ITC availed twice on single supply of security sercice

[KALLESHAMURTHY MURTHY K.N.]

 

Dear Sirs,

ABC LLP used security services from a registered person. The supplier collected tax under FCM. ABC LLP availed ITC on the invoice issued by the supplier. The Department officer observed the non-payment of tax under RCM as per Notification 29/2018 dated 31-03-2018. ABC LLP discharged the tax under RCM and availed ITC which served as availed ITC twice for a single supply but there was a double payment of tax. Is ABC LLP correct in availing of ITC twice on a single supply and what about double payment of tax?

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

ITC cannot be availed twice on the same invoice. File refund claim on account of excess payment under Section 54 (8)(e) of CGST Act.

[KALLESHAMURTHY MURTHY K.N.]

Respected Kasturi Sethi ji, 

Sir,

I have expressed the same opinion for an issue in Empathic under LinkedIn today 11-10-2024.  But they have raised another point that as under.

"sir, the advisory is in connection with double payments made with a conservative approach to avoid litigation. Now if a taxpayer takes a view that ITC of such payment can’t be made and it is entitled to refund only, then this advisory is not applicable at the first place..

Next, coming to your point of refund, if you are of view that duplicate GST amount can only be claimed as refund then it is the first payment made under forward charge which can be claimed as refund, and in no case the subsequent payment made under RCM." 

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Sir, I agree with you. The excess payment of GST has been made under FCM. So the relevant date will be computed from the date of payment of tax under FCM. Regarding discharging liability of GST, the taxpayer cannot switch over from RCM to FCM and vice versa on his own volition.

[KALLESHAMURTHY MURTHY K.N.]

Sri Kasturi Sethi Ji, 

Sir, 

Thanks very much. I put the above query to expand my knowledge. The answer by your good self has made me concreting my knowledge.   

With respects.

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Thank you very much, Sir. Your thirst for seeking more and more knowledge is highly appreciable. This is the very purpose of this platform created by TMI.

[Shilpi Jain]

Is the department in the first place disputing the double availing of credit?

Also, once tax in paid on a transaction, there should not be another demand for tax for the same transaction.

[Shilpi Jain]

If the department is not demanding reversal of ITC, just leave it at what has been done.

[Tarun Agarwalla]

here there can not be denial of ITC on the premises of double taxation or tax in excess. the payment Mechanism as tax also at the hand of different persons , FCM as well as RCM.

referring to section 32(1) it appears that the taxes charged and collected by the service provider under FCM is without authority of law, of that matter the same may not be retained . as the incidence passed upon to the service recipient, at best it can applied for refund being burdened.

the fact remain is that the demand of RCM by the tax PO, one it brings to its knowledge about the taxes being collected , paid and credit taken, without observing 32(1) advising for refund , proceeding to demand under RCM improper. and one can take this in its defence if in future one raise the demand siting 32(1), being the tax without authority of law.  

AI Summary

ABC LLP faces double tax payment issue due to GST mechanism switch; advised to claim refund under Section 54(8)(e). ABC LLP, having used security services, availed Input Tax Credit (ITC) twice for a single supply due to a misunderstanding of tax payment obligations under the Goods and Services Tax (GST) framework. The supplier initially collected tax under the Forward Charge Mechanism (FCM), but the Department later identified the need for tax payment under the Reverse Charge Mechanism (RCM) as per Notification 29/2018. This resulted in a double tax payment. Experts advised that ITC cannot be claimed twice on the same invoice and recommended filing a refund claim for the excess payment under Section 54(8)(e) of the CGST Act. Discussions highlighted the complexities of switching between FCM and RCM and the importance of adhering to proper tax procedures to avoid litigation.