ITC claimed under wrong head

[Vibha Palekar]

In FY 2018-19, a person has wrongly claimed CGST and SGST of ₹ 30,000 each instead of claiming IGST of ₹ 60,000. No correction made in subsequent returns upto September 2019. However, the net tax payable after such ITC availment is paid under the correct head. Is there any way to correct this mistake in GSTR-9? Will the IGST lapse?

[Rachit Agarwal]

As per Instructions to Annual Return, no credit of Input Tax can be claimed.

For the purpose of claim of credit of Input Tax, Provisions relating to 16(4) to be complied and time limit thereon

[SHARAD ANADA]

you may take a chance by applying ratio in case of 2018 (11) TMI 954 - KERALA HIGH COURT SAJI S., PROPRIETOR, ADITHYA AND AMBADI TRADERS, RANJITH R., PROPRIETOR, RANJITH ROADLINES VERSUS THE COMMISSIONER, STATE GST, THE ASSISTANT STATE TAX OFFICER WP(C).No. 35868 of 2018

[OmPrakash jain]

Refer another case of Jharkhand High Court Shree Nanak Ferro Alloys Pvt. Ltd. v. The Union of India 2020 (1) TMI 833 - JHARKHAND HIGH COURT, where IGST was wrongly paid under CGST head. The notice issued by the respondent fixing the liability to pay the short paid IGSTwas quashed. The petitioner is entitled to the benefit of the provisions of S.77(1), CGST Act, read with S.19(2), IGST Act. The petitioner is directed to deposit the amount under correct head, which was paid under wrong head towards the liability of Sept., 2017, without any interest on the said amount. The petitioner shall also be entitled to get the refund of the amount of deposited by them under the CGST head, or they may get the amount adjusted against their future liabilities, in accordance with law, as they may choose.

[KASTURI SETHI]

There are two different situations:-

(1) Availing ITC wrong head (against incorrect type of tax).

(2) Making paying of tax against wrong head.

First offence is more serious than second one inasmuch as the tax payer should be very careful while taking credit. Only correct posting is to be made against type of duty. Some tax payers are doing it knowingly with some motive. Govt. is well aware of it. Wrong posting means improper maintenance of records.It may attract penalty under Section 125 of CGST Act.

[KASTURI SETHI]

Payment of tax under incorrect head means one has failed to understand correct 'place of supply 'and that is why no interest is chargeable while sanctioning refund under Section 77 whereas availment of ITC against incorrect head means it has happened due to sheer negligence.No special intellect is required to post correct entry against any column.

[Vibha Palekar]

This is Case 1

(1) Availing ITC wrong head (against incorrect type of tax).

But it is entirely duty negligence of the accountant. However, since such wrongly availed CGST & SGST (instead of IGST) has been set off against Output CGST and SGST, (which also would have been the case had the ITC been claimed under correct head that is as IGST) there is no revenue loss to the government. What would be the consequences in such a case?

[OmPrakash jain]

Correct mistake as per case of Jharkhand High Court Shree Nanak Ferro Alloys Pvt. Ltd. v. The Union of India 2020 (1) TMI 833 - JHARKHAND HIGH COURT mentioning the factual position. You can also give reference of Kerala high court case of Saji S., Prop., Adithya & Ambadi Traders v. Commissioner 2018 (11) TMI 954 - KERALA HIGH COURT. In case of receipt of any notice from deptt. refer the case to me, in case you are unable to submit appropriate reply.

[KASTURI SETHI]

With reference to query at serial no. 6 dated 10.4.20, in this situation, Show Cause Notice or letter is most likely to be issued by the department as everything is on record in Common Portal System. In order to save penalty, you may bring it to the notice of jurisdictional GST Range Officer on your own and seek guidance to avoid avoidable litigation.

AI Summary

Input Tax Credit misclassification may be remedied by deposit and refund or adjustment, but risks penalties and notices.
Wrong classification of input tax credit where IGST was required but CGST and SGST credits were availed can be remedied by depositing under the correct head and seeking refund or adjustment of amounts paid under the incorrect heads; case law supports relief by aligning payments with the correct tax head where no revenue loss occurred.