Refund of Tax Paid under Sec.
77(1) of CGST Act, 2017 – Clarification
·
Tax paid in wrong head of
IGST/SGST/CGST can refunded after mistake corrected within two years
[Circular
No. 162/18/2021-GST
dated 25 September, 2021]
Subject: Clarification in respect of refund of tax specified in section 77(1) of the CGST Act
and section 19(1) of the IGST Act
Representations
have been received seeking clarification on the issues in respect of
refund of tax wrongfully paid as specified in section 77(1) of
the Central Goods and Services
Tax
Act, 2017 (hereinafter referred to as “CGST Act”) and section 19(1)
of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as “IGST Act”). In order
to clarify
these issues and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST
Act, hereby clarifies the issues
detailed hereunder:
2.1 Section
77 of the CGST Act, 2017 reads as follows:
“77. Tax wrongfully collected and paid to Central Government or
State
Government. — (1) A registered person who has paid the Central tax and State tax or,
as the case may be, the Central tax and the Union territory tax on a transaction considered by him to be an intra-State supply, but which is
subsequently held to be
an inter-State supply, shall be refunded the amount of taxes so paid
in such manner
and subject to
such conditions
as may be prescribed.
(2) A registered person who has paid integrated tax on a transaction considered by
him to be an inter-State supply, but which is subsequently held to be an intra-State
supply, shall not be required
to pay any interest on the amount of central
tax and State tax or, as the case may be,
the Central tax and the Union
territory tax payable.”
Section 19 of
the IGST Act, 2017 reads as follows:
“19. Tax wrongfully collected and paid to Central Government or
State
Government------(1) A registered person who has paid integrated tax on a supply
considered by him to be an inter-State supply, but which is
subsequently held to be
an intra-State supply,
shall
be granted refund
of the amount of integrated tax so
paid in such manner
and subject to
such conditions as
may
be prescribed.
(2) A registered person who has paid central
tax and State tax or Union
territory tax, as the
case
may be, on a transaction considered by
him to be an intra-State
supply, but which is subsequently held to be an inter-State supply, shall not be required to
pay any interest
on the amount of integrated
tax payable.”
3.
Interpretation
of the term “subsequently
held”
3.1
Doubts have been raised regarding the interpretation of the term “subsequently held” in
the aforementioned sections, and whether refund claim under the said sections is available
only if supply made by a taxpayer as inter-State or intra-State, is subsequently held by tax officers as intra-State and inter-State
respectively, either on scrutiny/ assessment/ audit/ investigation, or as a result of any adjudication, appellate or any other
proceeding or whether
the refund under the said sections is also available when the inter-State or
intra-State supply made by a taxpayer, is subsequently found by taxpayer himself as intra-State and inter-State respectively.
3.2
In this regard, it is clarified that the term “subsequently held” in section 77 of CGST
Act, 2017 or under section 19 of IGST Act, 2017 covers both the
cases where the
inter-State
or intra-State supply
made by a taxpayer, is either subsequently found by
taxpayer himself as intra-State or inter-State respectively or where the inter-State or intra-State supply
made
by a taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer in any
proceeding. Accordingly, refund claim under the said sections can be claimed by
the taxpayer in both the above mentioned situations, provided the taxpayer pays the required
amount of tax in the correct head.
4. 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.”
4.2
The aforementioned amendment in the rule 89 of CGST Rules, 2017 clarifies that the refund under section 77 of CGST Act/ Section 19 of IGST Act, 2017 can be claimed before the
expiry of two years from the date of payment of tax under the correct head, i.e. integrated tax
paid in respect of subsequently held inter-State supply, or central and state tax in respect of subsequently held intra-State supply, as the case may be. However, in cases, where the taxpayer
has
made the payment in the correct head before the date of issuance of notification No.35/2021-Central Tax dated 24.09.2021,
the refund application
under section 77 of the CGST
Act/ section 19 of the IGST Act can be filed before the expiry of two years from the date
of issuance of
the said notification. i.e. from
24.09.2021.
4.3
Application
of sub-rule (1A) of
rule 89 read with section
77 of the CGST Act / section
19
of the IGST Act is
explained through following
illustrations.
A taxpayer “A”
has issued the invoice dated 10.03.2018 charging CGST and SGST on a transaction and accordingly paid the applicable tax (CGST and SGST) in the return for March,
2018 tax period. The following
scenarios are explained
hereunder:
|
Sl.no. |
Scenario |
Last date for filing the refund claim |
|
1 |
Having realized
on his own that the said transaction is an inter-State supply, “A” paid
IGST in respect of the said transaction on
10.05.2021. |
Since “A” has paid the tax in the correct head
before issuance of
notification No. 35/2021-Central
Tax, dated 24.09.2021,
the last date for filing refund application in FORM GST RFD-01 would be 23.09.23 (two years from date of notification) |
|
2 |
Having realized
on his own that the said transaction is an inter-State supply, “A” paid
IGST in respect of the said transaction on
10.11.2021 i.e. after issuance of notification No. 35/2021-Central Tax dated
24.09.2021 |
Since “A” has paid the correct tax on 10.11.2021, in terms
of rule
89 (1A) of the CGST Rules, the last date
for filing refund application in FORM
GST RFD-01 would be 09.11.2023 (two
years from the date of
payment of tax under the correct head, i.e.
integrated tax) |
|
3 |
Proper officer or adjudication authority or appellate authority
of “A” has held the
transaction as an inter-State supply
and accordingly, “A” has paid the IGST in respect of the said transaction on
10.05.2019 |
Since “A” has paid the tax in the correct head
before issuance of
notification No. 35/2021-Central Tax, dated
24.09.2021, the last date
for filing refund application in FORM
GST RFD-01 would be 23.09.23 (two years from date of notification) |
|
4 |
Proper officer or adjudication authority or appellate authority
of “A” has held the
transaction as an inter-State supply
and accordingly, “A” has paid the IGST in respect of the said transaction on 10.11.2022 i.e. after
issuance of notification
No. 35/2021- Central Tax dated
24.09.2021 |
Since “A” has paid the correct tax on 10.11.2022, in terms
of rule
89 (1A) of the CGST Rules, the last date
for filing refund application in FORM
GST RFD-01 would be 09.11.2024 (two
years from the date of
payment of tax under the correct head, i.e.
integrated tax) |
The examples above are only indicative one and not an exhaustive list. Rule 89 (1A) of the CGST Rules would be applicable for section 19 of the IGST Act also, where
the taxpayer has initially paid IGST on a specific transaction which later on is held as intra-State supply and the
taxpayer accordingly pays CGST
and SGST on the said transaction. It
is also
clarified that any refund applications filed, whether pending
or disposed off, before issuance of notification No.35/2021-Central Tax, dated 24.09.2021, would also be
dealt in accordance with the
provisions of rule 89 (1A)
of the CGST Rules, 2017.
4.4
Refund under section 77 of the CGST Act / section 19 of the IGST Act would not be
available where the taxpayer has made tax adjustment through issuance of credit note under
section 34 of the CGST Act in
respect of the said transaction.
5.
It
is requested that suitable trade notices may be issued to publicize the contents of this circular.
6.
Difficulty, if any, in implementation
of this Circular may please be brought to the notice of the
Board.
F. No. CBIC-20001/8/2021-GST