CGST/SGST in place of IGST

[Ashiesh Prremji]

Dear Sir,

In case of Bill To & Ship To, if Supplier has paid CGST/SGST in place of IGST & receiver also availed same as CGST/SGST for whole FY 19-20. There are 60-80 Invoices during FY 19-20, by paying IGST & claim CGST/SGST as Refund is tedious work. What to be done now as a supplier & as a receiver also, please suggest ?

Thanks,

[YAGAY andSUN]

There is no other option available but to seek refund.

[Spudarjunan S]

Dear Sir,

Kindly find below my opinion -

As you rightly understood, refund has to claimed. However, if you read section 77(1) of CGST Act, 2017 - the provisions says it has to subsequently held, moreover the section is falling under the chapter of "Demand & Recovery", it has to be interpreted that the department has to held the same through any notice / order. Only based on the order/notice received from the department you can avail the refund. Moreover, there is no interest liability for you on such wrong payment.

Hence, practically suggested to wait till the department arrives and issues notice for payment of proper taxes to the paid wrong taxes and intimates for refund of the same. So that you can avoid interest applicability also.

[YAGAY andSUN]

In Shree Nanak Ferro Alloys (P.) Ltd. v. Union of India = 2020 (1) TMI 833 - JHARKHAND HIGH COURT, it is held by High Court of Jharkhand that interest is not payable by the petitioner where petitioner had inadvertently paid tax under head CGST, instead of IGST, and as such it was not a case of short payment.

[YAGAY andSUN]

wrongly paid GST will be shifted using PMT 09

This is the prescribed form for shifting of wrongly paid GST. Following is the format of GST PMT 09.

[Ashiesh Prremji]

Thanks for your kind opinion Sir!

Got your views as a supplier, we have option to wait for Department notice also as there is no interest implication for gst paid in wrong head.

But as a Receiver, if i have availed CGST/SGST in place of IGST in above case what consequences can be happen ? Is there any interest liability if Department issues any notice?

Sir, what treatment need to give as a Receiver who is availing ITC on the same?

[Ashiesh Prremji]

Dear Yagay & Sun, Is PMT-09 applicable if liability already set-off?

[YAGAY andSUN]

In our view, this PMT 09 is not restrospective.

[CA Seshukumar]

Dear Ashiesh,

I presume that the invoice also has been issued with CGST and SGST despite the taxability being Interstate attracting IGST.

Though the section 77 (1) states that a refund shall be granted subject to conditions. It is ought to be noted that Rule 89 (l) and (m) states that the incidence of the tax has not been passed on to any other person. In the current scenario the incidence of tax has been passed to recipient as the recipient would have made the payment. Hence Refund is not eligible.

however by paying tax back to recipient the same may be claimed as refund. by doing so the recipient will loose the benefit of credit automatically. practicially,

for FY20 you can issue credit notes till 30th sep,2020. and also a consolidated credit note can be given. Issue one credit note and also simultaneously issue an invoice with IGST. while doing this you will have net cash payment is Nil.

recipient will account the credit note and also new invoice and hence recipient credit get adjusted automatically. however it is to be noted that if recipient already utilized his CGST and SGST then he has to pay the tax in cash.

this approach is most suitable for service invoices.

[KASTURI SETHI]

No revenue loss in the whole scenario. The querist's query at serial no. 5 has been well answered by Sh.Seshu Kumar.

[Ashiesh Prremji]

Thanks a lot to both of you Seshu & Kasturi Sir!

[Spudarjunan S]

Dear Sir,

As an addition, the issuance of credit note under section 34 of CGST Act, 2017 can be made only in following two circumstances which one need to consider -

Where the amount charged exceeded the agreed value or excessive tax or

When there is a deficiency in supply.

[CA Seshukumar]

Hi all,

While issuing credit note the fact of wrongly charged taxes also may be mentioned.

As the time of supply is already over and adhered to pay tax and as per provisions also interest is not enforceable.

This way of adjustment will not be inline with sec.34 but it is with in the purview of adjustment which is holistic to do without impacting the same.

Practically we can say that the services are failed and hence credit note issued. And said services are done in next 1 weeks time hence re issued invoice.

I suggest the queries to give credit note with 1st of the month and invoice with last day of the month.

[CA Seshukumar]

Hi all

It may be interesting to note sec.34 uses words "may" issue a credit note and hence it is not barring issuing credit note in any other scenario. It is suggesting that a credit note may be issued in these 2 scenarios. If not tax payer may take some other option also say giving discount in next purchase...Etc.

I would agree that these are the only scenarios in which credit note can be issued if the provision carried a word "shall". Even in such case also it shall mean that these cases shall be looked at and any other cases can also go in credit note route.

[Krishna Murthy]

As suggested, Credit Notes can be issued provided the period for issue of Credit Notes is with in the period as specified by Sec 34. If the period specified u/s 34 is lapsed, then the only way is to pay correct tax and claim refund of wrong paid tax as specified Sec 77.

My further query in this matter is, does the limitation period specified in Sec 54 ie. two years from the date of payment of tax applies in this case? Whats happens in case the limitation period for claim of refund is lapsed? Does the supplier still need to pay correct tax and forget the refund of wrong tax paid.

[CA Seshukumar]

Dear all,

If supplier himself want to go for refund then he may go with in 2 years from the date of payment.

As the query arisen whether after 2 years the refund is eligible or not.

I would like to bring your attention towards below

"(d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;"

So , while supplier loose the right to go for refund on his own, he will wait for assessment where in he will get an assessment order stating the refund shall be granted.

Based on this order the supplier has 2 years time from the date of order.

Supplier will not loose the tax but it's only a time gap.

[Ganeshan Kalyani]

As a receiver, the person can claim credit based on the tax on the invoice. It may be CGST+SGST or IGST. This is because that the responsibility is upon the supplier to correctly determine the correct place of supply and pay tax under correct head.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Yes. You are right. There is also a judgement to this effect that the buyer cannot be penalized on account of supplier's fault.

But as per Section 155 of CGST Act, burden of proof is cast upon the person who avails ITC.

AI Summary

Wrong GST head payment: refund, adjustment, or credit-note correction available with ITC reversal risks. Supplies invoiced under CGST/SGST instead of IGST may be remedied by claiming refund of wrongly paid tax subject to departmental adjudication and limitation rules, by administrative shifting using the prescribed electronic adjustment form, or by issuing credit notes and re invoicing within the statutory period to correct tax heads; choice of route depends on whether the recipient has availed and utilized input tax credit, possible interest positions, and whether departmental orders later permit refund after assessment.