Supplier charged Lower GST rate, Goods and Services Tax - GST

[Mukesh Mudi]

Mr A purchase goods from Mr. B.

Invoiced GST rate of goods is 12% instead of charging 18%.

Who is responsible for paying the differential 6% . Buyer or Supplier

[Amit Agrawal]

Liability to pay output tax lies upon the supplier. So, Mr. B is liable to pay differential taxes @ 6%.

Subject to contractual terms & understanding between A & B, B can raise debit-note u/s 34 upon A to recover differential taxes @ 6%.

However, A needs to be aware & vary of the fact that ITC cannot be availed against 'any tax paid in accordance with the provisions of sections 74, 129 and 130' as per Section 17 (5) (i). Please also see Rule 53 (3) of the CGST Rules, 2017 in this regard.

These are ex facie views of mine, the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

The supplier ('B') is to collect GST from the buyer (A) and deposit into Govt.'s account. Ultimately, differential (6%) is borne by the buyer.

[Padmanathan KV]

I agree with views of Amit Ji in toto. Mr. B the seller is liable.

Whether or not Mr. A pays the differential tax to Mr.B is a whole together different issue and it is subject to contractual obligations and civil suit remedies.

Practically Mr. B can issue debit note to Mr.A, and Mr. A can avail ITC on the same.

[Padmanathan KV]

Just for academic interest, the jurisprudence in this regard seems to originate from below judgements:

In Tata Iron and Steel Company v. State of Bihar 1958 (2) TMI 29 - SUPREME COURT, the Constitution Bench of the Supreme Court, while considering the provisions of the Bihar Sales Tax Act, 1947 observed that the primary liability to pay sales tax, so far as the State is concerned, is on the seller. Though sales tax legislation may permit the seller who is a registered dealer to collect the sales tax as a tax from the purchaser that does not do away with the primary liability of the seller to pay the sales tax.upheld in George Oakes (Private) Ltd. v. State of Madras, 1961 (4) TMI 78 - SUPREME COURT and Khazan Chand vs. State of Jammu and Kashmir, 1984 (2) TMI 301 - SUPREME COURT. This principle was reiterated by Supreme Court in Central Wines v. Special Commercial Tax Officer (1987 (1) TMI 442 - SUPREME COURT

[Shilpi Jain]

Agreed that the primary liability to the department is of the seller which can be collected from the buyer, also being subject to the contract terms.

There have been decisions which have held that the tax liability can be collected from the buyers as it is an indirect tax.

Thereby, it is always advised that the contract terms are made clear at the inception itself regarding the quantum of tax payable by the buyer.

Some where the interest of the recipient also has to be kept in mind to ensure that the tax component is not kept open, left to be demanded by the seller whenever he gets a demand, more so when he would no longer be eligible to take credit (including scenarios mentioned by Amitji)

AI Summary

Supplier liability for undercharged GST may be recovered from buyer under contract terms, with ITC consequences considered. The supplier remains primarily liable to remit any undercharged GST; recovery of the differential from the buyer depends on contractual terms, and the supplier can issue a debit note to seek reimbursement. Input Tax Credit consequences must be considered, including potential ineligibility where taxes are paid under specified enforcement provisions (Section 17(5)(i) and Rule 53(3) of the CGST Rules, 2017). Established jurisprudence recognises the seller's primary tax liability even where tax is collected from purchasers.