Section 21 of CGST Act, 2017 : Section 21: Manner Of Recovery Of Credit Distributed In Excess

Explanation using Example

Imagine a company, ABC Ltd., that has its head office in Mumbai and branches in Delhi and Bangalore. The head office incurs an advertising expense that benefits all branches and receives an invoice for GST paid on this service. The head office, acting as an Input Service Distributor (ISD), is responsible for distributing the GST credit on this service to its branches based on their turnover.

If the head office mistakenly distributes more credit to the Delhi branch than it is entitled to, as per the rules laid out in section 20, this constitutes an excess distribution of credit. According to section 21, the excess credit distributed to the Delhi branch must be recovered from them, along with any applicable interest. Moreover, the process for recovery will follow the provisions of either section 73 or section 74, depending on whether the excess distribution was due to a genuine error or intentional evasion.