Zero rated supply and consequences of charging IGST in place of CGST and SGST

[Sanjeev Singhal]

What is Zero rated supply and what is the benefit and implication of the such supply. Just look at the provision of the same provided in Revised GST Law and IGST Law

As per revised GST Law Zero rated Supply has been provided in Section 2(111)

“ Zero rated supply “ means supply of any goods and /or services in terms of section 15 of the IGST Act, 2016; and “

As per revised IGST Law how the Zero rated supply has been defined in Section-2(29)  “ Zero rated supply”  shall have the meaning assigned to it under Section 15 ; and “

But there is typographical error in both the definitions under both laws as the “Zero rated Supply” is defined  in Section 16 of the IGST Act, 2016.

Zero Rated Supply [ Section- 16 ]

1. It means that taxable supply of goods and/ or services namely ;

• Export of goods and / or services
• Supply of goods and/ or services to SEZ Developer or an SEZ unit.

2. Credit of input tax may be availed for zero rated supply irrespective that there is no output tax on the supplies.

3. Registered taxable person is eligible to claim refund on export of goods or services under the following two options ;

• RTP may export of goods or services under bond without payment of IGST and can claim refund of unutilized credit in accordance with Section- 48 of the CGST Act,2016.
• RTP may export the goods or services on payment of IGST and can claim refund of IGST as provided in Section- 48 of the CGST Act,2016

4. SEZ Developer or SEZ unit receiving zero rated supply , can claim refund of IGST if paid by supplier.

Consequences of Tax wrongly Deposited with Central or State Government.

• Taxable person who wrongly deposited the IGST on supply considered by him as  inter-state supply instead of intra-state supply , shall be refunded IGST so paid by him wrongly subject to the condition as may be prescribed.

• Taxable person who considered the transaction as intra-state and later found to be inter State shall not be liable to pay any interest on the amount of IGST.

Law is silent on the first mistake where TP has paid tax under IGST  and where he need to pay SGST and CGST . Whether he need to pay interest on amount of tax payable as SGST and CGST.

About the Author:

 

Author is practicing chartered accountant in  Gurgaon and having specialization in Service Tax and Haryana VAT. He can be reached at  [email protected].  WWW. skaca.in

Discussions to this article

[Ramanujam Varadarajan]

As regards consequence of tax wrongly deposited, my understanding of Sec.70 of Draft law, is different from the the position explained in the article. In other words,

a. On a transaction where IGST is paid instead of CGST/SGST, no interest will apply on CGST/SGST payable. No clarity as to whether IGST wrongly paid can be availed as refund or it can be appropriated as CGST/SGST liability.

b. On a transaction where CGST/SGST is paid instead of IGST, no clarity on interest applicability on IGST payable. Refund of CGST/SGST to be claimed and it appears that IGST is payable separately.

Please clarify.

[Sanjeev Singhal]

as per Section 19 of IGST , if IGST deposited wrongly shall be refunded. and if CGST is paid instead of IGST ,no interest shall be paid under IGST.

[Ganeshan Kalyani]

If both the provision under section 19 and 90 read together then it is clear that provision talks about both interest and refund is case of wrong payment. That is, if IGST is paid wrongly instead of CGST /SGST then IGST wrongly paid will be refunded as section 19 and interest on delay payment of CGST/ SGST need not be paid as per section 70. And, if CGST/ SGST is paid wrongly instead of IGST then interest need not be paid at the time of paying IGST as per section 19 and wrongly paid CGST /SGST will be refunded as per section 90. This is my interpretation.

I wish that both the provision should have been embedded in draft law in one place (one section) in order to avoid any misinterpretation.

[Ramanujam Varadarajan]

Sec.70 of SGST/CSGT law and Sec.19 of IGST law jointly read together confirms the view that if any tax is wrongly paid as inter-state instead of intra-state and vice versa, no interest would apply on payment of tax correctly.

Only point which requires further clarity is if IGST is wrongly paid instead of CGST/SGST (or vice versa), the provision states that the tax wrongly paid is to be granted as refund, subject to conditions. In other words, there is NO automatic appropriation provided for tax wrongly paid against tax correctly payable. While tax correctly payable is to be paid again, tax wrongly paid is to be claimed as refund as per provisions (working capital blockage!).

[Sanjeev Singhal]

Yes there is automatic appropriation . it will be refunded on one hand and shall be paid on the other hand.