Learn how to correct IGST/CGST/SGST classification mistakes under the GST law. Explore Section 77 of the CGST Act, understand the refund process, and discover the recent rule amendments. File your refund application before the two-year deadline for reclaiming taxes paid under the correct head. Don’t miss this opportunity to rectify classification errors and claim refunds.
The novel GST law and dual GST system posed challenges during initial implementation as transactions were inaccurately classified as intra-state or inter-state supplies and the taxpayers discharged taxes under the incorrect heads. To rectify the omission caused by the taxpayer, many taxpayers on their own or on the intimation made by the officer have discharged the correct taxes in DRC-03 or in the subsequent months GSTR-3B but are still not aware as to the fate of taxes which were paid wrongly. Thereby, in this article, an attempt is made to understand as to what can be done with respect to the taxes paid wrongly due to the wrong classification of the place of supply.
Before starting the discussion, it becomes mandatory for us to understand Section 77 of the CGST Act 2017 (which is even read with Section 19 of the IGST Act 2017) to enable us to understand the legal provision of the statute. The same is extracted for easy reference.
“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.
Therefore, to conclude Section 77 of the CGST Act 2017 states that if you had wrongly classified the transaction as an intra-state transaction but later (on your own / or being informed by the officer) you got to know that the said transaction was an inter-state transaction then the taxpayer is left with an option to pay taxes under the correct head i.e. IGST and claim the refund of CGST & SGST.
The provisions of Section 54 of the CGST Act 2017, deal with the time limit to file the refund as 2 years from the relevant date thereby in this scenario it becomes interesting to know as to what is the relevant date in case where the taxes have been paid by mistake.
In this regard, reference is again made to Section 77 of the CGST Act 2017 which states that the government would prescribes the manner and conditions for claiming of the refund.
The government vide notification No. 35/2021-Central Tax dated 24.09.2021 has inserted sub-rule (1A) of rule 89 of the CGST Rules. The said sub-rule (1A) of rule 89 of CGST Rules, 2017 is read 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.”
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.
For better understanding of the relevant date the same is explained through the below illustration
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:
Thereby to conclude as the due date to file the refund application under Section 77 of the CGST Act 2017 is 23.09.2023 it is advisable to avail this opportunity and claim the refund of taxes which relates to FY 2017-18.
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The author can be reached out at ajay@mundadaandco.com
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