ADJUDICATION UNDER GST (PART-8)

[Dr. Sanjiv Agarwal]

Taxes wrongfully collected and paid

Tax wrongfully collected and paid to Central Government or State Government are covered in Section 77 of the CGST Act, 2017 which provides for refund of Central Tax on situations where intra-State supplies are subsequently held to be inter-State supplies.

As provided by section 77 of the CGST Act, 2017, a taxable person who has paid tax on a supply transaction considering it to be an intra-State transaction and deposited SGST and CGST on such transaction, but later on this transaction has been held to be an inter-State transaction. In such case, the taxable person would be-

(a)   required to deposit IGST on such transaction,

(b)   eligible to seek refund of SGST and CGST already paid by him on such transaction.

This provision deals with a situation where a taxable person wrongly pays CGST/SGST or CGST/UTGST on the transaction treating it as intra-state supply, but which is subsequently held to be inter-state supply. Upon payment of IGST on such transaction, the CGST/SGST or CGST/UTGST will to be refunded in such manner and subject to prescribed conditions

Section 77(2) of the CGST Act, 2017, provides that such taxable person would not be liable for payment of interest on the amount of central tax or state tax as the case may be.

Refund of CGST and SGST or, as the case may be, CGST and UTGST shall be granted in such manner and subject to such conditions as may be prescribed.

Refund of IGST (in IGST Act) shall be granted in such manner and subject to such conditions as may be prescribed.

If a taxable person wrongly pays IGST by treating a supply as inter-state supply, which is subsequently held to be intra-state supply, interest is not required to be paid on the CGST/SGST or CGST/UTGST payable. The law in such situations does not require any further payment of tax which implies that the Government will make suitable tax settlements at their end.

Meaning of Inter-State and Intra-State supplies

In order to understand the provision of this section, one needs to know the meaning of inter-state and intra-state supplies.

As provided in section 7(1) of the IGST Act, 2017, supply of goods in the course of inter-State trade and commerce means when the location of the supplier and place of supply of the goods are in:

(a)   two different States;

(b)   two different Union territories; or

(c)   a State and a Union territory,

The place of supply of goods is determined on the basis of provisions in this regard made in section10 of the IGST Act, 2017.

Example:

Arun Ltd. is a taxable person registered in the state of Delhi. It made supply of 10 tons of steel. If according to the provisions of section 10 of IGST law, the place of supply of 10 tons of steel is determined to be in the state of Uttar Pradesh, this transaction of supply by Arun Ltd. will be considered to be made in the course of inter-State trade and commerce as Delhi and Uttar Pradesh are two different states.

As provided in section 7(3) of the IGST Act, 2017 a service will be considered to have been supplied in the course of inter-State trade and commerce, where the location of the supplier and place of supply of service as per section 12 of the IGST Act, 2017 are in:

(a)   two different States;

(b)   two different Union territories; or

(c)    a State and a Union territory,

Example:

Sehgal and Co., an event management company registered in the state of Delhi, organized an event for Godrej Industries at Mumbai (Maharashtra). The place of supply of such service as per section 12 of the IGST Act, 2017 will be state of Maharashtra. This transaction of supply of service by Sehgal and Co. will be considered to be made in the course of inter-State supply of service, as Delhi and Maharashtra are two different states.

According to section 7(5) of the IGST Act, 2017, supply of goods or services or both––

1. when the supplier is located in India and the place of supply is outside India;
2. to or by a Special Economic Zone developer or a Special Economic Zone unit; or
3. in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

In SAJI S., PROPRIETOR, ADITHYA AND AMBADI TRADERS, RANJITH R., PROPRIETOR, RANJITH ROADLINES VERSUS THE COMMISSIONER, STATE GST, THE ASSISTANT STATE TAX OFFICER [2018 (11) TMI 954 - KERALA HIGH COURT];  the petitioner (consignee) purchased goods from Chennai and transported them to Kerala. While in transit, goods were detained and notice issued by the respondent. The consigner paid the tax and penalty but under a different head of SGST instead of IGST and hence, the goods were not released.

It was held that concerned officials can transfer amount from SGST head to IGST head and it was in-equitable for authorities to make the petitioner suffer on account of delay in such transfer. The respondent was therefore, directed to release the goods forthwith alongwith vehicle and also to ensure that tax and penalty already which stood remitted under SGGST is transferred to IGST head.