What is the treatment of Input Tax Credit (ITC) on Stock held as on 22-Sep-2025? GST Rate Changes Effect on Stock & ITC;
The implementation of new GST rates effective from has generated concerns regarding the treatment of ITC on existing stock.
Sharing you few FAQs on this issues
Q1. What will happen to the ITC for purchases made before changes in GST rates came into effect? Will I get ITC at a reduced rate now?
A1. - Section 16(1) of CGST Act: Registered persons can claim ITC on input tax charged on inward supplies, subject to conditions in the Act.
- ITC is permitted if the tax was paid at the rate applicable at the time of supply, provided all other conditions under the Central Goods and Services Tax (CGST) Act are satisfied.
Q2. The GST rate has been reduced on my outward supply of goods/services made on or after 22-Sept-2025, but I already have ITC of GST in the ledger that accrued on account of the higher rate. Can I continue to use such credit?
A2. ITC available in the electronic credit ledger may be utilised to discharge any output tax liability in accordance with section 49(4) of the CGST Act.
Q3. My outward supply is exempt under the new rate schedule. But I already have the ITC of GST paid in my ledger. Will I need to reverse ITC?
A3. ITC can be used for supplies until 21-Sep-2025.
For supplies made on or after 22-Sep-2025, when the revised rates become effective, ITC must be reversed in accordance with the provisions of the CGST Act.
- Sec 18(4): If choosing a composition scheme or goods/services become exempt, debit ITC for stock and capital goods based on pre-exemption stock.
Q4. Will I be allowed to take refund of accumulated credit arising out of inverted duty structure for supplies effected upto the date of effect of revised rate as notified?
A4. - Circular 135/05/2020-GST: Refund of accumulated ITC is allowed only if input tax rate is higher than output supply rate, not if rate changes on the same goods over time.
A refund of accumulated ITC is not permitted if the input and output consist of the same goods, even when these goods are taxed at different rates at different times.
Q5. If I already have stock on the date when the rate changes come into effect, should I apply the revised rate?
GST is levied at the rate applicable on the date of supply. The revised rates apply to outward supplies made from the date specified in the official notification. #gstfaq#taxguide
Taxguide (sunayana)
What is the treatment of Input Tax Credit (ITC) on Stock held as on 22-Sep-2025?
GST Rate Changes Effect on Stock & ITC;
The implementation of new GST rates effective from has generated concerns regarding the treatment of ITC on existing stock.
Sharing you few FAQs on this issues
Q1. What will happen to the ITC for purchases made before changes in GST rates came into effect? Will I get ITC at a reduced rate now?
A1. - Section 16(1) of CGST Act: Registered persons can claim ITC on input tax charged on inward supplies, subject to conditions in the Act.
- ITC is permitted if the tax was paid at the rate applicable at the time of supply, provided all other conditions under the Central Goods and Services Tax (CGST) Act are satisfied.
Q2. The GST rate has been reduced on my outward supply of goods/services made on or after 22-Sept-2025, but I already have ITC of GST in the ledger that accrued on account of the higher rate. Can I continue to use such credit?
A2. ITC available in the electronic credit ledger may be utilised to discharge any output tax liability in accordance with section 49(4) of the CGST Act.
Q3. My outward supply is exempt under the new rate schedule. But I already have the ITC of GST paid in my ledger. Will I need to reverse ITC?
A3. ITC can be used for supplies until 21-Sep-2025.
For supplies made on or after 22-Sep-2025, when the revised rates become effective, ITC must be reversed in accordance with the provisions of the CGST Act.
- Sec 18(4): If choosing a composition scheme or goods/services become exempt, debit ITC for stock and capital goods based on pre-exemption stock.
Q4. Will I be allowed to take refund of accumulated credit arising out of inverted duty structure for supplies effected upto the date of effect of revised rate as notified?
A4. - Circular 135/05/2020-GST: Refund of accumulated ITC is allowed only if input tax rate is higher than output supply rate, not if rate changes on the same goods over time.
A refund of accumulated ITC is not permitted if the input and output consist of the same goods, even when these goods are taxed at different rates at different times.
Q5. If I already have stock on the date when the rate changes come into effect, should I apply the revised rate?
GST is levied at the rate applicable on the date of supply. The revised rates apply to outward supplies made from the date specified in the official notification.
#gstfaq#taxguide
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