RECOVERING GST PAID AT HIGHER RATE, Goods and Services Tax - GST

[VIPUL JHAVERI]

Dear Experts

pl. share your valuable views and guidance

Buyer - B was charged GST at 12% by Seller- S by mistake, while later on it is found that actually this product is with NIL rate of tax B paid off invoice and claimed ITC credit and S paid off GST collected to govt, now during GST audit of B - GST officer found ITC credit wrongly availed as there is NIL rate of tax and asked B to pay off GST for availing ineligible ITC credit of purchase of nil rated product and B has paid of the same demanded by govt now B trying to recover wrong charged GST from S, S is not willing to issue credit note, informing that matter is very old of FY 18-19 and they can not get back amount paid to govt under this circumstance can B apply for refund from Govt as he has paid undue tax as neither seller is liable to pay nor buyer is liable to pay any GST on nil rated product under "undue enrichment" to be refunded back to the payer/suffer, here to Buyer B

Posts / Replies

[Yash Shah]

Yes we can take the stand as the revenue is not at loss, ITC should not be denied or Refund of the amount not required to be paid should not be denied. 

Further, we also can contend that the recipient only needs to check whether ITC is availed as per conditions in section 16 and the same is not blocked under Section 17. 

In addition if we take conservative approach we can as recipient reverse the ITC of the same and can claim refund of the tax paid on exempt supplies. Refer to Munjal Manish Bhat case.

[KASTURI SETHI]

Dear Querist,

You must file refund claim application taking shelter of various case laws in favour of the assessee.

In such cases, time limitation period specified under Section 54 of CGST Act, 2017 would not apply because it was not payable in law. The department has no authority to retain such amount. There is a plethora of case laws of various Courts including High Courts and Supreme Court pertaining to pre-GST era on this issue and these are equally applicable to the GST regime inasmuch as rationale behind is the same.

2022 (2) TMI 1170 - TRIPURA HIGH COURT-----based on various judgements of Supreme Court.

[VIPUL JHAVERI]

Thanks Yash bhai / Kasturi ji for your valuable views an insights

Also useful to note, recent Karnataka high court decision on similar lines, allowing buyer to claim refund from GOVT "REFUND OF GST PAID ON ADVANCE, WHEN ENTIRE CONTRACT IS CANCELLED"

Title: Nam Estates Pvt. Ltd. vs Joint Commissioner Commercial Taxes (Appeals-I), Bengaluru Court: - 2024 (5) TMI 408 - KARNATAKA HIGH COURT

[Shilpi Jain]

Mr..Vipul the case u have mentioned may not apply in the present case since the facts of your case is not cancellation of contract. 

From purchased point of view credit should not be denied as he has taken credit of what is charged.

There are many cases in this support. 

In my view B should not have reversed the credit. 

Now S applying for refund maybe a legal battle since 2 years have lapsed and lower authorities will not sanction refund.

[KASTURI SETHI]

Relief can be expected only through litigation. The issue is worth fighting. It cannot be treated as hoping against hope. 

[VIPUL JHAVERI]

Thanks Shilpi ji / Kasturi ji

your guidacne is well noted and i am also sure to get this refunded bacl to Buyer B ,
who suffered unduly 
 

[Padmanathan Kollengode]

A.1. This issue is more or less similar to that in BAJAJ ALLIANZ GENERAL INSURANCE CO LTD VERSUS COMMISSIONER OF CENTRAL EXCISE 2014 (8) TMI 787 - CESTAT MUMBAI, wherein it was held that:

"In these circumstances we hold that the CENVAT Credit taken by the appellant is nothing but refund of the service tax paid by them on the services on which they were not required to pay service tax."

A.2. Since B was never liable to pay 12% in the first place, he is entitled to refund of the same. So, the ITC taken by him is nothing but refund of tax paid by him.

B.1. Another angle which can be explored:

16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

B.2. The wording of section 16 (1) is input tax "charged", and not "chargeable". So once the supplier charges tax from recipient (whether or not it was chargeable in the first place), the recipient is entitled to the credit of the same.

As far as Supplier S is concerned, he may be in violation of Explanation to Section 11 which reads as under:

Explanation.––For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both. 

The Explanation as above per say does not exclude the ITC eligibility of recipient imo.

[VIPUL JHAVERI]

thanks a lot Padmanathan ji,

for your very crisp and clear thoughts and guidance shared, well noted