The CBIC vide Notification No. 35/2021–Central Tax dated September 24, 2021 read with Circular No. 162/18/2021-GST dated September 25, 2021 has further amended Central Goods and Services Tax Rules, 2017 (“CGST Rules”) to adhere to the recommendations of 45th GST Council meeting held on September 17, 2021.
Background:
The GST Council in it’s 45th meeting made inter-alia a recommendation that, a provision is to be incorporated in the CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund application w.r.t. taxes wrongfully paid due to incorrect determination of nature of supply being intra state subsequently held as inter-state or vice-versa as specified in Section 77(1) of the Central Goods and Services Tax Act, 2017 (“CGST Act”)/ State Goods and Services Tax Act, 2017 (“SGST Act”) and Section 19(1) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”).
Clarification was sought on the following issues in respect of refund of tax wrongfully paid as specified above:
1. Whether refund claim under the said sections is available only if supply made by a taxpayer as inter-State or intra-State, is subsequently held by tax officers as intra-State and inter-State respectively, either on scrutiny/ assessment/ audit/ investigation, or as a result of any adjudication, appellate or any other proceeding or whether the refund under the said sections is also available when the inter-State or intra-State supply made by a taxpayer, is subsequently found by taxpayer himself as intra-State and inter-State respectively.
2. Whether time limit of two years to be computed from the date of tax wrongfully paid or from the date of correct payment of tax at later date.
Notification & Circular
Giving effect to the recommendation of GST Council meeting, the CBIC vide this Notification has amended CBIC Rules as under:
In Rule 89 of the CGST Rules, after sub-rule (1), the following sub-rule shall be inserted, namely:-
“(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:
Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on which this sub-rule comes into force.”
Meaning thereby, refund can be claimed before the expiry of two years from the date of payment of tax under the correct head, However, in cases, where the taxpayer has made the payment in the correct head before the date of issuance of this Notification, the refund application under Section 77 of the CGST Act/ Section 19 of the IGST Act can be filed before the expiry of two years from the date of issuance of the said notification. i.e. from September 24, 2021.
Further, vide Circular CBIC has clarified that, the term “subsequently held” in Section 77 of CGST Act, 2017 or under section 19 of IGST Act, 2017 covers both the cases where the inter-State or intra-State supply made by a taxpayer, is either subsequently found by taxpayer himself as intra-State or inter-State respectively or where the inter-State or intra-State supply made by a taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer in any proceeding. Accordingly, refund claim under the said sections can be claimed by the taxpayer in both the above mentioned situations, provided the taxpayer pays the required amount of tax in the correct head.
The Notification can be accessed at: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-35-central-tax-english-2021.pdf
The Circular can be accessed at: https://a2z-bucket.s3.ap-south-1.amazonaws.com/clarification-w-r-t-refund-of-tax-erroneously-paid-where-inter-state-or-intra-state-supply-is-subsequently-found-to-be-intra-state-or-inter-state-respectively/