Adjustment of IGST Credit Note when no output tax liability of IGST

[Prakash and Thiagarajan]

Dear Members,

I have a scenario wherein Credit Note for an invoice of 22-23 was issued during April 2023 and shown in GSTR-1. This pertains to IGST transaction. However, since there is no IGST output tax liability to cover the said amount till date, I am unable to adjust it in GSTR-3B. In my view, once the amount in shown in GSTR-1, delay in adjustment beyond Nov 23 should also be legally possible without restriction. Any other view or suggestion to handle this situation.

Regards,

Ganesh

[Prakash and Thiagarajan]

Is refund an option as per Para 4 of Circular No. 26/26/2017-GST dated 29.12.2017?

[KASTURI SETHI]

GSTR-1 is for outward supplies. ITC is available for inward supplies. Check all the columns.

[KASTURI SETHI]

(i) Refund of IGST paid on inward supplies is possible on account of export of services or goods or both

(iii) . Do export against under LUT and claim refund of IGST lying unutilised in Electronic Credit Ledger. It is subject to the conditions laid under Section 54 (3) of CGST Act.

Relevant Extract of Section 54(3) of CGST ACT

"Provided that no refund of unutilised input tax credit shall be allowed in cases other than —

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council :

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty :

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies."

[Prakash and Thiagarajan]

@Kasturi Sethi Sir,

The scenario is as follows:

Supplier A supplied goods and charged IGST say, Rs. 1,00,000/- during March 2023. Paid the taxes while filing March 2023 returns. There were certain goods returned by the customer and CN was issued with an IGST of Rs. 50,000/- by Supplier A during April 2023. This CN was shown in GSTR-1 of April 2023. However, as there was no output IGST liability in April 2023, he was unable to adjust the CN IGST in GSTR-3B. Till date there is no output IGST liability to cover the IGST amount in CN.

In this context, any suggestion? In my view, it is not an inward supply hence, ITC cannot be availed.

[KASTURI SETHI]

Sh.Ganesh Ji,

In my view, you can apply for refund claim under Section 54 (8) (e) and relevant date will be the date of payment of tax (in any other case). See Explanation (h) below Section 14. It can also be covered under 'excess payment of tax'. Relevant date will be same i.e. the date of payment of tax.

Disclaimer Certificate : These are my personal views and meant for education purposes only and not meant for legal proceedings in any court.

[Prakash and Thiagarajan]

Thanks Sir

[Padmanathan KV]

In my opinion, refund can be claimed.

[Shilpi Jain]

Dispute free option would be to apply for refund.

Otherwise still a stand can be taken that the details of the credit note were disclosed in the Form GSTR-1 by the date allowed for disclosure under the law. Though department could dispute any actual tax adjustments done after Nov '23.

AI Summary

Adjusting IGST Credit Note Without Output Tax Liability: Refund Under Section 54 of CGST Act Suggested A participant raised a query about adjusting an Integrated Goods and Services Tax (IGST) credit note when there is no corresponding IGST output tax liability. The credit note was issued for a previous invoice and reported in GSTR-1, but the lack of output liability prevents its adjustment in GSTR-3B. Suggestions included applying for a refund under Section 54 of the CGST Act, particularly for excess tax payment or export scenarios. Participants advised that refunds could be claimed, although any adjustments made after November 2023 might face departmental scrutiny.