- June 23, 2017
- Posted by: Amit Mundhra CA
- Category: GST
Effect of wrong payment of tax (CGST / SGST or IGST) – A catch 77 situation
I am trying to summarize what can happen when a supply is considered as Intra State supply by the supplier but later on held as Inter State supply by the department.
|Date of Supply||31-07-2017||CGST & SGST paid on 20-08-2017 and input availed and utilized by recipient|
|Departmental Audit after 3 years held above transaction as inter- state and IGST demanded||01-04-2020||Order passed u/s 73 and supplier accepts wrong payment|
|Supplier deposits IGST as above on||15-04-2020||No appeal is filed and section 77 says pay correct tax and claim refund of wrong tax paid|
|Supplier will issue Credit Note to recipient u/s 34 for wrong charging of CGST & SGST||15-04-2020||Issue of credit note is mandatory as to prove that incidence of tax has not been passed. This is one of the basic requirement of claiming the refund u/s 54|
The supplier cannot issue credit note as it will be beyond the time limit specified in section 34.
|Supplier will issue Debit Note to recipient u/s 34 for charging of IGST||15-04-2020||Recipient cannot take input tax credit of this debit note as it has been issued beyond the time limit given in section 16(4)|
As the recipient cannot claim ITC of this debit note.
|Refund claim filed u/s 54 for wrong payment of CGST & SGST on 20-08-2017||15-04-2020||In section 54, relevant date for filing of refund claim is 2 years from the date of deposit. In this case the last date to file refund claim expires on 19-08-2019, hence supplier cannot claim refund under this section|
The date of passing of order u/s 73 is not considered for calculation of relevant date
|Story at the end||Supplier will end up paying both the taxes and government will be smiling at the catch 77 situation it has created|
Amit Mundhra FCA