A person inadvertently pays RCM tax on let us say Municipal Tax paid.
Will he be wrong in taking ITC of such tax. The doubt is because the definition of “input tax” will include RCM tax “payable” u/s 9(3) or 9(4).
Since RCM is not payable at all in the above case, a doubt arises on eligibility of ITC.
If input credit is not allowed, can the dealer claim refund of tax.
Debate on Eligibility of Input Tax Credit for Mistaken RCM Payment on Municipal Tax; Refund or Claim ITC? A forum participant raised a query about the eligibility of input tax credit (ITC) on reverse charge mechanism (RCM) tax paid mistakenly on municipal tax. The discussion involved multiple responses. One participant suggested that ITC could be claimed as the tax is revenue-neutral unless the final product is exempt. Another pointed out that the municipal tax is not under the CGST Act, suggesting ITC is allowable. However, another opinion stated that since no supply is involved, ITC is not eligible, and a refund should be sought. Additionally, it was noted that RCM should be paid in cash, indicating a mistake in payment. (AI Summary)
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