Excess IGST adjusted against CGST and SGST during first year of GST does not warrant demand where no revenue loss occurred and error was bona fide: GSTAT Bengaluru

The Tribunal held that while the cross-head adjustment was procedurally incorrect, the substantive outcome — had the taxpayer followed the refund and re-credit route — would have been identical, and the bona fide error during the initial year of GST implementation deserved a lenient view.

The Goods and Services Tax Appellate Tribunal, Bengaluru Bench, has dismissed a departmental appeal and upheld the setting aside of a demand of ₹22,30,128 raised against a motor vehicle dealer who had adjusted excess IGST output tax against CGST and SGST liability in December 2017, during the first year of GST implementation [Commissioner of Central GST, Bengaluru v. MG Automobiles Sales and Services, Ballary].

The respondent, a partnership firm dealing in motor vehicles, had erroneously treated credit notes received from its supplier as additional output tax liability in September to November 2017, instead of reversing the corresponding input tax credit. Upon noticing the error in December 2017, the respondent reversed the ITC and adjusted the excess tax paid. However, since the excess of ₹22,30,083 was under the IGST head while the outstanding liability was under CGST and SGST, the respondent directly adjusted the excess IGST against the CGST and SGST liability instead of either carrying it forward for adjustment against future IGST liability or claiming a refund under Section 54. The Department issued a show cause notice under Section 73 demanding the CGST and SGST afresh.

The Bench of Prabhakaran PM (Judicial Member) and Ravi Jesuraj S (Technical Member) analysed the issue through the lens of Section 49, Section 54, Rule 89 and Rule 92 of the CGST Act and Rules. The Tribunal made a critical observation: had the respondent followed the formal refund route under Section 54 for the excess IGST, Rule 92(1A) would have re-credited the refunded amount to the Electronic Credit Ledger under the IGST head, and Section 49(5)(a) would then have permitted its utilisation towards payment of CGST and SGST. The substantive outcome would have been identical to what the respondent achieved through the shortcut of direct cross-head adjustment. The Tribunal also examined CBIC Circular No. 26/26/2017-GST dated 29.12.2017, which permitted net-basis corrections in GSTR-3B for past months' errors, and found that the respondent had followed the mechanism contemplated therein.

While acknowledging that the cross-head adjustment was procedurally incorrect and that the case law cited by the respondent on wrong-head payment was not directly on point, the Tribunal applied the Karnataka High Court's approach in Orient Traders v. Deputy Commissioner of Commercial Taxes, which held that bona fide and inadvertent errors deserve a lenient view, particularly during the first year of GST. The Tribunal noted that there was no dispute about the availability of excess IGST, no revenue loss had occurred, the initial payment and subsequent reversal demonstrated bona fide conduct, and the error arose from the absence of a column in GSTR-3B to carry forward excess tax paid. The demand, interest and penalty were set aside in full.

2026-juristway.com-2845-GSTAT(Bengaluru)-GST  |  GSTAT Bengaluru  |  APL/43/BUR/2026  |  08.10.2026