CLARIFICATION ON CIRCULAR 162182021-GST DATED 25TH SEPTEMBER, 2021

• 04 Oct 2021
• Posted By arkca

CLARIFICATION ON CIRCULAR NO. 162/18/2021-GST DATED 25^TH SEPTEMBER, 2021

 

Not long ago the CBIC has issued a circular providing relaxation to the taxpayers who had paid tax in the wrong head and then claimed refund of the same subsequent to payment of tax in the correct head. The CBIC on 24^th September, 2021 issued Notification No. 35/2021 – Central Tax and eventually published Circular No. 162/18/2021 on 25^th September, 2021 ruling out the concern of the tax payers by providing appropriate clarification on the refund of tax wrongly paid under Section 77(1) of the CGST Act, 2017 and Section 19(1) of the IGST Act, 2017. The circular has brought forth the interpretation of the word “Subsequently held” and prescribed the manner and conditions for refund under the above specified sections.

Before analyzing Circular No. 162/18/2021, let us understand the crux of Section 77(1) of the CGST Act, 2017 and Section 19(1) of the IGST Act, 2017:

• Section 77(1) of the CGST Act enumerates that if a taxpayer has collected and paid tax to the Central and State Government considering the supply as intra-state and later it came to his knowledge (subsequently held) that the supply was actually inter-state, then he can apply for refund of such incorrect payment of tax via RFD-01 provided the taxpayer has paid tax in the correct head.

 

• Section 19(1) of the IGST Act speaks that if a tax payer has paid integrated tax on supply initially considering it as inter-state, later realized (subsequently held) it to be intrastate, then he can apply for refund of such incorrect payment of integrated tax via RFD-01 provided the taxpayer has paid tax in the correct head.

 

• It has been further provided in the above mentioned sections that the taxpayer is not required to pay any interest on the amount of tax paid in the correct head (as the tax paid earlier under the wrong head within time was with department).

 

The following matters have been clarified by the circular:

1. Interpretation of the term “Subsequently held” :

 

The refund claim under the above sections will be available if the supply made by the taxpayer as inter-state/intra-state is subsequently held as intra-state/inter-state respectively either by:

 

1. the tax officer on scrutiny/ assessment/ audit/investigation, or as a result of any adjudication, appellate or any other proceeding;

or

1. the taxpayer himself.

 

2. The relevant date for claiming refund under section 77 of the CGST Act/ Section 19 of the IGST Act, 2017:

 

Sub-Rule (1A) has been inserted after sub-rule (1) of rule 89 of the Central Goods and Services Tax Rules, 2017 vide notification No. 35/2021-Central Tax dated 24.09.2021. Sub Rule (1A) provides that refund for the tax paid under wrong head can be claimed within 2years from the date of payment of tax in the correct head. However it has been clarified that if the taxpayer has made the payment of tax in the correct head before the date of issuance of notification No. 35/2021-Central Tax dated 24.09.2021, then the taxpayer can claim refund for the amount of tax paid under the incorrect head within 2 year from the date of issuance of such notification (i.e. 24.09.2021).

 

Illustration:

 

A taxpayer Mr. A issued an invoice dated 15.03.2019 charging CGST and SGST (intra-state) of Rs. 2000 each and accordingly paid the tax to the government in the return for March 2018. The taxpayer/ tax officer subsequently held that the said transaction is an inter-state transaction. Then what will be the relevant date for claiming refund when the taxpayer made the payment of integrated tax (correct head) of Rs. 4000 on:

14. 06.2020
15. 12.2020

CASE-I: In the first case, the refund can be claimed within 2 years from the date of issuance notification No. 35/2021-Central Tax dated 24.09.2021 i.e. before 23.09.2023 vide RFD-01 as integrated tax was paid before the issuance of the said notification.

Case-II: Here, the refund can be claimed within 2 years from the date of payment of integrated tax (correct head) i.e. before 09.12.2023 vide RFD-01.

3. Refund in case of tax adjustment through issuance of Credit Note:

 

If the tax payer has used credit note to adjust the tax paid on previous invoices, then the taxpayer cannot claim refund against such invoices under section 77 of the CGST Act and section 19 of the IGST Act.