Reversal of IGST Credit Not Needed When Misclaimed as CGST and SGST

In a landmark decision on April 30, 2024, the Calcutta High Court addressed a critical issue affecting many businesses across India regarding the GST. Thus, This ruling has significant implications for how companies manage their GST compliance. Let’s understand all about it through this article.

The Case Overview

The issue at the heart of this case was whether IGST credits need to be reversed if they are wrongly claimed in lieu of CGST and SGST credits.

M/s. Cosyn Limited had availed IGST credits and used them for payment of CGST and SGST. And then it was challenged by the tax authorities.

What the Court Said

The Calcutta High Court decided that there is no necessity to reverse the IGST credits because they have been legitimately used for GST payments. The court’s decision highlights following key points:

Legitimate Use of Credits: As long as the IGST credits are used legitimately for the payment of CGST and SGST, businesses do not need to reverse them even if they were initially claimed by mistake.
Refund of Deposits: The court also ordered that any pre-deposits made by the petitioner (in this case, 10% as per the interim order) should be refunded within eight weeks from the date of receipt of the final order.

Reversal of IGST Credit: Key Takeaways for you

Businesses can be more confident in their use of IGST credits while GST Return Filing without risk of having to reverse them owing to misclassification.
With the court’s clarification, businesses can better plan their tax payments and manage their cash flow.

Tips for Businesses

Consult Tax Professionals: To ensure compliance with the GST framework, consult with tax professionals who can provide guidance based on the latest legal precedents.
Review GST Credit Management: Besides, regularly review your GST credit management practices to ensure they align with current laws and court decisions.