GST Wrongly Paid - ITC

[Ethirajan Parthasarathy]

A business entity, by mistake, pays RCM tax on municipal tax paid. Is it entitled to set-off this as ITC or should they go for only for refund.

[Himansu Sekhar]

Refund is the option.

[KASTURI SETHI]

Tax under RCM is paid in cash. So you must get refund in cash. So better option is filing refund claim on the ground of "Wrongly Paid". Read Rule 86(4A) inserted w.e.f. 23.03.2020 of CGST Rules.

"Rule-86 .[(4A) Where a registered person has claimed refund of any amount paid as tax wrongly paid or paid in excess for which debit has been made from the electronic credit ledger, the said amount, if found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03.]".

Also go through Circular No.135/05/2020-GST dated 31.3.2020 as amended vide Circular No. 139/09/2020-GST, dated 10-6-2020.

AI Summary

Wrongly paid reverse-charge GST on municipal tax should be reclaimed by refund in cash, not set off as ITC.
Payment of tax under reverse charge on municipal tax made by mistake is not to be treated as eligible for input tax credit but should be reclaimed through a refund claim; Rule 86(4A) and related circulars clarify re credit to the electronic credit ledger where amounts were debited there, and payments made in cash under reverse charge should be refunded in cash.