GST Ledger Mix-Up: A Practical Fix for CGST & SGST Claimed as IGST

1. What the law says about “wrong-head” ITC

Provision / Guidance	Key point	Practical impact
s. 16(2) CGST Act (basic ITC conditions)	Credit can be taken only for the tax actually “charged” on the supplier’s invoice.	If the invoice shows IGST but you booked it as CGST + SGST, the conditions of s. 16(2)(a) are technically not met, so the credit is prima facie “wrongly availed”.
s. 49(5) (order of utilisation)	Ledger is common, but set-off rules decide which head can pay which liability.	Mis-posting does not create revenue loss for the exchequer, yet the posting is irregular.
CBIC Circular 192/04/2023-GST, 17 Jul 2023	• Interest under s. 50(3) is due only if, between availment and reversal, the total ITC balance (IGST + CGST + SGST taken together) ever fell below the wrongly-availed amount. • If the ledger always had surplus, no interest is payable. Goods and Services Tax Council	Gives an objective test to decide whether interest is needed.
Kerala HC – Rejimon P. Alex (WA 54/2024, 26 Nov 2024)	Held that claiming IGST as CGST/SGST is a revenue-neutral technical error; demand for reversal/interest was quashed. TaxO	Useful precedent (persuasive outside Kerala; not yet before SC).
Calcutta HC – Agro Trade Centre (order 11 Jun 2025)	Stayed reversal of CGST/SGST claimed in place of IGST because “no loss to revenue”. Taxscan	Shows emerging pan-India judicial trend.

2. Do you have to reverse the FY 2019-20 CGST + SGST credit?

1. Strict legal view (department’s traditional stance)
   Because the invoice bore IGST, the credit under CGST/SGST heads is unsupported, so it must be reversed together with interest (if utilised).
2. Defensible view based on Circular 192/2023 and recent HCs
   If, at all times from the date of availment till today, your overall ledger balance exceeded the mis-posted amount, the credit was never “utilised”; therefore:
   • No interest (per Circular).
   • Courts have treated the mis-posting as curable without reversal where revenue neutrality is demonstrated.

Bottom line:
You are not automatically compelled to reverse if you can demonstrate revenue neutrality and rely on the above jurisprudence, but you must be prepared for departmental scrutiny.

3. Recommended step-by-step approach

Step	What to do	Why / Reference
A. Detailed Reconciliation	Prepare invoice-wise list of FY 2019-20 purchases where IGST was booked as CGST/SGST. Compute: (i) wrongly-posted amount, (ii) running ledger balance month-by-month to prove it never went negative.	Needed to satisfy the Circular 192/2023 “ledger-balance” test and to defend in any SCN.
B. Risk assessment	• If ledger never dipped below mis-posted amount → low interest risk. • If it dipped → interest @ 18 % from date of first shortfall to date of reversal.	s. 50(3) read with Circular.
C. Choose your compliance path	Path 1 – Conservative (future enquiry unlikely) 1. Reverse the CGST + SGST credit in Table 4(B)(2) of the current GSTR-3B. 2. Pay interest if applicable through Form DRC-03 (Reason: “Voluntary payment – wrong head ITC”). 3. Re-avail IGST? – Time-bar under s. 16(4) (30 Nov 2020) has passed, so re-availment is not legally permissible. The cost is loss of credit.	Eliminates procedural exposure but sacrifices IGST ITC.
	Path 2 – Judicial / Revenue-neutral (recommended where credit loss is material) 1. Keep the credit intact. 2. File a letter / rectification application u/s 161 to jurisdictional officer explaining the error, annexing reconciliation and citing Rejimon P. Alex & Agro Trade Centre decisions plus Circular 192/2023. 3. Request the officer to treat the posting as a technical error not warranting reversal/interest. 4. If SCN is issued, rely on the same authorities in reply/appeal. 5. Maintain contemporaneous working papers.	Preserves the monetary benefit; litigation risk exists but precedents are favourable.
D. Update annual returns	If you choose Path 1, reflect reversal in the next GSTR-9/9C in “ITC reversed”. If Path 2, disclose the technical mis-posting and cite the legal position in the Auditor’s Note.	Transparency reduces penalty exposure u/s 122.
E. Strengthen future process	1. Add a ledger-scrubbing check before 20th of every month. 2. Automate GSTR-2B-to-books mapping so that tax heads follow the supplier invoice. 3. Train AP team on intra- vs inter-state indicators (place of supply rules).	Prevents recurrence.

4. Points to keep in mind

• Time-bar for fresh IGST claim: For FY 2019-20 the deadline is long past, so any new IGST credit entry will be disallowed.
• Interest computation: Only if total ITC balance was ever below the mis-posted amount – use Circular 192/2023’s methodology.
• Applicability of High-Court rulings: Not yet settled by the Supreme Court; department may contest outside Kerala/Calcutta.
• Voluntary payment shields: If you opt for Path 1, paying by DRC-03 before SCN avoids 15 % penalty exposure under s. 73(5).

---

Quick checklist (tick before finalising)

• Invoice-wise workbook done
• Monthly ledger balance check done
• Management decision on Path 1 vs Path 2 documented
• If Path 1: DRC-03 filed & reference no. stored
• Annual return disclosure drafted

Practical tip: Even if you take the revenue-neutral stand, consider provisioning interest in your books until the matter is either accepted in writing by the department or attains finality in appeal, to avoid surprises during statutory audit.

---

Disclaimer: This analysis is based on the CGST/SGST/IGST Acts as amended up to 22 Jul 2025, CBIC Circular 192/04/2023-GST, and the cited High-Court rulings. Always evaluate case-specific facts and maintain documentary evidence before adopting the suggested approach.