Misreporting of Input Credit of RCM as Normal ITC Year 20-21
This query is : Resolved
03 February 2025
Upon conducting a detailed reconciliation of the ITC as per the GSTR-3B and GSTR-2A/2B, it was
observed that an excess amount of ITC was claimed for the period of FY 2020-21. The discrepancy arose due to Misreporting of Input Credit of RCM as Normal ITC (Annual GSTR-3B Summary annexed as Annexure 1), there were Reversal of Input credit in FORM -3B Which were not considered in Table 8B of FORM GSTR-9 (GSTR-9 annexed as Annexure 2). However, there was a misreporting of ITC Claimed of Previous Year in Current year in FORM GSTR-9 and GSTR-9C
which same is reversed through DRC-03 dated 22 nd January 2025 (Annexed as Annexure 3).
a) Now i have to ask weather we have to pay interest for the error.
observed that an excess amount of ITC was claimed for the period of FY 2020-21. The discrepancy arose due to Misreporting of Input Credit of RCM as Normal ITC (Annual GSTR-3B Summary annexed as Annexure 1), there were Reversal of Input credit in FORM -3B Which were not considered in Table 8B of FORM GSTR-9 (GSTR-9 annexed as Annexure 2). However, there was a misreporting of ITC Claimed of Previous Year in Current year in FORM GSTR-9 and GSTR-9C
which same is reversed through DRC-03 dated 22 nd January 2025 (Annexed as Annexure 3).
a) Now i have to ask weather we have to pay interest for the error.
12 August 2025
Scenario Recap:
Misreported ITC under Normal ITC instead of RCM ITC in FY 2020-21.
ITC was reversed through FORM GSTR-3B but not considered in Table 8B of GSTR-9.
Misreporting of ITC claimed of previous year shown in current year’s GSTR-9 and GSTR-9C.
Reversal done through DRC-03 on 22 Jan 2025.
Interest Liability on Misreported ITC:
Section 50 of CGST Act, 2017 deals with interest payable on delayed payment of tax.
When is interest payable?
Interest is payable on tax not paid (i.e., when the tax liability is discharged late).
In your case, since ITC was claimed erroneously (more ITC taken than eligible), effectively the tax liability was short paid in the original period.
On reversal through DRC-03:
Tax along with interest from the due date of filing original return till date of payment has to be paid.
Interest is calculated at 18% p.a. (or as per applicable law) on the amount of tax reversed.
Is interest payable for misreporting but reversal done now?
Yes, interest is payable on the amount of tax related to excess ITC claimed from the due date of original return (FY 2020-21) till the date of actual payment (22 Jan 2025).
However, no penalty should be applicable if the amount is voluntarily reversed with interest through DRC-03, assuming no audit or investigation has initiated.
Summary:
Issue Interest Payable?
Excess ITC claimed due to misreporting Yes, interest from original due date till payment date
Reversal through DRC-03 (voluntary) Yes, interest applicable but no penalty if voluntary
Delay in reporting in GSTR-9 Interest applies on tax amount, penalty depends on circumstances
Recommendation:
Calculate interest from the due date of filing GSTR-3B for that period till 22 Jan 2025.
Pay the interest along with tax via DRC-03.
Ensure correct reporting in future returns.
Misreported ITC under Normal ITC instead of RCM ITC in FY 2020-21.
ITC was reversed through FORM GSTR-3B but not considered in Table 8B of GSTR-9.
Misreporting of ITC claimed of previous year shown in current year’s GSTR-9 and GSTR-9C.
Reversal done through DRC-03 on 22 Jan 2025.
Interest Liability on Misreported ITC:
Section 50 of CGST Act, 2017 deals with interest payable on delayed payment of tax.
When is interest payable?
Interest is payable on tax not paid (i.e., when the tax liability is discharged late).
In your case, since ITC was claimed erroneously (more ITC taken than eligible), effectively the tax liability was short paid in the original period.
On reversal through DRC-03:
Tax along with interest from the due date of filing original return till date of payment has to be paid.
Interest is calculated at 18% p.a. (or as per applicable law) on the amount of tax reversed.
Is interest payable for misreporting but reversal done now?
Yes, interest is payable on the amount of tax related to excess ITC claimed from the due date of original return (FY 2020-21) till the date of actual payment (22 Jan 2025).
However, no penalty should be applicable if the amount is voluntarily reversed with interest through DRC-03, assuming no audit or investigation has initiated.
Summary:
Issue Interest Payable?
Excess ITC claimed due to misreporting Yes, interest from original due date till payment date
Reversal through DRC-03 (voluntary) Yes, interest applicable but no penalty if voluntary
Delay in reporting in GSTR-9 Interest applies on tax amount, penalty depends on circumstances
Recommendation:
Calculate interest from the due date of filing GSTR-3B for that period till 22 Jan 2025.
Pay the interest along with tax via DRC-03.
Ensure correct reporting in future returns.
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