Gst on Guest house 5% without ITC

• Month 1 Error: DRC-03 debited against the Electronic Credit Ledger was the correct remedy. Because the credit was never utilized, no interest is payable under Section 50(3).

• SOP for Future Months: Accept invoices in IMS $\rightarrow$ Allow GSTR-2B to auto-populate Table 4(A)(5) $\rightarrow$ Manually record a 100% permanent reversal in Table 4(B)(1) $\rightarrow$ Net ITC in Table 4(C) becomes ₹0.

• Scrutiny Defense: This workflow complies with CBIC Circular 170/02/2022-GST and satisfies GST audit and scrutiny requirements

Okay, Actually I also have the same view but want experienced view on it. Thankyou.

A guest house at 5% without ITC and the whole 2B flowing into 4(A)(5) is a very common first-month slip.

The main point on your first question: interest under Section 50(3) applies to wrongly availed ITC only when it is also UTILISED. Since the credit sat unused in the ledger, you are mostly looking at a correction, not an interest case. So the route matters less than having a clean record:
- Reverse it in GSTR-3B of the earliest open month, and keep a note of the month and amount.
- If you have already paid through DRC-03 out of the credit ledger, keep the ARN and ledger entry with the file so the two entries can be tied together if a notice comes.
- Do not do both. Reversing in 3B and also paying DRC-03 would double count.

On the monthly workflow: if the client can never take ITC on the 5% supply, reversing 100% every month is noise that invites questions. Better to fix it at the source: check what the entry actually allows (some inputs and input services may be eligible under the notification conditions) and claim only that portion. Then the 3B shows a small, explainable reversal instead of a full one.

On ASMT-10: a full reversal is not a mismatch that the department flags on its own. Scrutiny usually comes from 2B vs 3B differences, so keep a simple working sheet showing 2B ITC, eligible ITC, reversed ITC and the reason.

More on the correction and interest side is in this [DRC-03 voluntary payment guide](https://taxgarden.in/blog/gst-drc-03-voluntary-payment-guide-india-2026).