Dec 042018
 

GST paid under wrong heads – IGST instead of CGST / SGST

Relevant provision of GST laws:

IGST Act

CGST / SGST / UTGST

Section 19 (1) A registered person who has paid integrated tax on a supply considered by him to be an inter-State supply,

–  but which is subsequently held to be an intra-State supply,

shall be granted refund of the amount of integrated tax so paid in such manner and subject to such conditions as may be prescribed.

(2) A registered person who has paid central tax and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-State supply,

–  but which is subsequently held to be an inter-State supply,

shall not be required to pay any interest on the amount of integrated tax payable.

Section 77. (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.

Implications of Section 77 of the CGST Act read with Section 19 of the IGST Act

It is possible for taxable person to come across situations where he has paid the wrong nature of tax viz, CGST and SGST / UTGST in lieu of IGST and vice versa. Therefore, such incorrect payment of tax, if any, should be identified and ought to be considered appropriately.

A plain reading of Section 77 of CGST Act and Section 19 of IGST Act, 2017 (which are pari- material as reproduced above), a reasonable inference can be drawn that the provisions of the said sections shall apply only in a situation where an adjudicating authority holds an interstate transaction as intra-state transaction or visa versa.

A situation where parties themselves decides that wrong tax has been charged and paid would not fall within these two provisions, whereas the effect of it must be given through table 9A of GSTR 1 read with GSTR 3B.

Section 77 of the CGST Act provides for the adjustment of taxes paid incorrectly. Where a registered person has considered a transaction to be an intra-State supply and paid CGST and SGST/UTGST, but it is subsequently held to be an inter-State supply and IGST is liable to be paid, the registered person, is required to pay IGST on such transaction. The registered person is entitled to claim refund of CGST and SGST/UTGST paid on the transaction.

In such situations interest is not payable by virtue of Section 77(2) of the CGST Act and 19(2) of the IGST Act, 2017.

Similarly, where the registered person has considered a transaction to be an inter- State supply and paid CGST and SGST/UTGST, but it is subsequently held to be an intra-State supply and CGST and SGST/UTGST is liable to be paid, the registered person is required to pay the applicable CGST and SGST/UTGST on such transaction.

In this situation also, it is to be noted that interest is not liable to be paid when the correct tax is paid.

Sensys Technologies

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