ITC Inter head difference

This query is : Resolved

E.KALAIKOVAN (Querist)
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05 August 2025 Sir,

Few entries are wrongly updated in General Ledger. Instead of IGST SGST and CGST are updated. Based on this ITC claimed in SGST and CGST in GSTR3B. But in GSTR2A they are in IGST. In GSTR2A and 3B Reconciliation we got inter head difference. GST proper officer asking why it is not corrected latter. What is the issue of inter head wrong claim of ITC.

Entry in GL Wrong, Hence ITC claim in GSTR3B is wrong. Hence ECL balance also wrong Inter head wise. What is issue, how to solve. Thank you

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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12 August 2025 Here’s a clear explanation of your issue related to wrong head-wise ITC claim (IGST vs. CGST/SGST) and how to resolve it, especially in case of a GST departmental inquiry.
🧾 Issue Summary:
Wrong accounting in General Ledger (GL):
IGST entries were wrongly posted as CGST & SGST.
Based on GL, you claimed ITC under CGST & SGST in GSTR-3B, even though:
In GSTR-2A, the suppliers reported those invoices under IGST.
Result: Mismatch between GSTR-2A and GSTR-3B → Inter-head difference in Electronic Credit Ledger (ECL).
GST officer is asking:
Why wasn’t it corrected later?
⚠️ What’s the Issue with Wrong Head-Wise ITC Claim?
❌ 1. ITC Cannot Be Cross-Utilized Freely Between Heads
As per Section 49A/49B of CGST Act and Rule 88A:
You cannot use IGST ITC by wrongly claiming it as CGST/SGST or vice versa.
ITC must be claimed under the correct tax head (CGST, SGST, IGST).
📉 2. Impact on Electronic Credit Ledger (ECL):
You have excess CGST/SGST ITC, but insufficient IGST ITC.
This may lead to:
Ineligible utilization of credit
Wrong ECL balances
Possible interest and penalty under Sections 73 or 74
🧮 3. Mismatch in GSTR-2A vs GSTR-3B:
GSTR-2A reflects supplier’s IGST invoices
Your GSTR-3B reflects ITC under CGST/SGST
This mismatch flags wrong head-wise claim and may lead to scrutiny, audit objection, or show-cause notice (SCN)
✅ How to Solve / Rectify It Now
1. Identify and Quantify the Mistake
Prepare a reconciliation sheet:
Invoice No Supplier GSTIN ITC in GSTR-2A (IGST) Claimed in GSTR-3B (CGST/SGST) Difference
... ... IGST ₹10,000 CGST ₹5,000 + SGST ₹5,000 Wrong head
2. Reverse Wrongly Claimed ITC (Optional Step – if asked)
If department insists:
You may reverse CGST/SGST ITC wrongly claimed in a later GSTR-3B.
Then reclaim the correct IGST ITC, subject to time limit under Section 16(4) (currently extended via court rulings and notifications in some cases).
⚠️ Note: If time limit under Sec 16(4) is over (for FY 2020-21), you may not be allowed to reclaim IGST ITC, and the wrongly claimed credit could be treated as ineligible.
3. Pay Interest if Utilized Wrongly
If the wrong credit was utilized, department may demand interest @18% under Section 50.
If not utilized (just lying in ECL), you can explain it was an unintentional booking error and no interest applies.
4. Explanation Letter to GST Officer
Include:
Reason: GL error caused wrong claim.
Confirmation: No double benefit taken.
Proposal to correct (reversal or reclassification).
Request for waiver of penalty/interest if unutilized or genuine.
📝 Sample Reply Summary
Subject: Clarification Regarding Inter-head ITC Mismatch in GSTR-3B vs GSTR-2A (FY 2020–21)
Respected Sir,

During internal reconciliation, it was found that due to inadvertent GL posting error, certain IGST credits reflected in GSTR-2A were wrongly claimed under CGST and SGST in GSTR-3B. The taxable value, invoices, and vendors match, but only the tax head was wrongly classified.

We confirm that no excess ITC has been claimed and no double benefit has been taken. The error was unintentional and is limited to head-wise classification. We are ready to:

Reverse and re-claim ITC appropriately (subject to eligibility),
Or follow department's guidance in resolving the mismatch.
We kindly request that the genuine nature of this error be considered and penalty/interest be waived accordingly.
Sincerely,
[Your Name / Company Name]

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