Refund of tax paid on non-compliance of rule 86B

[vaibhav agrawal]

A taxpayer paid entire output tax liability through ITC. During scrutiny, it was found that Rule 86B applied, requiring part payment in cash. The taxpayer has now paid the required amount in cash.

Can the ITC earlier utilized (now effectively replaced by cash) be refunded or re-credited to the Electronic Credit Ledger?

If refundable, will the two-year limitation under Section 54 be counted from the date of cash payment or from the date of original GSTR-3B filing (FY 2022-23)?

[Pinnacle Tax Advisor]

This case pertains to the excess payment of tax made by mistake, for which a refund is permissible. As per the applicable provisions, the two-year time limitation for claiming the refund begins from the date of tax payment.

Since the excess payment arose due to litigation concerning security, the two-year limitation should be counted from the date of payment made in connection with that scrutiny—not from the date of filing GSTR-3B.

[Shilpi Jain]

You should also be able to take a re-credit, though could lead to dispute from the department. So if 2 years have not lapsed from date of payment you should proceed for refund. 

Also have a look at this decision 

AM Enterprises 2024 (9) TMI 1485 - HIMACHAL PRADESH HIGH COURT

 

[KASTURI SETHI]

Relevant date of computation of time limit for filing refund claim by way of re-credit is the date of payment of tax in cash.

[KASTURI SETHI]

         Also see replies against Issue ID 120149. 

[PAWAN KUMAR]

As per my view, the date of payment of tax, relevant date in this case is :-

Section 54, second explanation, Clause (2) :-

(h) in any other case, the date of payment of tax.

two years from the tax payment date.

 

[KASTURI SETHI]

In this case,  there are two dates of payment of tax i.e. payment of tax via Electronic Credit Ledger  and payment of tax in cash. The most crucial  point is   "What is a  determinant  factor  here ?" Which payment is instrumental  in excess payment of tax ? 

[vaibhav agrawal]

Dear Kasturi Sethi sir

Refund will be attracted only when liability is paid in cash (excess 1 percent) but we will be seeking refund for that 1 percent which was utilized through ITC at the time of filing of GSTR 3B. So what according to you shall be determinant factor here ?

 

[KASTURI SETHI]

 In continuation of my earlier replies:-                      

(i)  You have paid tax in excess. Tax cannot be charged twice. It is well settled law.  If tax charged twice, that is without any authority of law. Hence time limit would not be applicable. Study deep.

(ii) You have used ITC which was not admissible to you as per GST Laws. It is an offence and hence interest is payable (despite having sufficient balance in Electronic Credit Ledger) and penalty is imposable in this situation. First pay Govt. dues on the issue involved and thereafter, you should talk of claiming refund of ITC by way of re-credit. 

(iii) The issue is worth contesting.  In my view, chances for decision in your favour are bright.

[Padmanathan KV]

In my opinion you are entitled to re-credit. I am of the view that 2 years should not apply for such re-credit. However, you will have to litigate the matter if department does not agree.

AI Summary

Taxpayer paid Rule 86B cash shortfall after using ITC; seeks re-credit or refund under Section 54 timing rules A taxpayer who used ITC to pay output tax but was later required under Rule 86B to pay part in cash has paid the cash shortfall and seeks re-credit or refund of the earlier ITC use. Forum contributors generally state excess tax paid can be refunded and the two-year limitation under Section 54 is computed from the date of payment of tax (i.e., the cash payment), not from the original GSTR-3B filing; several responders caution the department may dispute re-credit, note possible interest/penalty for improper ITC use, and advise litigation if the claim is denied.