GST Update on Issues in Annual Return- Part 5

In our previous update we have discussed issues related to comparision of credit availed in GSTR-3B with GSTR-2A. In our today’s update we are discussing on another issue as regards the “Details of ineligible credit in relation to sec 17(5)” which is required to be mentioned under the Table 7E, Part III, of GSTR-9 “Details of ITC availed as declared in returns filed during the financial year”
Firstly, the credit under the head 6A will be auto-populated from the GSTR-3B filled by the assessees. Further, if the format of annual return is observed, it is found that the input tax credit falling under section 17(5) of the CGST Act, 2017 is to be separately disclosed in 7E of the annual return. The information reflected in 7E would be deducted from the total ITC availed by the assessee. However, the point of concern here is that if the format of GSTR-3B is observed, it is found that the ineligible ITC as per section 17(5) is merely reported and has no effect on the Net ITC available. Consequently, since the ineligible ITC under section 17(5) is merely reported for disclosure purpose, many of the assessees have not disclosed the data pertaining to ineligible ITC as per section 17(5). However, the format of annual return requires assessee to mention gross credit and deduct the ineligible credit pertaining to section 17(5) to arrive at the figure of ‘Net ITC available for utilisation’.
The practical difficulty encountered by an assessee can be explained with the help of an illustration as follows-
-Total eligible credit for the month of October 17 is Rs.1,40,000 which is shown in the GSTR 3B for the month of October 17
-Total ineligible credit of sec 17(5) for the month of October 17 is Rs.10,000 which was not reported in GSTR-3B by the assessee.
Now, as per the format of Annual Return in Table 7E, the ineligible credit of sec 17(5) to be mentioned separately and deducted from the total ITC availed by the assessee thereby meaning that ineligible credit of section 17(5) is also to be included in the ITC availed which is against the provision of law. The provision of section 17(5) of the CGST Act, 2017 reads as follows:-
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

It is submitted that the input tax credit specified in section 17(5) is not admissible at all and so reporting the same in ITC availed would be against the provisions contained in CGST Act, 2017. Hence, the format of the annual return should be amended accordingly.

Hence, there is contradiction in disclosure of ineligible credit under section 17(5) of the CGST Act, 2017 in GSTR-3B and GSTR-9.
To conclude, the assessees should ideally take the net amount of credit excluding the ineligible credit of section 17(5) and declare no reversal under table 7E of the annual return as if the ineligible ITC is reflected in table 7E, it would lead to wrong reporting of ITC availed by the assessee.

This is solely for the educational purpose.
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GST Update on Issues in Annual Return- Part 5

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