GST PAID IN DRC-03 IN CORRECT HEAD BUT WRONG PLACE OF SUPPLY

IGST 1217 views 2 replies

MOHIT

58 Points Joined March 2009

IGST ITC extra claimed paid in other place of Supply state in DRC-03 - do we need to repay and claim refund or since it seems paid in correct head IGST but incorrect state in DRC-03, it should be ok, since IGST is a common allocation pool mainly driven by GSTR-1 in Govt GST accounting system.

For instance, if we are registered in Delhi and claimed extra ITC of 1 lakh with no proper reasoning because some parties did not file their bills.

Now what should be the basis to identify place of supply to repay IGST ITC extra claimed in DRC-03.

As of now, if the person paid back extra IGST ITC in DRC-03 but not in Delhi state as place of supply, while he marked Haryana as place of supply, since his interpretation at that time was that, due to extra ITC claimed in 3B, on FIFO basis, he offset Output liability IGST of Haryana state, so interpreting section 50 as to repay the tax short paid erroneously, he repaid IGST in Haryana place of supply.

So, what should be the correct place of supply in DRC-03 to repay extra IGST availed ?

In light of above, there are two ways to interpret while repaying extra ITC in DRC-03

1. To simply see extra ITC claimed in respective head and repay it back in DRC-03 in same state of registration, if there is no credit note or actual transaction reversal, rather it's just erroneous extra ITC claim.

Similarly, if it's extra CGST SGST availed, it may be reversed and repaid in same state in DRC-03.

2. Or, to co-orelate which output tax was short paid due to extra or fictitious liability offset in month of claiming extra ITC, although there is no one-to-one correlation laid out but going by this interpretation of section 50, it may also be a contention based on FIFO basis or so.. although its doesn't seems rational approach, but there is indeed a confusion here the way law has been drafted and given that there is no clarity on this and dept officers themselves appear to be of no help or guidance.

3. Is there no rectification module for this Inter-head / place of supply correction and related allocation of tax already paid just like GST PMT-09, rather than painful and stringent hardship route of again paying and claiming refund..

How does Government side of Inter-state GST accounting settlement happens .. In case there is any clarification please share..

Replies (2)

Yasaswi Gomes new

Finance

4545 Points Joined September 2020

To rectify the situation where IGST ITC was erroneously claimed in the wrong place of supply in the DRC-03, you have a few options:

Repay in the Same State of Registration:
Correlate with Output Tax Shortfall:
Lack of Rectification Module:
- Unfortunately, there isn’t a specific rectification module for inter-head or place-of-supply corrections in the DRC-03, similar to GST PMT-09. Instead, the current process involves repaying the excess ITC and then claiming a refund.
Government’s Inter-State GST Accounting Settlement:
- The government handles inter-state GST accounting settlements, but there is no clarity on this matter.

Remember to consult with a tax professional or seek guidance from relevant authorities to ensure compliance with the correct procedure for your specific case. 📝💡

MOHIT

58 Points Joined March 2009

Hi,

Thanks for your reply !

1) What i understand regarding repayment in DRC-03 for extra ITC wrongfully availed is that we need to see the liability head first that was wrongly offset and short paid.

Since POS wise output liability is already registered in Taxpayer and Govt Records via GSTR 1. So, that should be the only POS liability that needs to be settled by taxpayer individually vis-a-vis by Inter-Governmental revenue departments.

How that liability could be paid was either through Cash or ITC offset. Where in, if paid by cash totally, then ofcoourse there won't be any issue.

It's only where ITC offset either wholly or in part, with some wrongful ITC availed, that in such case the liability remained offset and remained unpaid to the extent of ITC wrongly availed.

Now since there is FIFO or LIFO settlement method prescribed for ITC offset, therefore, one needs to see whether it's IGST or CGST or SGST short paid.

If its IGST short paid due to excess ITC offset wrongly, then in that case we may simply pay thru IGST head in own state of supply as POS in DRC-03 or even if any other POS is marked in DRC-03 it shouldn't make any difference because actually IGST overall mapping is already existing thru GSTR-1 filed, so inter-governmental revenue accounting should be done thru system based on collective pool of IGST settlements registered thru GSTR-1 and tax payments recd. in IGST head thru GSTR-3B incl. DRC-03 now.

As regards, output liability short paid for CGST and SGST, one may simply pay now in same heads with POS of registered state in DRC-03.

You may pls share your views. Thanks

2) Indeed there must be a simple automated rectification module rather than asking for double tax payments to small businesses and entangling him in complex refund process.

3) Moreover, in such what should be relevant date for refund time limit, where lets say for FY 19-20 dept now acknowledges or replies to DRC-03 filed in Mar 2024 lets say that tax payer should again pay for FY 19-20 in this or that POS and claim refund of tax paid earlier in drc-03.

I believe it should be considered tax paid provisionally earlier in DRC-03 and relevant date should count now from this 2024 dept communication date as follows based on following sub section 2 of Section 54 clause (f) of CGST Act 2017

4) Relevant date means in case - Refund in case of tax paid provisionally: Where the tax is paid provisionally under this Act or the rules made thereunder, the relevant date is the date of adjustment of tax after the final assessment.

5) And Interest should not be levied but in most cases it is being levied..

Actually it seems of no use checking with dept. as they themselves are neither interested nor do they seem to have proper diligence and technical expertise to take care of tax payer's queries. They apparently rather seem to always scare the taxpayer and make it so annoying to tax payer that he would rather prefer going to hell than turning up to these Govt depts.