Claimed IGST ITC instead of CGST and SGST

[SHARAD ANADA]

In FY 17-18 taxable person has wrongly claimed IGST ITC ₹ 1,000/- in GSTR 3B instead of CGST ITC ₹ 500/- and SGST ITC ₹ 500/-. Whether wrongly claimed IGST ITC ₹ 1,000/- is to be paid through DRC 03 and actual CGST ITC ₹ 500/- and SGST ₹ 500/- not claimed in GSTR 3B will be lapsed? Any remedy.

[KASTURI SETHI]

In my view, ITC will not be hit by time limitation inasmuch as once ITC has been availed as IGST within prescribed time limit. Now the tax payer will reverse by way of cash payment through DRC 03 and after such reversal if that person avails ITC as CGST + SGST, that will be called, 'Re-credit'.

Further, Section 16(4) is not applicable to a claim for re-availing of any credit which has already been reversed.

ITC taken as IGST instead of CGST + SGST is a PROCEDURAL LAPSE.

[Venkataprasad Pasupuleti]

It can be said that it is revenue neutral situation as claiming igst instead of cgst & sgst would not cause any revenue loss to the department. There would be some challenge when such wrongly Igst was used for payment of cgst/sgst (>50% of each component).

[KASTURI SETHI]

The querist has made up his mind to pay/reverse IGST of ₹ 1000/- through DRC-03.

[Ganeshan Kalyani]

IGST paid wrongly under CGST - a taxpayer is directed to pay tax under correct head and claim refund of the tax paid under incorrect head without interest

[Ganeshan Kalyani]

https://www.taxtmi.com/article/detailed?id=8915

[KASTURI SETHI]

I think the querist has given just an example. There may be a huge amount involved.

[KASTURI SETHI]

Why charging tax in the invoice there may be confusion regarding whether IGST or CGST/SGST is applicable (depending up the place of supply) but there should be no confusion while availing credit (ITC). The buyer/ receiver of service or goods has to take credit of the kind of tax mentioned in the supplier's invoice.

If invoice shows CGST/SGST but the purchaser/receiver of service takes credit of IGST, the department may consider that such wrong ITC has been taken intentionally (may be modus operandi) in order to encash accumulated unutilized credit because of any reason. If mala fide intention is proved to this effect, such wrong credit will attract interest and penalty both.

AI Summary

Input tax credit misclassification: reverse wrongly claimed IGST via DRC 03, then re avail CGST and SGST.
A taxable person who availed IGST ITC instead of CGST and SGST should reverse the erroneously availed IGST by payment through the appropriate adjustment form and thereafter re avail the correct CGST and SGST credits; this correction is treated as a procedural recredit and not barred by time limitation. The situation is generally revenue neutral if corrected, but use of wrongly availed IGST to discharge CGST/SGST or conduct suggesting mala fide intent can attract interest and penalties and complicate remedy options such as refund.