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)?

AI Summary

Refund of excess tax paid through input tax credit may be claimed; two-year limitation runs from date of tax payment.
A taxpayer who used input tax credit to pay output tax but later made the required cash payment can seek refund or re credit of the ITC used; practitioners advise the two year limitation for such refund/re credit is measured from the date of tax payment (the cash payment), though claims may invite departmental dispute and potential interest or penalties if the ITC was improperly used.