2022 (9) TMI 373 - HC - GST

GST Payment for Railway Advertising Services: Procedural Correction Mandated with Input Tax Credit Preservation

SC ruled on GST payment dispute involving advertising services for Railways. The court directed Respondent to correctly pay GST to tax authorities within ... Reverse charge - payment of GST by recipient - refund of wrongly paid tax - input tax credit - sympathetic consideration of interest and penaltyReverse charge - payment of GST by recipient - refund of wrongly paid tax - input tax credit - Relief in respect of GST amounts paid by the petitioner to Indian Railways instead of directly to CGST/SGST authorities and entitlement to input tax credit. - HELD THAT: - The Court found that the petitioner, a recipient of advertising services, had paid the CGST and SGST components to the Railways contrary to the statutory mechanism under the GST law where tax was shown payable on a reverse charge basis by the recipient. Respondent No.5 (Railways) admitted that the amounts had been paid to it and that those payments were erroneous. The Court directed Respondent No.5 to ensure that the amounts wrongly received from the petitioner are paid to the CGST and SGST authorities within two weeks so that the petitioner may be given input tax credit. The Court observed that the petitioner had not attempted to evade tax but had made an erroneous payment, and therefore ordered corrective transfer of the sums to the appropriate tax authorities. [Paras 7, 9, 10, 11, 13]Respondent No.5 to cause the wrongly paid GST amounts to be paid to the CGST and SGST authorities within two weeks and, upon deposit, the CGST/SGST authorities will grant input tax credit to the petitioner.Refund of wrongly paid tax - payment of GST by recipient - input tax credit - Procedure to be followed where electronic payment portal requires the recipient party to make the payment and direct deposit by Railways to authorities is not feasible. - HELD THAT: - After the order was dictated it was pointed out that GST payments are made electronically and the portal accepts payment only when made by the concerned taxpayer. In light of this administrative constraint the Court directed Respondent No.5 to pay the amounts to the petitioner within one week so that the petitioner can make the electronic payment to the CGST/SGST authorities. The petitioner was directed to effect the payment within one week after receiving the credit in its account. The CGST and SGST authorities were directed to open/provide the portal/link to the petitioner within one week to enable payment. The Court thereby provided a practical route to ensure the statutory authorities receive the tax and the petitioner obtains input tax credit. [Paras 15]Respondent No.5 to pay the amounts to the petitioner within one week; petitioner to pay the CGST/SGST authorities within one week after receipt; CGST/SGST authorities to open the portal/link for the petitioner within one week.Sympathetic consideration of interest and penalty - Entitlement to relief from interest and penalty in view of the erroneous payment. - HELD THAT: - The Court recorded that the petitioner had not attempted to evade tax but had made an honest mistake by paying the tax to the Railways. The Court expressed the hope that, given the unusual facts and circumstances, the CGST and SGST authorities would, unless there are other reasons, consider the petitioner sympathetically and not saddle it with interest or penalty. [Paras 10, 12]The CGST and SGST authorities are urged to consider waiving interest and penalty in the petitioner's favour, having regard to the admitted erroneous payment and the factual circumstances.Final Conclusion: The writ petition was disposed with directions that the amounts of CGST and SGST wrongly paid by the petitioner to the Railways be transferred to the respective tax authorities (or paid to the petitioner to enable electronic payment), input tax credit be allowed upon deposit, and the tax authorities be asked to consider waiver of interest and penalty in the unusual factual matrix; no order as to costs. Issues:1. Payment of GST on advertising services provided to Railways.2. Obligation to pay GST under reverse charge mechanism.3. Refund or direct payment of wrongly paid GST amounts.4. Consideration of interest and penalty for the taxpayer.5. Input tax credit for the taxpayer.6. Mechanism for correcting the payment of GST.Analysis:1. The Petitioner, engaged in advertising services, submitted a bid to Railways, which was accepted. The Petitioner paid service tax as per the contract terms. After the introduction of GST in July 2017, the Petitioner continued paying the amount along with GST at 18% per annum. The issue arose when it was discovered that the GST paid by the Petitioner to Railways was not forwarded to the tax authorities, resulting in a discrepancy.2. Respondent No.5 contended that under the CGST/SGST Act and IGST Act, the tax liability falls under the reverse charge mechanism, making the recipient of services responsible for paying GST directly to the government. The Respondent provided evidence that the tax invoices indicated the tax was payable on a reverse charge basis. The Petitioner admitted to paying SGST and CGST to Railways instead of the tax authorities.3. Respondent No.5 acknowledged the wrongful payment by the Petitioner and offered to refund the amount or pay it directly to the tax authorities as per the invoice details. The Court directed Respondent No.5 to ensure the correct payment of the GST amounts to the CGST and SGST authorities within two weeks, emphasizing the mistake made by the Petitioner and the need for rectification.4. Considering the circumstances where the Petitioner did not evade taxes but made an error in payment, the Court urged the tax authorities to treat the case sympathetically regarding interest and penalty. The judgment aimed to relieve the Petitioner from additional financial burdens due to the inadvertent mistake made in the payment process.5. Upon the correct payment of GST to the tax authorities, the Court directed that the Petitioner should receive input tax credit. This step ensures that the Petitioner is not financially disadvantaged due to the rectification process and can benefit from the tax credit as applicable under the law.6. In response to the practical issue of electronic payment systems, the Court directed Respondent No.5 to pay the corrected amount to the Petitioner within one week. Subsequently, the Petitioner was instructed to pay the amount to the tax authorities promptly. The CGST/SGST authorities were directed to facilitate the payment process for the Petitioner, ensuring a seamless correction of the GST payment mechanism.