Relevant date for claiming refund, Goods and Services Tax - GST

[Kaustubh Karandikar]

GST wrongly paid under the head CGST + SGST instead of IGST in June’2019. Mistake noticed by the Range Officer in July’2023. If the IGST is paid now in July’ 2023, can refund be claimed of CGST + SGST in July’ 2023 by taking shelter of Rule 89(1A) read with Circular No. 162/18/2021 dt. 25.09.2021? In my view, it can be claimed. Views of the experts please.

Posts / Replies

[Padmanathan Kollengode]

Yes. Amended Rule 89 provides that the "relevant date" would be 2 years from date of payment under correct head of tax.

The example in Circular 162, Seriel No 4 of Para 4.3 also clarifies the same.

[GUNASEKARAN K]

The relevant date for claiming refund under section 77 of the CGST Act/ Section 19 of the IGST Act, 2017

4.1  Section 77 of the CGST Act and Section 19 of the IGST Act, 2017 provide that in case a supply earlier considered by a taxpayer as intra-State or inter-State, is subsequently held as inter-State or intra-State respectively, the amount of central and state tax paid or integrated tax paid, as the case may be, on such supply shall be refunded in such manner and subject to such conditions as may be prescribed. In order to prescribe the manner and conditions for refund under section 77 of the CGST Act and section 19 of the IGST Act, sub-rule (1A) has been inserted after sub-rule (1) of rule 89 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”) vide notification No. 35/2021-Central Tax dated 24.09.2021. The said sub-rule (1A) of rule 89 of CGST Rules, 2017 reads as follows:

 “(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

 Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on which this sub-rule comes into force.”

[Amit Agrawal]

While I concur with my professional colleagues, it needs to be noted that said provisions of law & quoted rule applies where tax-payer has treated a supply as intra-state supply which is subsequently held as inter-state supply or vis-a-versa.

But, this route of claiming refund can be disputed by Revenue where tax-payer had correctly classified a supply as inter-state or intra-state (as the case may be), charged & collected correct taxes (i.e. as per correct nature of supply) in his tax-invoice but paid taxes under wrong head.

In this context, querist is requested to throw more lights on factual aspects involved for the query raised.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan Kollengode]

I agree with ld friend Amit Ji.

The previous post is under the assumption that the queriest case is infact covered under 77 rws 19 of IGST Act.

The querist may confirm the following

1. whether the invoice was issued charging wrong tax? or

2. whether It was only a payment of tax under wrong head in GSTR-3B?

[Kaustubh Karandikar]

Respected Amit ji and Padmanathen ji, the invoice was correctly issued but while filing Return GSTR - 3B, it was wrongly paid under CGST + SGST instead of IGST. Will it affect anyway the refund claimed? if yes then what is the remedy for getting back the GST paid twice for the same transaction?

[Amit Agrawal]

Revenue is expected to treat payment of taxes made in June, 19 as wrong / excess payment of taxes and deny the taxpayer the benefit of earlier quoted provisions (including denial of relief from from interest-liability).

Assuming that extended date of claiming refund, using covid-related extensions granted by SC, is also not available in given case, following can be done:

A. Pay taxes under IGST, against Dept's observation / objection, wherein the fact that tax-payer has considered very same supply as 'Intra-state' and paid taxes under CGST & SGST - while filing return in from GSTR-3B - should be brought clearly on record of Dept.

B. Seek benefit of Section 77 of CGST Act, 2017 read with Rule 89(1A) & Circular No. 162/18/2021 dt. 25.09.2021 and claim refund of earlier taxes so paid in June, 2019.

C. If Dept. proposes rejection of refund-claim so sought (as feared, for reasons briefly mentioned in my earlier post)), kindly submit reply to such SCN by taking - very broadly specking - following two grounds:

1. Your disclosure of very same same as 'intra-state' while filing form GSTR-3B, which is now treated as inter-state by Dept. while demanding IGST, itself means that you have duly & fully fulfilled conditions to seek benefit of Section 77 read with Rule 89 (1A).

2. Alternatively and without prejudice to above, payment made by the tax-payer in June, 19 cannot be treated as 'wrong / excess payment of taxes' at all (i.e. same are only amount deposited / paid in name of taxes but same was NOT tax-payment per se). With suitable evidence/s like CA certificate, you can prove that those taxes were never charged & recovered from any one and burden there-against was never passed on anyone (Plus, you have already paid taxes i.e. IGST, as charged & recovered).

3. And there is no time-limit applicable for claiming refund for such deposits / payments and Govt. cannot keep such amounts with itself as taxes without any authority of law. You can quote multiple HC rulings which are favouring tax-payer in this regard.

4. But, please be mindful of Nine member Bench of Supreme Court's decision in case of Mafatlal Industries v. Union of India, to understand the risks involved.

Also, there is option of filing writ petition once SCN is issued proposing denial of refund in given set of facts.

These are broad guidelines only. One needs to be careful while replying to objections of Dept., while paying taxes under correct head, while seeking refund and reply to SCN proposing denial of refund (where reply needs to be suitably fine-turned, based on actual allegations / charge against the tax-payer) etc.

This can be long-drawn legal battle where when tax-payer is not paying interest seeking benefit of Section 77 (2) & Dept. starting separate proceedings u/s 73 / 74 for non-payment of taxes (though duly charged & collected in June, 19). And same needs also be separately defended seeking benefit of Section 77 as well as non-applicability of Section 74 (if same section is indeed used) for given set of facts & circumstances.

Last but not the least, one need to take the quantum involved in given case & associated issues on practical side, before embarking on journey of seeking justice.

All said & done, what tax-payer has done here is a default of very technical nature with zero gains. And this is fit case where Govt / CBIC must comes with suitable clarification / instructions to their officers by taking holistic view favouring such tax-payers.

But till then, this can be long-battle, though I sincerely hope that officer takes holistic view and grant the tax-payer benefit of Section 77 read with rule 89 (1A).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Sh.Kaustubh Karandikar Ji,

I agree with the detailed and fool-proof views of Sh.Amit Agrawal Ji at serial nos.3 & 6. All aspects and possibilities of risks involved highlighted. Also peruse Section 54 (8) (e) of CGST Act in this context. You will have to fight on both grounds.

Relief without litigation not possible.

[Amit Agrawal]

I thank Shri Kasturi Sethi Ji for highlighting Section 54(8)(e) of CGST Act which reads as under:

"the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person"

Explanation given under Section 54 is worth noting:

"Explanation.-For the purposes of this section,––

(1) ..................................

(2) “relevant date” means-

..........................................

(h) in any other case, the date of payment of tax."

For restrictions of time-limit to claim refund against amount deposited in June, 2019, in support of grounds given in my earlier post in sub-Para (2) & (3) of Para C, one can also argue that Section 54 (8) (e) of CGST Act deals with "the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person" and what was paid in June, 19 was not 'tax' per se (but amount paid under the head of tax). Section 51 (1) also talks about refund of any other amount paid as well'. And there is no relevant date (for claiming refund) prescribed for claiming refund of such amount in given scenario. This argument can then be supported by many HC rulings which are available favouring person claiming refund (on the basic premises that no taxes can be collected without authority of law & Govt. cannot deny refund of amount wrongly deposited / paid as taxes).

Needless to say, Dept. is expected to argue otherwise.

And as said before, this can be long-drawn battle on multiple fronts (i.e. unless Dept. takes holistic approach & give benefit of Section 77 read with rule 89 (1A), which can not assured though one always hope for the best) but tax-payer needs to be ready to bear this gruesome process to get justice.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Kaustubh Karandikar]

Thanks Kasturi Ji for your additional caution on this issue

[KASTURI SETHI]

Dear Sir, The following case laws worth perusal in this scenario :-

2023 (3) TMI 628 - MADRAS HIGH COURT DEEPA TRADERS VERSUS PRINCIPAL CHIEF COMMISSIONER OF GST & CENTRAL EXCISE CHENNAI, TAMIL NADU, SUPERINTENDENT OF GST, CENTRAL EXCISE, COIMBATORE GOODS AND SERVICES TAX NETWORK (GSTN) , NEW DELHI Sun Dye Chem Order dated 6.10.2020 of Madras High Court reported as 2021(44)GSTL.358(Madras)

[Kaustubh Karandikar]

Kasturi ji, thanks for taking the sincere pains for sharing the case law which is very much relevant for the issue under discussion and will definitely help the tax payer if the matter reaches court.

[Padmanathan Kollengode]

Respected Sirs,

Reading the replies, the following thoughts are coming to my mind:

In this case, practically speaking, refund cannot be filed under section 77 because of the following reason:

The annexure to the refund application to be submitted by assessee is mapped to GSTR-1 for validation.

In this case, I assume that GSTR-1 is filed declaring the correct taxes as per the invoice and the mistake was committed only in GSTR-3B.

Hence, it would not be possible to file the refund application itself due to the validation error in the annexure.

This is my understanding from practical experience.

[Padmanathan Kollengode]

With regard to the refund issue:

A. In my humble opinion, any amount wrongly paid as "tax" will not be covered under section 54 itself and hence question of relevant date does not arise.

B. "Any other amount paid by him" has to be read in the colors of tax and interest and would include cess, fee etc and in my opinion cannot be extended to an amount paid purporting to be "tax", applying Ejusdem generis and noscitur sociis.

C. One should Keep in mind Article 265 - No tax can be levied or collected without the authority of law.

D. Therefore, Section 72 of contract Act comes to effect and 3 years limitation period would be applicable as per Limitation Act.

[KASTURI SETHI]

With reference to sub-section (e) of Section 54, see the power and essence of 'coma' and 'or' in the clause, 'the tax and interest, if any, or any other amount-------" the phrase 'any other amount' cannot be read in isolation. The word 'or' is conjunction and it connects 'tax and interest'. Cannot be segregated grammatically. .

ITC paid in excess in the form of IGST or CGST/SGST is a tax and interest is also integrally related to tax.

Section 72 of Contract Act cannot come into play.

[Padmanathan Kollengode]

Learned Kasturi Sir,

I find your last post contradictory for the following reason:

"With reference to sub-section (e) of Section 54, see the power and essence of 'coma' and 'or' in the clause, 'the tax and interest, if any, or any other amount-------" the phrase 'any other amount' cannot be read in isolation. The word 'or' is conjunction and it connects 'tax and interest'. Cannot be segregated grammatically."

I agree to the view thay " , " and "or" in section 54 connects "any other amount" with "tax" and "interest" and that "any other amount" cannot br read in isolation.

That is exactly why I am of the view that something which is paid purporting to be "tax" but which is not a "tax"at all (As per Article 265) cannot fall within ambit of "any other amount".

However I find it had to under the below view:

ITC paid in excess in the form of IGST or CGST/SGST is a tax and interest is also integrally related to tax.

Section 72 of Contract Act cannot come into play.

1. The facts of the case above do not speak about any ITC at all. It is purely a case of outward supply wrongly paid.

2. Secondly and importantly, any amount which is collected or retained by Govt without authority of law, cannot be tax.

regards

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

1. The facts of the case above do not speak about any ITC at all. It is purely a case of outward supply wrongly paid.------I Agree with you

2. Secondly and importantly, any amount which is collected or retained by Govt without authority of law, cannot be tax.--------I agree with you.

W.r.t. above at serial no.2 here, that is why time limitation is not applicable. There are so many case laws to this effect (including High Courts). In view of case laws, I have written that Section 72 Contract Act does not come into play.

 

 

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

My views at serial no.14 dated 26.7.23 are not contradictory.

The root cause of lapse is payment of 'tax' under wrong head.

To bring the amount of tax paid in excess within fold of phrase , 'any other amount' , for the purpose of refund claim, requires further penetration. Section 77 is also subject to Section 54. Refund claim is possible only in Section 54.