A recipient of goods or services cannot file GST refund application

[CA Bimal Jain]

The Hon’ble Madras High Court in the case of TVL. NORTON GRANITES & PROPERTIES (P) LTD VERSUS THE ASSISTANT COMMISSIONER (ST) , CHENNAI - 2024 (6) TMI 607 - MADRAS HIGH COURT, held that the refund application for excess tax paid must be filed by the registered service provider, not by the recipient of services. Since M/s KG Foundation was the registered entity, the Assessee’s direct refund claim was deemed invalid. Consequently, the writ petition was dismissed.

Facts:

M/s. Tvl. Norton Granites & Properties Private Ltd. (“the Petitioner”), had entered into an agreement for development/sale with KG Foundation Private Limited. Under this agreement, KG Foundation provided construction services and collected GST at 18% from the Petitioner. The Petitioner contended that the GST rate for the services should have been 5% and therefore, filed a refund application for the excess GST paid.

However, the Assistant Commissioner (ST) (“the Respondent”) rejected the refund application by an Order dated November 24, 2022 (“the Impugned Order”) for assessment period 2018-19, stating that only KG Foundation was the registered service provider, had the authority to file the refund claim.  

Hence, aggrieved by the Impugned Order, the Petitioner filed the present writ petition before the Hon’ble Madras High Court.

Issue:

Whether a recipient of a service can file GST refund application?

Held:

The Hon’ble Madras High Court in TVL. NORTON GRANITES & PROPERTIES (P) LTD VERSUS THE ASSISTANT COMMISSIONER (ST) , CHENNAI - 2024 (6) TMI 607 - MADRAS HIGH COURT held as under:

Held that, the GST on construction services was levied on a forward charge basis, meaning the service provider is responsible for tax collection. Consequently, the refund application should have been filed by KG Foundation, the registered service provider, rather than the recipient of the services. Hence, the writ petition was dismissed.

Our Comments:

Section 54 of the CGST Act discusses about “Recovery of tax”. Section 54(1) of the CGST Act states that any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed, provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of section 49(6) of the CGST Act, may claim such refund in manner as may be prescribed.

Further, Section 77 of the CGST Act discusses about “Tax wrongfully collected and paid to Central Government or State Government”. It states that 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. Further, 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.

 (Author can be reached at [email protected])

Discussions to this article

[Gnanamuthu samidurai]

Tirupur

Dated:22-09-2024

DISCUSSION

ON REJECTION OF REFUND CLAIMED BY THE RECIPIENT U/S 54(1) OF THE CGST ACT

1) As per the decision in the case of NORTON GRANITES & PROPERTIES (P) LTD VERSUS THE ASSISTANT COMMISSIONER (ST), CHENNAI published in 2024 (6) TMI 607 - MADRAS HIGH COURT wherein it was held that the recipient is not eligible to claim refund (18-5=13% )tax collected by the service provider, namely KG Foundation in relation to the construction activities . In the article, the author, sought for discussion over the issue. Please find my discussion given below:-

2) In my view, section 54. (1) says that “ Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed.

3) A casual reading of the word “person” available in the above section may pave way to interpret any person, ie, registered or un registered, supplier or recipient. But, if the word “person” is read along with the other words “amount paid on such tax or any other amount paid by him” used in the above section would mean the supplier alone and not the recipient

4) Moreover, according to clause (b) of sub-section (4) of section 54 of the Act, the eligibility to claim the refund is subject to production of documents((including the documents referred to in section 33 (ie., to be indicated in the tax invoice) or evidences to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person

5) Contrary to the above, there are certain circumstances in which refund may be claimed by the recipient. Kindly see the explanation given in clause (g) of (2) of sub section (16) of section 54, wherein the “relevant date” is described as that in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person. This position would normally occur in the case of deemed export.

6) Kindly have a reading of the second proviso given to Rule 89 (2) according to which it is described that the application may be filed in respect of supplies regarded as deemed exports, the application may be filed by, -

a. the recipient of deemed export supplies; or

7) Now coming back to the above decision, it is a case wherein there was supply of service and not supply of goods involved in works contract. So also, there was no circumstances as described in rule 89(2) as explained above. Therefore I am of the view that the decision of the Hon’ble court is acceptable.

With regards

Samidurai M.A.,

Deuty Commissioner(Retd.,)

GSTP, Tirupur.