Refund under Sec 77 whether governed by time under Sec 54 of GST Act

[Srinivasan Krishnamachari]

What is a Sec 77 refund one might wonder if we name drop all of a sudden a section, not so familiar and in use daily. So, let us briefly acquaint ourselves with the subject Section 77 and the refund claims that arise out of the above and then explain the applicability of time under the general Provision governing all refunds under GST.

Background

This provision deals with a situation when CGST/SGST or CGST/UTGST is paid on any inter-State supply. Further also it covers interest implication in a situation where IGST is paid on transaction of intra-State supply.

Sub-section (1) of section 77 of the CGST Act deals with a situation where CGST and SGST has been paid considering the supply “intra-State” and subsequently the same is held to be inter-State and, therefore, it is stipulated that in such situation the amounts of CGST and SGST, which were paid wrongly, shall be refunded and, of course, the registered person has to pay IGST on such supply for which no interest shall be required to be paid as stipulated under sub-section (2) of section 19 of the IGST Act.

Sub-section (1) of section 19 of the IGST Act deals with a situation where IGST has been paid considering the supply “inter-State” and subsequently the same is held to be intra-State and, therefore, it is stipulated that in such situation the IGST, which was paid wrongly, shall be refunded and, of course, the registered person has to pay CGST and SGST on such supply for which no interest shall be required to be paid as stipulated under sub-section (2) of section 77 of the CGST Act.

Payment of tax based on erroneous determination of ‘nature of supply’ is not permitted to be adjusted because of the given appropriation of payments.

Remedy under GST Law and the jurisdiction

Remedy lies only in filing a claim for Cash refund.

Please note that Jurisdiction to demand for CGST (and SGST) is contained in section 77(1) whereas jurisdiction to demand IGST is contained in section 19(1) of IGST Act.

And relief from payment of interest on CGST-SGST is allowed under section 77(2) whereas relief from payment of interest on IGST is allowed under section 19(2) of IGST Act.

Applicability of limitation period for claiming refund of taxes paid by a registered person on a supply considering the same as intra-State and which is subsequently held to be inter-State and vice-versa.

Discussion

Though long discussions were already held on the above subject in many forums by tax experts, still a small doubt lingers in the minds of tax payers if the refund can be claimed without the usual time limit of two years prescribed under Sec 54 of the Act.

The apprehension of the tax payers in this regard can’t be said to be totally without any cause because this is not so explicitly provided or explained in the Acts and hence this inquiry.

The application of Sec 54 can't be ruled out to any refund and in particular to Sec 77 refunds, in view of the specific connection it bears upon Sec 77/under 54(8)(d), regarding disbursal of it in cash.

However, it is implied that no unjust enrichment test is necessary in view of mention of 77 under 54(8) (d).  Sec 77/19 vide sub-section (2) under them of the CG/IG STA respectively, waive imposition of any interest at the time of deposit of tax made afresh for the original supplies made.

When a new supply is recognized in place of the original supply factoring in the the new tax, meaning without interest, the element of time for demand of tax also stands waived.

The justification for the same is found in the tax paid already to the credit of the Exchequer of the center. This not a case of an amount collected without the authority of Law as envisaged under Article 265, since taxable supply is made but the type of tax paid under the tax head alone is wrong.

Therefore, as a natural corollary to the leeway provided under Sec 77/19 of the CG/IG STA to make the fresh deposit without interest and also without involving sec 73 and so also the refund if any, may be made without any time limit under the Act.

Here, however no exception to Sec 50 or Sec 73 is made as the non-applicability of interest is explicitly stated in 77(2)/19(2) for fresh deposit of tax for a back dated supply.

 In the same manner, refund application for the tax remitted under wrong tax head CG/IG ST as the case may be, has to be preferred only Under Sec 54. For that matter even refunds where no time limits apply such as taxes paid without authority of Law are also preferred and disbursed only under the regular refund provision of the Act by the Authorities from time immemorial and in GST it will not an exception to the said age old practice, it is hoped.

Refund is to be granted through PMT-04- Electronic route, I must think as applicable to all other refunds. It is not known if there's a patch created to overlook time limit of 2 years in the portal. Similarly, it is not sure of the provision in the portal for waiver of interest under 77/19 as well.

But, principally, both cases of deposit and release of the tax money by refund, belonging to different tax heads is a simultaneous process , must be endowed with the same immunity of time.

It's a mutual swap between account heads which was managed by the Pay and Accounts Officer of the local Controller of Accounts office in the past on a written request certified by the jurisdictional officer,.

But in GST, due to the involvement of Articles 246 A(2)/269 A(1) to(4) mandating a certain appropriation scheme by the center of the revenues collected before transferring it to the Consolidated Fund of India, a new deposit is insisted even as a new refund is assured, with no interest on either side and with no time limit or unjust enrichment test either.

But Rule 89 is made applicable automatically to all refunds as it's a procedural rule already in place by virtue of the mention of the word as prescribed in Sec 77/19 of CG/IG STA, but one discovers nothing is prescribed to the above effect, to the contrary of granting the refund without imposing the time limit of 2 years, either in Sec 54 or 77/19 or rule 89.

END NOTE

In the above back drop, by applying the doctrine of harmonious construction, the refund under Sec 77/19 of CG/IG STA needs to be granted without time limit of 2 years in the same manner as the fresh deposit is required to be made, without time for demand of tax and interest. Hope, best attempt is made to explain the issue by the Author.

K.Srinivasan(IRS)

Advocate

Sr.Associate,RANK Associates, Chennnai

 E-mail. [email protected]

Discussions to this article

[Sumit Srivastava]

Respected Sir,

I came across an article on another website on a sllightly similar subject matter. May be, you can share your thoughts on the same too -

Curious case of refund of tax paid to the wrong 'government'
https://taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MzkzNTM=

Thanks for the interesting insight though.

regards

[Srinivasan Krishnamachari]

Dear Sumit Srivatsava,

As per your request, here's my response. Please follow the link. https://taxguru.in/goods-and-service-tax/section-77-19-cgst-igst-act-replayed-redefined.html

K. Srinivasan (IRS)

Advocate/Sr. Associate

RANK Associates, Chennai