Regarding GST query annual return

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This query is : Resolved

Quick Summary

Claiming custom duty as Input Tax Credit (ITC) on your GST Annual Return can be complex. Generally, only the Integrated GST (IGST) component paid on imports is eligible for ITC, not the Basic Customs Duty (BCD). Incorrectly claiming ineligible duties can be seen as tax evasion, leading to penalties, interest, and potentially prosecution, especially if done deliberately.

CA Parul Saxena

CA Parul Saxena (Querist)

20 February 2021 If input on custom duty is shown as all other itc is it considered as financial fraud and prisonment could be there?

CA PARTH SHAH

CA PARTH SHAH (Expert)

22 February 2021 You should reverse all such inputs to avoid interest liability during the assessment.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

20 July 2025 About showing input on custom duty as ITC in GST Annual Return:

Is it allowed?
Generally, customs duty paid on import of goods is not eligible for input tax credit (ITC) under GST, except the Integrated GST (IGST) component paid on imports is eligible as ITC. The basic customs duty (BCD) is not eligible for ITC.
If you claim BCD or other non-eligible customs duties as ITC:
It would be incorrect and could be considered tax evasion or fraud if done knowingly and repeatedly. This can lead to penalty, interest, and possibly prosecution under GST laws.
Is it financial fraud or punishable with imprisonment?
If done unintentionally or due to misunderstanding, usually it leads to demand with interest and penalty. But if it's deliberate and fraudulent claim, the law does provide for penal provisions including imprisonment under GST Act sections like 132 (Offences and penalties).
Bottom line:
Always claim ITC only on eligible components (like IGST on import). Claiming ineligible credits is a serious compliance risk.

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