CBIC issued a clarification on vide Circular No. 162/18/2021-GST on 25.09.2021 address the issues pertaining to refund of tax wrongly paid as IGST in place of CGST/SGST and vice versa.
To understand the issues involved, reference has been made below to Section 77 of CGST Act, 2017–
Relevant Provision
“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.”
Frequent doubts were emerging in respect of the following matters which have been resolved through the aforementioned circular-
- Whether refund will be available when the fact that tax has been paid under wrong major head is found out on the basis of scrutiny/ assessment /audit/investigation/adjudication/ any other proceeding or when the same is found out by the taxpayer himself?
- What will be the relevant date for computing 2 years within which refund application for the aforementioned purpose is to be made?
CBIC Clarification Issued:
- Interpretation of “Subsequently Held”:
It has been clarified that “Subsequently Held” in Section 77 of the CGST Act, includes both the cases i.e. refund will be available irrespective of the fact that determination of tax being paid under the incorrect head is made in pursuance of any proceedings or the taxpayer himself.
- Relevant Date
In this regard, CBIC has vide Notification No. 35/2021- Central Tax dated 24.09.2021 inserted sub-rule (1A) under Rule 89 of CGST Rules, 2017. The same 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.”
CBIC clarification issued elucidates the ambiguity regarding the reference date from which 2 years are to be reckoned for filing refund application. Earlier there were doubts regarding whether the reference date will be the date on which tax is paid under the incorrect major head or the date on which tax is paid under the correct major head. The wordings “from the date of payment of the tax on the inter-State supply” of newly inserted sub-rule (1A) in the case where tax was earlier incorrectly paid under CGST/SGST make it apparent that the date on which tax is paid under the correct head will be considered. In addition to the Sub-rule (1A), the proviso thereto intends to deal with cases where tax had been paid under the correct head prior to 24.09.2021 since the Sub-rule (1A) will be effective from the said date. In such cases, the period of 2 years will be reckoned from the date of issuance of the aforementioned notification i.e. 24.09.2021.
