CBIC may free up importers' IGST credits to address payment issues

In a bid to facilitate importers who may have underpaid Integrated Goods and Services Tax (IGST) dues, the Central Board of Indirect Taxes and Customs (CBIC) is likely to issue a standard operating procedure (SOP) to enable them to claim input tax credit (ITC) on IGST payments made to rectify shortfalls flagged after Customs clearance.

 

This new protocol for GST field formations could potentially unlock several hundreds of crores worth of input tax credits of importers that are currently stuck, straining their working capital flows, two government officials aware of the development told Business Standard. 

Short payments of IGST on imports are usually discovered during internal audits or regulatory checks, and tend to arise due to valuation differences, classification errors, or other discrepancies. To settle the remaining amount of the originally owed IGST, importers have to pay the shortfall through a TR-6 challan, a manual government receipt used for such payments. 

While the IGST originally paid at the time of import is recorded in the Bill of Entry and is eligible for ITC, the portion paid later through TR-6 challans often does not get linked back to the Bill of Entry. Under existing GST rules, this disconnect prevents businesses from claiming ITC on the remaining tax they’ve subsequently paid, even though it was part of their original import liability. “Earlier, the Application Programming Interface (API) — the digital link between the Customs department’s ICEGATE system and the GST Network (GSTN) — wasn’t working for these post-clearance payments. So details from TR-6 challans couldn’t flow into GSTN to update the Bill of Entry,” an official said. “This meant importers were unable to claim input tax credit on the remaining IGST they paid.” 

“The government is integrating the Customs and GST systems so that TR-6 data can automatically be updated in Bills of Entry, facilitating revisions and ITC claims,” the second official said. “This will align India’s processes with global tax regimes where similar documents are accepted for credit claims.” 

 

To support the changes, the government plans to launch an online platform soon where taxpayers can file voluntary declarations, pay differential duties and interest, and seek refunds electronically. 

“With global supply chains growing increasingly complex, errors in customs declarations often emerge during internal audits, especially at the end of the financial year. Until now, fixing these errors has involved a cumbersome manual process, leading to disputes and delays,” a senior official said. 

The move comes alongside efforts to operationalise a Budget announcement to create a legal framework for voluntary post-clearance corrections. The new provision allows importers and exporters to declare errors in customs filings and pay any short-paid duties with interest, while enabling excess payments to be refunded under existing laws. 

“Businesses face a lot of trouble claiming ITC for IGST paid after goods are cleared, because changing the Bill of Entry takes too much time and paperwork,” said Vivek Jalan, partner, Tax Connect Advisory Services. 

“This requirement creates significant challenges, particularly in cases involving DRI investigations or payments due to transfer pricing adjustments, where reassessment is often impractical or infeasible... A simplified mechanism to integrate TR-6 payments with BoEs in the GSTN system is recommended to ensure seamless ITC availment,” said Suresh Nair, indirect tax partner at EY.

 

Post-facto correction

 

Importers often end up paying lower IGST on imports; largely due to classification errors or valuation differences

 

At present, documents integrated with the GSTN — like Bill of Entry — are valid for claiming input tax credit

 

Importers cannot claim ITC on tax dues paid to rectify shortfalls through TR-6 challans

 

CBIC to issue an SOP to link TR-6 data to bills of entry, enabling automatic updates and ITC claims