Gst related query

Hey Ajnas! Let’s go through your GST query step-by-step regarding the car purchase and ITC under Section 17(5):

Background recap:

• Car purchased for Rs. 25,00,000 + 18% GST in Dec 2020.

• ITC on this purchase is ineligible under Section 17(5) (cars for personal use are blocked except certain cases).

• The ineligible ITC was shown in GSTR-3B under the “ineligible ITC” column for Dec 2020.

• No ITC was claimed by the recipient.

• In Jan 2021, the car was returned to supplier and supplier issued a credit note.

• Credit note appears in GSTR 2A for Jan 2021.

Your questions:

1. Is the recipient required to reverse the ITC on this return?

• No reversal is required by recipient because the ITC was never claimed by recipient (as it was blocked/ineligible).

• Since ITC was not availed, there is nothing to reverse.

• The credit note will reduce supplier’s output tax liability, but the recipient’s side has no ITC to adjust or reverse.

2. If it was reported in “Ineligible ITC” column in December 2020 GSTR-3B, is reversal required?

• Reporting in the “ineligible ITC” column is just disclosure that ITC on such goods/services is not claimed.

• No reversal is applicable because the ITC was not claimed.

• So no action needed for reversal.

3. If not reported in GSTR-3B, what are the consequences?

• Since ITC on the car is ineligible (blocked ITC under Section 17(5)), no ITC should be claimed or reported as eligible.

• If ITC was not reported at all, no penalty or reversal is applicable as no ITC was claimed.

• However, if ITC was wrongly claimed on such cars, that would invite reversal, interest, and possibly penalty.

• In your case, since ITC was not claimed and the ineligible ITC was properly disclosed, there are no negative consequences.

Summary: