A recent judgment by the Patna High Court in the case of Sai Steel v. State of Bihar on July 28, 2025, provides a crucial clarification on the limitation period for refund claims under Section 77 of the CGST Act. This ruling addresses the common issue of misclassification of supply and subsequent tax payments under the correct head. The court’s decision provides a clear distinction between the limitations under Section 54 and Section 77, offering a significant takeaway for businesses.
Facts of the Case
The petitioner, a company named Sai Steel, filed all their GST returns for the financial year 2017-18 and paid taxes accordingly. Subsequently, an audit was conducted under Section 65(1) of the BGST/CGST Act, 2017. The audit report identified certain transactions that the petitioner had treated as intra-State supply but were re-classified by the authorities as inter-State supply. This re-classification resulted in a shortfall of Integrated Goods and Services Tax (IGST), which the petitioner paid on March 4, 2023, amounting to Rs. 5,08,195, based on the audit’s observations. After paying the correct tax, the petitioner filed a refund application for the excess CGST and SGST they had originally paid under the intra-State tax head. However, the respondent authority rejected the refund application on May 6, 2024, citing that the claim was barred by the two-year limitation period under Section 54 of the BGST/CGST Act, 2017. The authority calculated this limitation from the date of the original tax payment in January 2018
