ITC IN WRONG HEAD (IGST instead of CGST SGST)

This query is : Resolved

CA Hardik Bunha (Querist)
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12 July 2022 IN FY 18-19 WRONG ITC CLAIMED IN GSTR 3B (IGST CLAIMED INSTEAD OF CGST AND SGST). QUESTIONS ARE (1) IF RIGHT TAX NOW PAY AND CAN CLAIM REFUND ? (2) INTEREST APPLICABLE ? (3) PENALTY APPLICABLE ? INFORMATIVE MATERIAL (1) SECTION 77 OF CGST AND SECTION 19 OF IGST (2) RULE 89(1A) (3) NOTIFICATION 35/2021 (4) CIRCULAR 162/18/2021 WHAT WILL BE SCENARIO RIGHT NOW ? BECAUSE IN CIRCULAR AND NOTIFICATION "ONLY FOR TAX PAID", WHAT ABOUT ITC ? THANKS IN ADVANCE

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 In the scenario where wrong Input Tax Credit (ITC) was claimed in FY 18-19 under GST (IGST claimed instead of CGST and SGST), here's how the situation would typically unfold based on the provisions of the GST law and related notifications:

### 1. Correcting the Wrong ITC Claim:

- **Reversal of Wrong ITC:** First, you need to reverse the incorrect ITC claimed in GSTR-3B. Since IGST was claimed incorrectly instead of CGST and SGST, you would need to reverse this amount.

- **Payment of Correct Tax:** Pay the correct tax liability by remitting the CGST and SGST amounts that were incorrectly claimed as IGST. This payment should be made through Form GST DRC-03.

- **Claim of Refund:** After making the payment of correct taxes (CGST and SGST), you can apply for a refund of the excess IGST that was paid earlier. This refund can be claimed under Section 54 of the CGST Act, 2017, read with relevant rules.

### 2. Interest and Penalty:

- **Interest:** As per Section 50 of the CGST Act, interest is applicable on the amount of tax paid late or where ITC is utilized incorrectly. Since you have utilized IGST incorrectly, interest will be applicable on the CGST and SGST amounts that were short-paid. The interest is calculated from the due date of filing GSTR-3B for the period in which the incorrect ITC was claimed until the date of payment of correct taxes.

- **Penalty:** Penalty provisions under Section 122 or Section 125 of the CGST Act may apply if the incorrect claim of ITC is considered a case of deliberate fraud or suppression of facts with intent to evade tax. If it was an inadvertent mistake and there was no intent to evade tax, penalties may not be levied, but interest would still apply.

### Relevant Provisions and Notifications:

- **Section 77 of CGST Act:** This section deals with penalties for failure to furnish information or return.

- **Section 19 of IGST Act:** Pertains to the determination of the place of supply of goods and services.

- **Rule 89(1A):** Specifies the manner of claiming refund of tax paid on zero-rated supplies.

- **Notification 35/2021:** Specific notifications may provide procedural relaxations or clarifications regarding the refund process. You should refer to this notification for any updates relevant to your situation.

- **Circular 162/18/2021:** Provides administrative clarifications or interpretations related to GST laws and procedures.

### Current Scenario and Actions:

- **Reversal of ITC:** Reverse the incorrect ITC claimed in GSTR-3B by adjusting it in subsequent returns. Ensure proper documentation of this reversal.

- **Payment of Correct Taxes:** Pay CGST and SGST amounts that were claimed incorrectly as IGST through GST DRC-03.

- **Application for Refund:** After payment, file a refund application under Section 54 of the CGST Act for the excess IGST paid earlier.

- **Interest Calculation:** Calculate and pay interest on the late payment of correct taxes (CGST and SGST) from the due date until the date of payment.

- **Consultation:** Consider consulting with a tax professional or GST practitioner who can assist in correctly navigating the refund process and ensuring compliance with GST laws.

By following these steps and ensuring timely compliance with GST regulations, you can rectify the erroneous ITC claim and proceed to claim the refund of excess IGST paid earlier.