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Common Errors in ITC

12 Common Errors in ITC

Due to numerous regulation relating to ITC under GST Regime there always remain high chances of errors or mistakes in claiming Input Tax Credit. In this article we try to highlight 12 common errors which you should check while analyzing Input Tax Credit.

1. Considering ITC balance to payoff liability under reverse charge

  • Recipient cannot utilize ITC for discharging RCM liabilities. GST portal also does not allow such adjustment while filing returns.

  • ITC can be claimed in the same month where taxes are paid by the recipient under RCM in end of previous month.

2. ITC could be claimed on the taxes paid under RCM on the GTA services

ITC is only restricted for provider of GTA service who pays at 5%. The customer who pays taxes under RCM could avail ITC if eligible.

3. Treating export of goods/services as exempted goods/services and not availing eligible credits related to same

Refund of taxes paid on the goods or services could be availed by the person making the exports even when output GST is not paid on exported goods/exported services.

4. Non reversal of ITC in cases where payment is not made to supplier within 180 days from the date of invoice.

  • Reversal of ITC with interest is required. (recently the amendment for no interest has been made but retrospective applicability not made clear.)

  • The care to enable re credit on future payment can be suggested.

5. Inter State purchases made from unregistered persons

  • Procure goods only from a registered vendor & avail eligible ITC.

  • ITC availed on the basis of invoice of registered dealer provided by the unregistered person would not be available. Further availing ITC on the basis of photocopies may be disputed

  • No restriction for availing 100% of ITC on the purchase of capital goods. [ 50% credit was in earlier central excise regime].

6. Availing ITC on supplies specifically blocked u/s 17

Not allowed and if availed has to be reversed.

7. Availing credit when the same is restricted by rate notification

Where ITC was availed when the conditional of notification restricts. Credit to be reversed with interest.

8. Availing ITC merely on receipt of invoice without actual receipt of goods/services

ITC could be availed only on receipt of invoice and goods ( constructive receipts on instruction of purchaser included).

9. Non reversal of proportionate ITC in respect of exempted supplies, non business purpose use

Non business, non taxable or exempt supplies not eligible for credit. It would amount to non compliance of Rule 42 and 43 of the CGST Rules. supplies, where rate notification restricts availment of ITC (eg restaurant) shall be treated as exempt supplies for the purposes of computation of ITC reversal under Rule 42 & 43 of CGST Rules.

10. Non availment of ITC on bank charges

ITC could be availed as there is no specific restriction U/S 17(5)

11. Non reversal of ITC in respect of goods lost, stolen, destroyed, written off or distributed as gifts/free samples

  • Where ITC is availed and then the goods lost, stolen, destroyed, written off or distributed as gifts/free samples, ITC has to be reversed with interest.

  • Written off could mean fully written off and therefore provision may not impact this.

  • Inputs destroyed before putting into the production process would be covered.

  • Inputs sent as samples are covered in this section. Inputs contained in final products would not be impacted.

12. Delay in availing ITC

  • Avail the ITC on monthly basis and utilize for payment of output liability

  • ITC of F.Y 2017-18 cannot be claimed after 30th April 2019.

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