ITC claimed on wrongInvoice

This query is : Resolved

Eajaz Ahmad (Querist)
Follow

26 December 2024 Hi.. Mam / Sir
Our accountant wrongly claimed ITC on an invoice which was not issued to us in *Feb 2023*..

And the supplier found this mistake in *December 2024* and notified us..

What to do.. how to resolve this.. Two Financial years have passed..
Please advise..

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
Follow

12 August 2025 This is a sensitive but manageable situation — let’s walk through it step-by-step.
📌 Situation Summary:
ITC wrongly claimed in Feb 2023 (FY 2022–23) on an invoice not issued to your company.
The supplier caught this in December 2024.
So the ITC is ineligible, and now you're past the deadline to reverse it in the usual way.
🧾 Legal & Compliance Context:
Section 16(2) of CGST Act says you can claim ITC only if you actually possess a valid tax invoice and receive the goods/services.
Since the invoice wasn’t even issued to you, ITC is illegally claimed, and needs to be reversed immediately, even though it relates to an earlier FY.
As per Section 73, recovery of wrongly availed credit can go back up to 3 years, and even longer in case of fraud.
✅ What You Must Do Now:
🔸 Step 1: Reverse the Wrong ITC via DRC-03
You cannot revise GSTR-3B for Feb 2023 now.
So, you need to voluntarily reverse the wrongly claimed ITC via Form DRC-03.
In DRC-03:

Tax type: ITC wrongly availed
Section: 73(5) – voluntary payment before show cause notice
Select Tax head: IGST/CGST/SGST (as originally claimed)
Use the correct Place of Supply, same as the original claim
Pay with interest under Section 50(3) (as this is ineligible ITC)
🔸 Step 2: Pay Interest
Interest is mandatory under Section 50(3) for ineligible ITC.
Interest @ 24% per annum on the amount wrongly availed from date of availment (Feb 2023) to date of payment via DRC-03.
You can use a simple interest calculator or I can help compute it if you tell me the ITC amount and DRC-03 payment date.
🔸 Step 3: Maintain Documentation
Keep records of:
The DRC-03 challan,
A note explaining the error,
Email/letter from the supplier identifying the issue.
This is crucial in case of future GST audit.
🚫 What Not to Do:
Do not try to adjust this in current GSTR-3B — it’s for current-period liabilities only.
Do not delay – any delay increases interest liability and invites risk of notice under Section 73 or 74.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now