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INPUT TAX EXCESS IN CREDIT LEDGER

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Samrat Karar

20 Points Posted on 09 July 2020

One of my client has taxable purchase but sale is nil rated. For this reason a huge amount is accumulated in gst credit ledger. It is a fake assets. Can I reverse it in GSTR 3B. What is the rule?
please suggest.

Replies (12)

Quick Summary

If your business has a significant GST credit ledger balance due to taxable purchases but nil-rated or exempt sales, it can appear as a 'fake asset'. This discussion explores the correct procedure for reversing this excess input tax. While some suggest using form DRC-03, the consensus leans towards reversing it in your subsequent GSTR-3B filings, aligning with rules like 42 and 43 for exempt supplies. This ensures your accounts accurately reflect the credit position.

Geetha Jayagopi

20 Points Posted on 09 July 2020

You can reverse by using form DRC 3 available in the portal

KRISSHNAN KP

20 Points Posted on 09 July 2020

Yes you may to do so

RAJA P M

"Do the Right Thing...!!!"

20 Points Posted on 09 July 2020

Yes... If Taxpayers dealing Nil Rated or Exempted goods then ITC will reversible.

You can reverse such input tax which is showing in credit ledger also reverse coming returns related ITCs.

Samrat Karar

20 Points Posted on 09 July 2020

Which is better and right process for reverse DRC 3 or GSTR 3B ?

chethan data

20 Points Posted on 09 July 2020

As per my view if it's exempted sales n nil rated then rule 42 n 43 coming to picture for reverse of itc better for reverse n report in return s

CA Shubhi Khandelwal

Chartered Accountant

20 Points Posted on 09 July 2020

It is better to reverse the excess ITC Claimed at the time of filing subsequent GSTR-3B only

Samrat Karar

20 Points Posted on 09 July 2020

Madam ITC is excess because of nil rated sale and taxable puchase...it is not claim wrongly. But in this process a huge ITC is showing in credit ledger which is our assets bt in accounts we take all input as our purchase cost because of nil rated sale..so there is a mismatch in accounts and credit ledger. so is it require to reverse itc of credit ledger or not if yes what is the right process ? please tell me