Meaning of Input Tax

[Ethirajan Parthasarathy]

A registered person pays RCM tax on some transaction, which as per law he is not required to pay. Whether such payment will fit into definition of “INPUT TAX” as per section 2(62) of CGST Act which treats any “TAX PAYABLE” under section 9(3) or 9(4) as input tax. In this case what is “not payable” is paid. If it is not input tax, then dealer cannot take ITC. In such situation whether such tax is refundable?

[KASTURI SETHI]

Yes. Such paid tax is refundable. Also see Section 54 (8)(e) of CGST ACT, 2017 which is as follows:.

(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or

You can claim refund under the category of "any other amount". Tax which is not leviable and has been paid is beyond constitution and hence refundable under, "any other amount".

The department cannot deny.

AI Summary

Is Tax Paid Under RCM Refundable if Not Legally Required? Section 54(8)(e) Clarifies Refund Eligibility A registered person inquires if tax paid under reverse charge mechanism (RCM) on a transaction not required by law can be considered 'input tax' under section 2(62) of the CGST Act. The concern is whether such tax is refundable if it cannot be claimed as input tax credit (ITC). The response clarifies that the tax is refundable under Section 54(8)(e) of the CGST Act, 2017, as it is considered 'any other amount' paid without legal obligation. The department cannot deny the refund if the tax incidence was not passed on to another party.