Principal of unjust enrichment [ section 54(8) ] - GST Ready Reckoner - GST

Principal unjust enrichment As per principal of unjust enrichment no person shall be allowed to enrich himself at the cost of another. Only the person who has not passed the incidence of tax will be eligible to claim refund. If a supplier supplies taxable goods or services or both to the recipient he has charge /collected GST from the recipient . so the supplier has passes the burden of GST to the recipient. Where the refund arise and it is paid to supplier, if it will be undeserved benefit from the customer from the government resulting in unjust enrichment Doctrine of unjust enrichment (to whom refund given) a) refund should be paid to the consumer who has actually borne the burden of duty. However not practically possible to identify such person and pay to them. b) So under GST and Custom law refund due should be transferred to consumer welfare fund established by central government under section 57 of CGST Act instead of paying it to the supplier /exporter. Principal unjust enrichment define by also supreme court The Hon ble Supreme Court in the case of Sahakari Khand Udyog Mandal Ltd. v/s Commissioner of Central Excise Customs as reported in 2005 (181) ELT 328 S.C. = 2005 (3) TMI 116 - SUPREME COURT OF INDIA has defined unjust enrichment as under: (a) Unjust enrichment means retention of a benefit by a person that is unjust or inequitable. Unjust enrichment occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else. (b) That no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of unjust enrichment arises where retention of a benefit is considered contrary to justice or against equity Principal of unjust enrichment apply to GST The concept is inbuilt in Section 54(5) read with Section 54(8) of the CGST Act, 2017. Every claim of refund sanctioned will be credited to the Consumer Welfare Fund in terms of Section 54(5) of CGST Act, 2017. It will, instead of being credited to the fund, be paid to the claimant in situations mentioned in Section 54(8) . The Principal of unjust enrichment will not apply to (a) refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports; (b) refund of unutilised input tax credit under sub-section (3); (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; (d) refund of tax in pursuance of section 77 i.e. tax wrongfully collected and paid to Central Government or State Government ; (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify. These are cases where the principle of unjust enrichment is not applicable and the proper officer need not satisfy himself whether the incidence of tax has been passed on to any other person in such cases. In all other cases, refund will be sanctioned to the claimant only if the claimant demonstrates that the incidence of tax has not been passed on to any other person.