Delhi GST issues instruction on Verification and monitoring in cases of reversal of ineligible ITC:

Delhi GST Issues Instruction on Verification and Monitoring in Cases of Reversal of Ineligible ITC Incorrect reporting in GSTR-3B, particularly of IGST ITC on exempt outward supplies, can distort settlement to the State, especially when reversal of ineligible credit is not properly declared. In some cases, it has been noticed that there is a huge input tax credit on inward supplies, but outward supplies are exempted. In such cases, the taxpayer doesn't reverse the IGST Credit, which is ineligible; the IGST credit will go to the indivisible pool and the IGST settlement gets affected. If the actual ineligible IGST credit is properly reversed by the taxpayers, the State will get 50% of the ineligible credit so reversed every month. Taxpayers may not be aware of the IGST Settlement through the fund transfer mechanism and do not report their IGST ITC claim and reversal correctly, as they believe there is no intention on their part to evade tax. The IGST amount gets appropriated to the State whenever there is a break in the ITC Chain. In this regard, Circular No. 01/2022-GST State Tax dated 11.10.2022, has also been issued by this Department where in Para 4 detailed guidelines for availment of ineligible ITC and reversal thereof have been provided and all the Ward/Proper Officers are directed to ensure that the guidelines on the subject mater are strictly followed by the taxpayers. In this regard, the following additional guidelines are being issued for the procedure, verification and monitoring of such cases: Procedural Clarifications for Reporting ITC in Table 4 in GSTR-3B

• Total ITC to be auto-populated in table 4A from GSTR-2B
• The taxpayer should not deduct the amount of ineligible input tax credit directly by editing the total amount of input tax credit auto-populated in Table 4A of FORM GSTR-3B.
• Permanent reversals (under Section 17(5), Rules 38, 42, 43) must be declared in Table 4(B)(1).
• Temporary reversals (e.g., under Rule 37, Section 16(2)) to be shown in Table 4(B)(2) and reclaimable upon conditions being met.
• Net ITC = Table 4(A) - [4(B)(1) + 4(B)(2)].

Input tax credit not available, on account of limitation of time period as specified in Section 16(4) of the CGST/DGST Act, 2017 or where the recipient of an intra State supply is located in a different State /UT than that of place of supply, may be reported by the taxpayer in Table 4(D)(2) of FORM GSTR-3B. Such details are available in Table 4 of FORM GSTR2B. The amount declared in Table 4(D)(2) of FORM GSTR-3B gets appropriated during IGST settlement as the reversal is of a permanent nature. To ensure the inflow of IGST Credit eligible to the State, the disclosure of correct figures in GSTR 3B by the taxpayers shall be ensured through the following steps.