System not in confirmation with Rule 39(e) of CGST Rules

[RadheyShyam Mangal]

As per Section 20 of the CGST Act, input tax credit on account of IGST Credit can be distributed by Input Service Distributor as IGST or CGST.

As per Rule 39(e) of CGST Rules, which prescribes procedure for distribution of credit by Input Service Distributor, says input tax credit on account of IGST can be distributed as IGST itself.

The GSTR-6 available online has one loophole i.e. it is not according to Rule 39(e) of CGST Rules because in case of ISD and recipient of credit are in the same state it doesn't have column for distribution of IGST credit as IGST credit.

What should be done.

If I go ahead and distribute IGST credit as CGST credit in the same state then I will be complying Section 20 but there will be violation of Rule 39(e) of CGST Rules.

Though we all know Rules cannot override Act.

Please opine on the same

[DR.MARIAPPAN GOVINDARAJAN]

Rules cannot over ride the provisions of Act. There may draft error in Rule 39(e). If it is pointed out to the GST Council an amendment may be brought in future by GST Council. Earlier I also pointed out such discrepancies to the GST Council which has been later amended.

AI Summary

Input tax credit distribution conflict: IGST allocation rights vs return format limits, seek regulatory correction and amendment. An Input Service Distributor faces a procedural conflict: the CGST Act permits allocation of IGST-origin input tax credit as IGST or as central/state credits, but the CGST Rules/ GSTR 6 return format do not provide a field to distribute IGST credit as IGST where ISD and recipient are in the same State, creating a compliance dilemma. The practical recommendation is to treat this as a drafting or system defect, invoke the primacy of the Act over rules, and seek amendment or technical correction through the appropriate governance process.