹50 lakhs ITC via DRC-03, that amount is no longer available as input credit.

• You have to pay the tax amount out of pocket while filing GSTR-3B for May 2024.

2. Filing GSTR-3B after ITC Reversal

• In your May 2024 GSTR-3B, you must report:

  • Taxable turnover as usual under outward supplies.

  • No ITC claim, since your ITC was reversed.

• The tax liability (GST on outward supplies) must be discharged fully in cash because ITC balance is zero.

3. How to show this in GSTR-3B?

• Table 3.1 (Outward Supplies): Declare gross sales with applicable GST.

• Table 4 (Input Tax Credit): You cannot claim ITC of ₹50 lakhs; input tax credit will be zero or balance after reversal.

• Table 3.2 (Tax Paid): Pay the entire tax amount in cash.

4. Suggestions

• Check if you have any ITC remaining after reversal; use it carefully.

• File the return on time to avoid further interest/penalty.

• If you think the ITC reversal is incorrect, you may consider appeal or rectification after consulting a tax professional.