Manager - Finance & Accounts
58337 Points
Joined June 2010
Yes, manual transfer of ITC from IGST to CGST and SGST in GSTR-3B for FY 2019–20—without actual utilization via proper set-off mechanism—can lead to issues, especially during assessments, audits, or departmental scrutiny.
Let’s break it down:
๐งพ What the Law Prescribes
In GST, Input Tax Credit (ITC) utilization is governed strictly under:
The correct way to utilize ITC:
-
You cannot manually "transfer" credit between IGST, CGST, and SGST.
-
You must use the prescribed order of utilization:
-
IGST → IGST
-
IGST → CGST
-
IGST → SGST
-
Then, CGST → CGST, and SGST → SGST
There is no legal provision to manually shift or transfer IGST balance into CGST or SGST “just for convenience” in GSTR-3B.
โ ๏ธ What Could Go Wrong
1. Mismatch with GSTR-2A
-
GSTR-2A reflects supplier-wise data auto-populated from GSTR-1, not how you chose to utilize ITC.
-
While GSTR-2A mismatch alone may not invalidate ITC (especially for FY 2019–20 per old circulars), a manual transfer raises red flags.
2. Audit or Scrutiny Risk
-
GST officers may raise questions during audit or annual return (GSTR-9) reconciliation.
-
They may ask why the ITC was claimed under CGST/SGST when invoice-wise data shows IGST.
-
If you can’t justify proper utilization as per the Rule 88A order, they may demand reversal of credit + interest.
3. Interest & Penalty
โ
What You Can Do Now
If scrutiny hasn’t happened yet:
-
Reconcile ITC from FY 2019–20:
-
Keep documentation ready:
-
Ledger records
-
Tax invoices
-
GSTR-3B workings
-
Disclose correctly in GSTR-9:
If notice is received:
-
Respond with:
-
Justification that credit was utilized and not claimed in excess
-
If applicable, file DRC-03 to voluntarily reverse and pay interest for any excess ITC (if department insists)
๐งพ Summary
Concern |
Status |
Manual "transfer" of IGST to CGST/SGST |
โ Not allowed under GST law |
Risk due to GSTR-2A mismatch |
โ ๏ธ Possible scrutiny, but manageable with backup |
Action |
โ
Reconcile, prepare documentation, justify utilization order |