Limitation Period for Refund Claims Under Section 77(1) CGST and Section 19(1) IGST Is Two Years Only

The HC held that the limitation period for seeking refund under section 77(1) CGST Act and section 19(1) IGST Act is two years from the date of the notification dated 24.09.2021, as per amended Rule 89(1A) CGST Rules and the Circular of 25.09.2021. However, once a refund claim is rejected on the ground of time limitation, the petitioner cannot file a fresh application despite the amendment being beneficial. The court granted the Respondent CGST three weeks' extension to file a counter affidavit addressing this issue, with the matter listed for further hearing on 01.03.2023.

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ISSUES:

Whether the limitation period for filing a refund claim under section 77(1) of the CGST Act and section 19(1) of the IGST Act is extended by the insertion of sub-rule (1A) to Rule 89 of the CGST Rules, 2017.Whether a taxpayer who paid tax under the wrong head (intra-State supply) and subsequently paid tax under the correct head (inter-State supply) can file a refund claim within two years from the date of payment of tax under the correct head.Whether the amended Rule 89(1A) and the CBIC circular dated 25.09.2021 apply retrospectively to cases where the refund claim was earlier rejected as time barred.

RULINGS / HOLDINGS:

The limitation period for claiming refund under section 77 of the CGST Act and section 19 of the IGST Act is governed by the newly inserted sub-rule (1A) to Rule 89 of the CGST Rules, 2017, which provides that refund claims may be filed "before the expiry of a period of two years from the date of payment of the tax on the inter-State supply."A taxpayer who initially paid tax as intra-State supply but subsequently paid IGST on realizing the transaction was inter-State supply may file a refund application electronically in FORM GST RFD-01 within two years from the date of payment of the tax under the correct head.The amended Rule 89(1A) and the CBIC circular dated 25.09.2021 extend the limitation period beneficially, allowing refund claims to be filed within two years from 24.09.2021 (date of notification), but a fresh application cannot be made if the refund was already rejected as time barred prior to this amendment.

RATIONALE:

The Court relied on the statutory amendment to Rule 89 of the CGST Rules, 2017 by insertion of sub-rule (1A), and the CBIC circular no. 162/18/2021-GST dated 25.09.2021, which clarifies the application of limitation for refund claims under section 77 of the CGST Act and section 19 of the IGST Act.The circular provides illustrative scenarios demonstrating that the limitation for refund claims runs from the date of payment of tax under the correct head or from the date of notification, whichever is later, thereby clarifying prior ambiguity.The Court recognized the amendment as a beneficial provision but noted that it cannot be invoked to revive claims already rejected as time barred before the amendment came into force, thereby maintaining the finality of previous orders.

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