Input Tax Credit - RCM

[Ethirajan Parthasarathy]

A dealer pays GST under RCM on some transaction on which no RCM tax is not payable. Eg: Fee paid to Government costing less than Rs.5000/ -

Is he eligible for ITC on such payment. One view is GST paid erroneously can only be claimed as refund and not as ITC. Can anybody clarify on this point.

AI Summary

Input Tax Credit on reverse charge: credit for RCM paid when not payable may be treated as refund-equivalent via ITC.
Input Tax Credit against taxes paid under the Reverse Charge Mechanism when those taxes were not payable has been treated in tribunal decisions as effectively constituting a refund of taxes erroneously paid and may be claimed as ITC; utilisation of such credit is regarded as reversal without further liability. However, where exemptions are conditional and a dealer was not under a legal obligation to claim them, taxes paid under RCM may not be deemed erroneous and ITC cannot be denied solely on the premise of erroneous payment. Tribunals examine the facts holistically when allowing credit as refund-equivalent.