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mani bharathi

21 Points Posted on 04 April 2021

Im into a Travels company, i purchased a vehicle for my business and hence had an ITC of Rs 2,00,000 for the year 2019-20. since the ITC was used for making exempt supplies for the whole year, i reversed the ITC to the extent of Rs 2,00,0000 while filing GSTR9.
Now my question is - what if in succeeding years if i make taxable supplies, is there any option i can reclaim my ITC which was reveresed previously, since i am making taxable supplies in future.
Or is that, the ITC was applicable only for the year 2019-20 and therefore it cannot be reclaimed?

Replies (3)

Quick Summary

A business in the travel industry reversed ₹2,00,000 of ITC in 2019-20 because the vehicle purchased was used for exempt supplies. The user wants to know if this reversed ITC can be reclaimed if the vehicle is later used for taxable supplies. According to GST provisions, specifically Section 18(1)(d), it may be possible to reclaim the ITC if the vehicle is used for taxable supplies, provided it falls under eligible categories and not blocked credits. The ITC for capital goods would be reduced by 5% per quarter. Rule 42 also outlines procedures for ITC reversal and potential reclaim based on supply types.

Mujeeb Doi

171 Points Posted on 04 April 2021

As per section 18(1)(d), in such case ITC can be claimed in such case on the date immediately preceeding the date on which supply becomes taxable. However, for capital goods the ITC should be reduced by 5% per quarter or part of the quarter.
The above provision in your case will be applicable only if you are using that vehicle (now for taxable supply) for the purpose allowed u/s 17(5) blocked credit for motor vehicles. If, now you are using the vehicle for pupose other than the exception provided u/s 17(5) then the ITC will any way be blocked.

CA Rashmi Gandhi

Chartered Accountant

44487 Points Posted on 04 April 2021

You can claim ITC as per Rule 42. You have to reverse ITC in 60 equal instalments in ration of exempted supplies over total supplies.

Mujeeb Doi

171 Points Posted on 04 April 2021

The rule of 60 monthly installment calcuation is relevant for reversal of ITC already claimed, when the supplies which were then taxable has now become exempted.