A vendor operating in the same State delivers goods or services to your local premises but mistakenly selects an inter-State place of supply on the invoice. Your GSTR-2B displays an IGST amount, while your accounting books record a local purchase requiring CGST and SGST. Many accounts teams wonder whether they can simply claim the IGST credit appearing in GSTR-2B to offset their liabilities. Doing so creates serious exposure to audit demands and tax recovery.
Why the buyer cannot claim ITC when wrong tax is charged
The nature of a supply is determined by statute, not by the description printed on an invoice. When the location of the supplier and the place of supply are in the same State, the transaction is an intra-State supply under Section 9 of the CGST Act. The law requires payment of CGST and SGST. Charging IGST does not convert an intra-State transaction into an inter-State transaction.
Under Section 16(2)(a) and Section 16(2)(c) of the CGST Act, input tax credit is admissible only if the recipient possesses a valid tax invoice issued in accordance with the law and the tax charged has actually been paid to the Government. You can read our detailed guide on input tax credit meaning and conditions to verify how statutory rules govern eligibility.
Notice risk: Availing IGST on an intra-State supply means you have claimed tax under a head where no legal levy existed. Tax officers can disallow the IGST credit, demand reversal, and assess interest. Because you never held a valid tax invoice showing CGST and SGST, you cannot claim local credit until the supplier rectifies the document.
How the supplier corrects the error via credit note and fresh invoice
A buyer cannot unilaterally alter the tax heads on a purchase voucher. The correction must originate from the supplier who generated the document.
The standard statutory method involves the following sequence:
- Issue a credit note: The supplier issues a credit note against the original invoice to reverse the wrong IGST charge.
- Report the credit note in GSTR-1: The supplier declares the credit note in Table 9B of GSTR-1, which reduces the supplier's outward IGST liability and flows to the buyer's GSTR-2B.
- Issue a fresh invoice: The supplier issues a fresh, correctly dated invoice charging CGST and SGST with the accurate place of supply. The serial number must follow Rule 46(b) of the CGST Rules (a consecutive serial number not exceeding 16 characters).
- Report the fresh invoice in GSTR-1: Once the fresh invoice is submitted in GSTR-1, the CGST and SGST amounts reflect in the buyer's GSTR-2B for valid credit availment.
Supplier refund under Section 77 and Section 19
Suppliers often hesitate to correct invoices because they fear paying double tax or losing money already remitted to the portal. The law provides a statutory refund mechanism specifically designed for this situation.
Under Section 19(1) of the IGST Act, a registered person who has paid integrated tax on a supply considered to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall be granted a refund of the integrated tax so paid. Conversely, Section 77(1) of the CGST Act provides the identical refund mechanism where central and State tax were mistakenly paid on a transaction subsequently held to be inter-State.
Under Section 19(2) of the IGST Act and Section 77(2) of the CGST Act, when the supplier pays the correct tax (CGST and SGST), they are not required to pay any interest on the newly assessed correct taxes.
Self-discovery counts: In CBIC Circular No. 162/18/2021-GST, the Board clarified that the phrase 'subsequently held' covers both cases where the tax position is decided by tax authorities and cases where the taxpayer discovers the error on their own. The supplier does not need an adjudication order to claim a refund under Section 77 or Section 19.
The procedural mechanism for filing this refund is prescribed in Rule 89(1A) and Rule 89(2)(j) of the CGST Rules. The supplier applies electronically in Form GST RFD-01 on the GST portal under the category of refund on account of wrong tax paid under Section 77 or Section 19, uploading Statement 6 with details of the transactions.
Worked example: correcting a wrong IGST charge
Consider an equipment servicing company in Maharashtra, Supplier A, providing on-site repair services to Recipient B, also located in Maharashtra. The taxable value of the repair service is ₹1,00,000, with a GST rate of 18%.
Supplier A mistakenly treats the transaction as an inter-State supply and issues Invoice INV-501 charging 18% IGST instead of 9% CGST and 9% SGST.
| Document | Taxable value | Tax charged | Buyer ITC eligibility | Portal impact |
|---|---|---|---|---|
| Original Invoice INV-501 | ₹1,00,000 | ₹18,000 IGST | Inadmissible (wrong head) | Supplier paid IGST in GSTR-3B |
| Credit Note CN-012 | ₹1,00,000 | ₹18,000 IGST | Reverses incorrect invoice | Supplier reduces IGST liability |
| Fresh Invoice INV-509 | ₹1,00,000 | ₹9,000 CGST + ₹9,000 SGST | Eligible in GSTR-2B | Supplier pays CGST and SGST |
The mathematical outcome for both parties is balanced as follows:
- Recipient B does not avail the ₹18,000 IGST credit in GSTR-3B.
- Supplier A issues Credit Note CN-012 for ₹18,000 IGST and fresh Invoice INV-509 charging ₹9,000 CGST and ₹9,000 SGST.
- Supplier A pays ₹9,000 CGST plus ₹9,000 SGST in the next GSTR-3B. Under Section 19(2), zero interest is payable on this payment.
- Recipient B receives Invoice INV-509 in GSTR-2B and validly claims ₹9,000 CGST and ₹9,000 SGST credit.
- Supplier A claims a refund of ₹18,000 under Section 19 of the IGST Act via Form GST RFD-01 Statement 6, or adjusts the liability via the credit note in GSTR-1.
Template letter to send to your vendor
When you discover an invoice with the wrong tax head during your monthly reconciliation, email the vendor's finance team immediately before the monthly return filing deadline.
Frequently asked questions
Can a buyer claim IGST credit if the transaction is intra-State?
No. When the supplier and the place of supply are in the same State, the supply is legally intra-State. Tax paid under the wrong head cannot be set off or regularised as valid input tax credit by the buyer.
How does the supplier fix an invoice with the wrong tax type?
The supplier issues a credit note to cancel the original invoice charging IGST, reports the credit note in GSTR-1, issues a fresh invoice charging CGST and SGST, and pays the correct tax in GSTR-3B.
Does the supplier pay interest when correcting tax from IGST to CGST and SGST?
No. Under Section 19(2) of the IGST Act, a registered person who paid integrated tax on a transaction subsequently held to be intra-State is not required to pay interest on the central tax and State tax liability.
Check your own GSTR-2B
Catch tax head discrepancies and place of supply mismatches between your purchase register and supplier returns before filing GSTR-3B. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 23 October 2026. Sources: Section 19 of the IGST Act, Section 77 of the CGST Act, CBIC Circular No. 162/18/2021-GST, GSTN Returns Portal Guide.