GST refund cum ITC

I have paid excess output tax in FY 2017-18 due to mistakenly making output tax payment both on advance received against supply of goods and again on the entire transaction value(including advance component). Instead of adjusting such excess output tax paid against future output tax payable, I have claimed an equivalent Input Tax Credit in FY 2019-20.

Such ITC has not been reversed yet and has been availed from the electronic ledger ever since.

My question is:

1. Do we need to change this position or its fine?
2. Can I still claim a refund in RFD-01 of the erroneous excess output tax paid even though 2 years may have passed from the date of payment?
3. Do we have to reverse such ITC claimed and pay applicable interest? In case refund is time-barred, do I still need to reverse ITC?

Hey! This is quite a nuanced GST issue. Let me break it down for you:

1. Position of availing ITC on excess output tax paid twice:

If you paid GST twice on the same supply (once on advance and then on full value), you should have adjusted the excess output tax paid against future GST liabilities, rather than claiming ITC on it.
Claiming ITC on the excess output tax paid is not correct as per GST law, because ITC can be claimed only on input supplies, not on your own output tax.

So, you need to correct this position by reversing the wrongly claimed ITC.

2. Claiming refund after 2 years:

The general time limit for claiming GST refund under Section 54 is 2 years from the relevant date (usually date of payment of tax).
Since you mentioned that 2 years have passed, it’s likely time-barred for claiming refund of the excess output tax paid.
However, if the excess tax was paid genuinely and it’s not your fault, you may explore legal remedies like filing a writ petition or approaching appellate authorities, but refund claim through normal RFD-01 form after 2 years is generally not allowed.

3. Reversal of ITC and payment of interest:

Since you availed ITC wrongly on your own output tax, you must reverse this ITC in your GSTR-3B return immediately.
Additionally, you should pay interest under Section 50 on the amount of wrongly claimed ITC (because ITC on output tax paid is not allowed).
Even if refund is time-barred, reversal of ITC and payment of interest is mandatory to comply with law and avoid penalties.

Summary:

Point	Action Required
Wrongly claimed ITC on excess output tax paid	Reverse ITC in return immediately
Claim refund after 2 years	Generally not allowed, consider legal remedies
Interest on wrongly claimed ITC	Pay interest as applicable under Section 50