WRONG AVAIL IGST INSTEAD CGST AND SGST (NOTIFICATION 35/2021 AND CIRCULAR 162/18/2021)

This query is : Resolved

CA Hardik Bunha (Querist)
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04 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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11 July 2024 In the scenario where wrong ITC (Input Tax Credit) was claimed in GSTR-3B for FY 18-19 (IGST claimed instead of CGST and SGST), here’s how the situation is typically addressed under GST rules and regulations:

### 1. Correcting the ITC Claimed

1. **Pay the Correct Tax**: Firstly, you should pay the correct tax amount that was initially claimed incorrectly. In your case, this would mean paying the CGST and SGST amount that should have been claimed instead of IGST.

2. **Claim Refund of Excess Tax Paid**: Once you have paid the correct tax amount, you can then proceed to claim a refund of the excess tax paid. This is based on the provision under Rule 89(1A) of the CGST Rules, 2017, which allows for refund of any unutilized ITC.

### 2. Interest and Penalty

1. **Interest**: According to Section 50 of the CGST Act, 2017, interest is applicable on any amount of tax that is paid after the due date. In your case, if there was a delay in paying the correct tax (CGST and SGST), interest would be applicable from the due date of payment till the date of actual payment.

2. **Penalty**: Section 77 of the CGST Act deals with penalties for various offenses, including incorrect or wrongful availment of ITC. However, if the mistake was genuine and voluntarily disclosed, penalties might be waived or reduced based on your communication with the tax authorities.

### Relevant Circular and Notifications

- **Notification 35/2021**: This notification and Circular 162/18/2021 provide guidelines on the procedure and conditions for claiming refunds of unutilized ITC. They emphasize that refunds are applicable only for tax paid and not for ITC.

### Current Scenario

Based on the information provided:
- Pay the correct amount of CGST and SGST that should have been claimed originally.
- File an application for refund under Rule 89(1A) of the CGST Rules, 2017, after paying the correct tax amount.
- Interest will be applicable on the delayed payment of correct tax.
- Penalties may apply depending on the circumstances, but voluntary disclosure and correction can mitigate penalties.

### Conclusion

To resolve the issue of incorrect ITC claimed in FY 18-19:
- Pay the correct tax amount (CGST and SGST).
- Claim refund of the excess IGST paid, following the procedures outlined in GST rules and notifications.
- Communicate with the GST authorities to ensure compliance and seek any possible waivers or reductions in penalties, especially if the mistake was disclosed voluntarily.

It's advisable to consult with a tax professional or GST practitioner to handle the specifics of your case and ensure compliance with GST regulations.