ITC-03 is the form in which you pay back input tax credit on stock and capital goods when you stop being eligible for credit, mainly on opting for the composition scheme or when all your supplies become exempt. It must be filed within 60 days of the change taking effect.
Section 18(4) of the CGST Act requires a registered person who has availed credit to pay an amount equal to the credit on inputs held in stock, inputs in semi-finished or finished goods, and capital goods, on the day immediately before the date of the change, when:
Rule 44 sets the method. For inputs and goods in stock, the credit is worked out proportionately from the corresponding invoices; where invoices are not available, it is estimated from the prevailing market price. For capital goods, the credit taken is reduced by 5 percentage points for every quarter or part of a quarter since the invoice date. The amount is computed separately for IGST, CGST, SGST and cess.
ITC-03 is filed within 60 days of the date on which the option for composition takes effect or the supplies become exempt, unless the Commissioner extends the time. The amount is paid by debiting the electronic credit ledger or cash ledger. Any balance credit left in the ledger after payment lapses. For composition taxpayers, this normally means filing within 60 days of the start of the financial year for which the option was exercised.
ITC-03 is different from the stock reversal on cancellation of registration, which is reported in the final return GSTR-10. Underestimating stock or ignoring capital goods is a common reason for later demands. If you later move back from composition to normal tax, credit on stock is claimed through ITC-01. A professional can prepare the stock valuation and file within the deadline.
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This guide explains the law in general terms as of October 2026. Time limits and requirements can depend on the facts of your case and on the notice you received.
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