https://help.tallysolutions.com/docs/te9rel65/Tax_India/gst/gst_accounting_for_ineligible_itc.htm

Accounting for Ineligible Input Tax Credit under GST

You can record purchases of stock items on which tax credit cannot be claimed, by setting the option Is ineligible for input credit? to Yes in the group/ledger or stock group/item. If tax credit cannot be claimed on any of the purchases, then you can enable this option at the company level. If the tax credit is eligible during purchases, but later becomes ineligible, you can record a journal voucher to reverse it.

Ineligibility of tax credit during purchases

Eligibility of tax credit during purchases but reversed later due to ineligibility

Ineligibility of tax credit during purchases

If the tax credit on a particular transaction cannot be claimed, you can set the option In ineligible for input credit? to Yes in the GST Details screen at the stock group/item level, as shown below:

Record a purchase invoice on which tax credit cannot be claimed as shown below:

The transaction appears in detailed mode, in table 4D(1) of GSTR-3B as shown below:

Eligibility of tax credit during purchases but reversed later due to ineligibility

Record a purchase invoice for stock item on which tax credit can be claimed, as shown below:

Note: In the GST Details screen of the invoice, the option Is ineligible for input credit? appears as set in the master, and the same configuration appears in brackets for reference. You can change this while recording the invoice, if required.

In the above purchase, if one computer is lost in transit, then the tax credit on that becomes ineligible, and needs to be reversed. You can reverse the tax credit using journal voucher.

To record a journal voucher

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

3. In the Stat Adjustment Details screen, select the options as shown below:

4. Debit the expense ledger and credit the tax ledgers.

5. Press Ctrl+A to accept.

The amount reversed as ineligible tax credit appears in detailed mode, in table 4D(1) of GSTR-3B as shown below: