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.

AI Summary

Input tax credit eligibility for mistakenly paid reverse charge tax may depend on supply characterization and adjustment rules.
Whether a taxpayer who inadvertently discharged tax under the reverse charge mechanism on municipal tax may claim input tax credit is contested. One view treats RCM-paid tax as includible in transaction value and eligible for ITC where GST is payable; another view says RCM payment on non-supply expenses is a mistaken cash outlay not eligible for ITC and may require a refund. It is noted that RCM must be paid in cash and cannot be debited to ITC, though an erroneous cash payment may be adjusted against output liability if permitted.