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

Refund of wrongly paid reverse-charge tax available where incidence was not passed on, claimable as other refundable amount.
Where a registered person pays tax under the reverse charge mechanism that was not legally leviable, such payment should be recoverable by refund rather than treated as input tax for credit. The refundable route is available as a claim for "any other amount" paid where the payer did not pass on the incidence to another person, providing restitution of wrongly paid reverse-charge tax without creating an input tax credit entitlement.