GST UPDATE no. 260 on Limitation period for Refund of Tax paid under wrong head

The paradigm shift from the erstwhile indirect tax regime to GST regime has increased the complications, specially as regards determination of the transaction as inter state/intra state and the chargeability of GST on the same. During the initial years of GST implementation, there were various errors committed as regards the determination of the nature of transaction as that of intra state/inter state thereby leading to payment of tax under wrong head. This resulted into double payment of GST in various cases. However, the assessees find it difficult to claim the refund of tax paid under wrong head and similar issue was reported before hon’ble Karnataka High Court in the case of M/S TAFE ACCESS LTD. V/S DEPUTY COMMISSIONER OF CENTRAL TAX. The decision delivered in this case is subject matter of discussion of our present update. The petitioner filed a Writ Petition seeking relief in the form of refund of IGST paid by mistake. IGST of Rs. 7,40,972/- was inadvertently paid for the Assessment Year 2017-18, which was discovered during internal audit and was subsequently communicated to the Deputy Commissioner vide letter as on 07.07.2020. The petitioner sought for refund of the said amount which was rejected by the departmental authorities. The Counsel of petitioner relied on CBIC Circular No. F. No. CBIC20001/8/2021-GST dated 25.09.2021 clarifying that refund application must be applied within a period of 2 years from date of payment of tax under correct head which was 30.01.2020. The refund application was filed as on 07.07.2020 i.e. within 2 years and hence, refund is entitled to them. The Counsel for the revenue on the other hand argued that the said Circular should be read along with Section 54(8) of the CGST Act, 2017. A harmonious reading of the same represents that refund under Section 77 cannot be applied for Section 54 of CGST Act, 2017. Further, writ petition is not maintainable as the impugned order is appealable under section 107 of the CGST Act, 2017. The Court considered the submissions and stated that although it is undisputed that the petitioner mistakenly paid GST twice for which refund application is also filed within a period of 2 years in accordance with the limitation of 2years from date of payment of tax under the correct head. Hence, the refund application is filed timely by the petitioner. However, it was also held that the contentions raised by revenue department regarding availability of appellate remedy to the petitioner is also correct. However, remanding of case back to the appellate authority would not be just and appropriate and hence, the writ petition is allowed. It was directed to the departmental authority to consider the refund application and refund the amount within an outer limit of three months from the date of receipt of copy of the order. The above favourable decision proved to be a silver lining in the clouds for the trade and industry and is also in alignment with the recent clarification issued vide CBIC Circular No. F. No. CBIC-20001/8/2021-GST dated 25.09.2021. It is logical that the time limit for claiming refund should commence from the date when course of action arose rather than the actual date of payment. In cases where tax has been paid under wrong head, the course of action is the date of payment of tax under correct head and so it is rightly held that limitation period of 2 years should start from the date of payment of tax under correct head.

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GST UPDATE no. 260 on Limitation period for Refund of Tax paid under wrong head

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