GST paid under protest on imports

[Kaustubh Karandikar]

XYZ imported goods and paid the IGST @ 12% but “STRICTLY UNDER PROTEST” since in their view as per the GST Tariff the rate applicable is IGST @ 5%. The IGST of 12% so paid on imports, they claimed full input tax credit of the same. However, while re – selling these goods in the domestic market i.e., trading activity, they charged GST @ 5% in the Tax Invoice which according to them is the correct GST rate. Will this create any problem for XYZ?

[Rajagopalan Ranganathan]

Sir,

There is no permission to pay tax under protest under GST Law (CGST, SGST< IGST etc.). If you pay the tax under protest I feel the Department will say that you cannot avail the credit till the dispute is settled. If you have paid IGST @12% and the tax leviable when the imported goods are sold at 5% you can utilize the remaining credit to discharge the tax on any other subsequent supply made by you.

[MUKUND THAKKAR]

please refer Explanation giving under notification no 01/2017 dt 28.06.2017 -CGST which has self explanatory. so according to me if cleared under the rate of 5% may be create a problem for differential payments in future with the penalty and interest.

[KASTURI SETHI]

In FAQ it is mentioned that there is no provision for payment of GST under protest but in my view saving Section 174 of CGST Act covers the provision of 'under protest' also which was available in pre-GST era. High Court Chattisgarh in the case of GTL Infrastructure Ltd. reported as 2020 (37) G.S.T.L. 414 (Chhattisgarh) = 2019 (5) TMI 1812 - CHHATTISGARH HIGH COURT has accepted the payment under protest. To make payment under protest is an integral part of principles of natural justice.

Payment of tax under protest is not a hurdle in availing ITC inasmuch as burden of proof is cast upon the person who avails ITC (Section 155 of CGST refers.) So such person will have to keep the track of 'under protest'.

[CA HemanthKumar]

May be the option of refund under inverted duty structure can also be explored in case of accumulated ITC.

Regards

CA Hemanth Kumar

[KASTURI SETHI]

I agree with Sh.Hemant Kumar C.A. The option for refund claim under Inverted Duty Structure will be pre-audited/pre-examined. So there will no problem at all later on.

[YAGAY andSUN]

Since matter related to imported goods therefore under the provisions of Customs Laws IGST can be deposited under Protest.

AI Summary

Payment under protest may affect input tax credit availability and trigger differential GST liabilities and compliance risk. Importer paid higher IGST on importation 'under protest,' claimed full input tax credit, and sold the goods charging a lower GST rate. The GST law lacks an explicit payment under protest mechanism, creating potential departmental challenge to ITC, and exposure to differential tax, interest and penalty. Respondents note Customs practice may allow protest payments on import, cite a High Court decision and Section 174 as supportive, and suggest seeking refunds under an inverted duty structure-subject to pre audit-while maintaining detailed records of the protest.