ITC of RCM Paid Wrongly

[Ethirajan Parthasarathy]

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.

[Ganeshan Kalyani]

In my view you can take credit. The tax paid under RCM is a revenue neutral to the Govt. unless your final product is exempt.

[Alkesh Jani]

Sir,

for which period. As you can adjust the the same towards your output liability.

Thanks

[Rajagopalan Ranganathan]

Sir,

According to Section 15 (2) (a) of CGST Act, 2017 "the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier.

Therefore Municipal tax is paid under separate law other than CGST Act, SGST Act, UTGST Act and Goods and Service Tax (Compensation to States) Act the said tax in includible in the trasaction value on which gst is paid/payable. Therefore you can avail ITC of gst paid on Municipal Tax paid under RCM.

[Prasanna Kumar]

In my opinion, since there is no supply involved(assumed that Municipal tax is paid on brining the goods into the local area or sending out of the loal area) the RCM is paid on wrong expense, hence not eligible for ITC. Probably asking for refund is the best way since it is paid by mistake.

[Alkesh Jani]

Shri

As per the definition of “Output Tax” given at Section 2(82) of CGST Act, the payment of RCM is required to be paid in cash (not from ITC). Therefore, the person have made a mistake of paying the tax on RCM basis by way of cash, which can be adjusted.

AI Summary

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.