Input Tax Credit Claim In Wrong Head

[MAHTAB KHAN]

A taxpayer inadvertently claimed Input Tax Credit pertaining to IGST—under the heads of CGST and SGST in GSTR-3B. The tax invoice was correctly reflecting IGST liability, but while filing the return, the ITC was claimed under the wrong heads due to a clerical error. Will the taxpayer still be eligible to avail the benefit of ITC under section 16 of the CGST Act?

[Sadanand Bulbule]

Yes, ITC  is still admissible under Section 16, if all substantive considtiions are met. There is no loss of revenue to the Government. You may seek rectification or adjust in future return, subject to time limits. Make a proper & factual representation to the jurisidicational  GST officer.

[Raam Srinivasan Swaminathan Kalpathi]

Kindly note that Kerala HC in the case of REJIMON PADICKAPPARAMBIL ALEX - 2024 (12) TMI 399 - KERALA HIGH COURT

Observed that, the GST law allows for the utilization of IGST credit towards CGST and SGST liabilities as per Section 49(5) of the CGST Act. Further, the Central Board of Indirect Taxes and Customs (CBIC) Circular No. 192/04/2023 clarified that such errors in head allocation are revenue-neutral and do not result in a loss to the exchequer.

Held that, demanding repayment in such cases, where no ineligible credit was availed, was unsustainable. The appellant’s actions were within the legal framework as the ITC had been validly availed, albeit under an incorrect head, and no further recovery was justified.

Kindly use this case law in the event of department notice / audit/ scrutiny

[Shilpi Jain]

Courts have taken a liberal view in cases of ITC taken under the wrong head and allowed the credit without requiring reversal of the credit. They have considered ITC under the various heads to be a common pool.

AI Summary

Input Tax Credit misallocation remains admissible if substantive entitlement conditions are met and error is revenue-neutral.
Where an invoice correctly shows IGST but a taxpayer inadvertently claims the corresponding input tax credit under CGST and SGST, the credit remains admissible if all substantive conditions of entitlement under Section 16 are met. Clerical misallocation that causes no revenue loss is revenue-neutral, may be adjusted in future returns or rectified with the jurisdictional officer within time limits, and is supported by administrative circulars and judicial decisions recognizing the common-pool treatment of ITC.