Wrongful collection or payment of GST to the government

The concept of GST been on face for goods and service taxes since 2017 which is a new concept with new tax structure designed and are applicable on consumable goods and services. The collections of GST are based on the territory which further classified as CGST, SGST and IGST.  With varying GST payment there are chances of wrongful payment of taxes to the government hence, with reference to “Shree Nanak Ferro Alloy Pvt. Ltd. Vs Union of India” the High Court of Jharkhand held that, Under Section 77(1) of CGST Act, read with Section 19(2) of IGST Act lays down that a registered person who has paid the CGST wrongfully in the place of IGST is entitled for a refund, in the above said case the petitioner was directed to deposit IGST and there shall lie no liability to pay any interest on another hand the court held and notified the eligibility to apply for a refund for the paying CSGT or they may get the amount adjusted against their future liabilities, in accordance with the law. 

Table of Contents:

Introduction 

The sale under GST are classified as Intra State and Inter State types of sales where the Intra State sales actually pay IGST and Inter State sales pay CGST and SGST, further, if there raises any wrongful payment in terms of GST a refund could be claimed according to Rule 92(1) of CSGT Rule, 2017. 

Governing Law(s) 

Section 77 CGST Act

Tax wrongfully collected and paid to the Central Government or State Government 

Sec 77(1) – A registered person paying the GST under different head of CGST or SGST shall be eligible to initiate and claim refund the amount of taxes paid in accordance with the Law and subject prescribed. 

Sec 77(2) – A registered person who has paid tax considering the nature of sale as Inter-State where in which is actually a Intra-State supply, shall not be imposed with any interest either on Central and State tax or Union Territory tax. 

Chapter X of CGST Rule on Refund

Rule 89Application for refund 

Any registered person can claim refund of tax, interest, penalty, fees or any amount paid exempting the refund on integrated tax paid on goods exported out of India, may file an electronic application in FORM GST RFD-01 along with a certificate acquired by a Charted Accountant or Cost Accountant to the effect that the incidence of tax, interest or any other claim made as refund (applicable for the claim which exceeds INR 2 lakh. 

The application of FORM GST RFD-01 shall be accompanied by following documentary evidence 

  • Reference number of the order and a copy of the order passed by the proper officer or an Appellate Authority or Appellate Tribunal or Court.
  • Statement containing the number and date of shipping bills or bills of export and the number and the date of relevant export invoices where the refund is on account of export of goods. 
  • When the refund is on export of services, a statement containing the number and date of invoices and bank Realisation Certificates or Foreign Inward Remittance Certificate. 
  • Statement showing the details of transaction considering as intra-state supply but which is subsequently held to be inter-state supply.
  • Statement showing the details of the amount of claim on account of excess payment of tax

In case of Special Economic Zone the details are collected by SEZ UNIT OR SEZ Zone developer and the details of invoice, bank transaction etc presented according to the Rule 46 compiling with Rule 89 of CGST Rule.

Rule 90 – Acknowledgment 

When the applicant fills in FORM GST RFD-01 relating refund and other claim shall receive an acknowledgement in FORM GST RFD-02 which indicates the date of filing of claim for refund and the time period for such shall be 60 days (Section 54(7) of CGST Act.

Acknowledgement – The application for refund shall be forwarded to the proper officer who shall, within a period of 15 days of filing scrutinize the application and produce with an acknowledgment in FORM GST RFD-02 

Deficiencies in record – where any deficiencies are noticed, the proper officer shall the deficiencies be communicated with the applicant in FORM GST RFD-03 

Rule 91 – Grant of Refund 

The registered officer has to initiate the refund procedure within 5 years of immediately preceding the tax period. After the verification of the documents and other related document the proper office shall make an order in FORM GST RFD-04 sanctioning the amount of refund within or not exceeding 70 days from the date of such acknowledgement. The sanctioned amount shall be electronically credited to the bank account of the applicant mentioned in the registration particulars and as specified in the application for refund by issuing FORM GST RFD-05 by the proper officer. 

The order of such sanction or refund shall be made through FORM RFD-06 and the proper officer shall issue FORM GST PMT-03 immediately after re-crediting the said amount as Input Tax Credit in E-Ledger.   

Penalty – for any tax evasion be found by the proper officer the registered person shall be entitled to pay a penalty of INR 2 lakh. 

IGST Act – Section 19

Tax wrongfully collected and paid to Central or State Government  

Section 19(1) – A registered person, who has paid tax on Inter-State instead of Intra-State, shall be granted a refund of the amount paid.

Section 19(2) – A registered person, who has paid Central tax and State tax or Union territory tax as an intra state supply which is held to be an intra state supply shall not require to pay any interest on the amount of integrated tax payable.   

When inter-state is wrongfully treated as an intra-state 

When the registered person pays CSGT or SGST on an inter-state supply transaction instead of IGST shall be eligible for a refund of the amount paid as CGST or SGST. 

When intra-state wrongfully treated as an inter-state 

When the registered person pays IGST an inter-state supply transaction instead of CGST or SGST has to pay the concerned tax to the authority and a refund has to be claimed with the concerned authority. 

NOTE – until there’s an ulterior motive to evade tax on the registered person’s part and the same being brought to light by proper officer the registered person need not pay any interest for wrongful payment of tax.  

Situation where the excess payment of GST arises 

  • Wrongful GST head – if the registered person pays the tax wrongly under GST head such as SGST, CGST, IGST.
  • Erroneous calculation of tax amount – while calculation the accountants might calculate and quote an incorrect tax amount while filing FORM GSTR-3B.
  • Incorrect details – Business owner owning multiple business may enter wrong GSTIN and file and pay wrongful tax. 
  • Advance tax payment – n the case where the taxpayer has paid an advance in the GST and the cancellation of such transaction can be eligible for claiming refund. 

How to claim refund 

To claim the refund the registered person must be a resident of India and the refund amount should be more than INR 1000. Further to the above mentioned, the checklist for claiming refunds are as below – 

  • Login to the GST portable, insert GSTIN eligible for refund
  • Click service – refund – application for refund 
  • Select the financial year and month 
  • Click on create 
  • FORM GST RFD-01 will be displayed 
  • Under Details of Excess Payment of Tax – enter the value 
  • Selection of Bank Account Number 
  • Uploading supporting documents 
  • Click on save 
  • Download the submitted form 
  • Undertaking and self declaration has to submitted by selecting an authorized signatory, the signature could be of DSC or filing could be done with EVC, to proceed with signature EVC gets an OTP and DSC needs an signature  
  • With successful submission notification shall be sent to the registered E-mail ID and Mobile Number 
  • After submission, the status of the application can be tracked from GST portal by following the steps such as Services – Refunds – Track application status – Enter ARN

Final words 

With no intention to evade tax and by the mistake of the tax payer while paying GST files and pays the tax under different head of GST or by depositing an excess tax amount of tax due to the incorrect calculation shall be eligible for a refund and the payment of the GST under the appropriate head of GST with no penalty or interest and the refund shall be initiated by the proper officer after the verification of the documents and seems satisfied the refund shall be initiated within 60 working days from such date. 

While the Government provides and proceeds with transparency and lenience the tax payer is expected to utilize the concerned provision with no ulterior motive and with any difference of opinion raises, the tax payer has to pay the tax amount along with an interest and penalty. 

CategoryGST

CA Rishabh Maheshwari is an associate Chartered Accountant having expertise in conducting statutory and internal audits of large clients. He has also done a certified course on Concurrent audits of banks. He is responsible for coordination, planning, team leadership in connection with Audits and GST of Private and Public Companies with an experience of almost 3 years.

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