Depositing GST on the wrong head

[Balakrishna]

Dear Sirs, 

1. During 2018-19 Rs. 19,000 tax was wrongly deposited as IGST instead of CGST & SGST

2. Business was closed due to Corona in April 2021 and the GST Registration was cancelled in November 2021

3. During assessment now, the Dept is demanding Rs. 19K as correct tax and 25% penalty (about 5K)

My querry is: 

1. While the section 77 (2) and 19 (2) explicitly mention about not charging interest under this circumstance, there is no specific mention about not charging penalty. Section 122 lists 21 situations under which penalty is applied which doesn't cover this situation. Depositing under wrong head which does not amount to loss of revenue to Govt. need not attract penalty.  

Please help provide specific reference for not charging Penalty. Anyway, upon depositing right tax, IGST will get refunded. Don't want to pay penalty for no wrong. 

2. Is there any specific section, clause or rule to get the refund directly to the Bank account instead of electronic cash ledger as the GST registration of the entity is cancelled. There is a Kerala High Court judgement of 2018 directing the Dept to refund directly to the Bank Account

[Shilpi Jain]

There should not be any penalty as there is no mens rea. Also when interest itself is not levied by law where is the question of penalty.

The point is in these circumstances the dept officer himself should be considerate and drop the issue. Else for these aspects and for such a small amount it is not worth going to the HC to get directions.

Also, once registration is cancelled I am not sure if the department can credit the amount to electronic cash ledger. Should not be possible so ideally you should get this refund into your bank account.

[KASTURI SETHI]

MY VIEWS

(i) Neither interest is chargeable nor penalty is imposable. It is a clerical/typographical mistake. No revenue loss is involved.

(ii) Reply to Query No. 1 : Read case law reported as (Kerala High Court) in the case of REJIMON PADICKAPPARAMBIL ALEX Versus UNION OF INDIA - 2024 (12) TMI 399 - KERALA HIGH COURT and Boards Circular No. 192/04/2023.

(iii) Reply to Query No. 2 : Since the registration has been cancelled, your status is of unregistered person at present. As per Section 54 (1), ANY person can claim refund. Emphasis is laid on ANY. Here the word, “ANY” also includes unregistered person.

(iv): Mode of payment of refund in cash via Electronic Cash Ledger is meant for REGISTERED person only. The department cannot withhold or deny your refund on the ground that your Electronic Cash Ledger is inactive on Common Portal System, you being unregistered person.

(v) You do not need any case law for getting refund in cash in your Bank Account.

We cannot find solution to ALL PROBLEMS in law.

[KALLESHAMURTHY MURTHY K.N.]

Sir, 

Please refer Circular No. 162/18/2021-GST. 

[Ryan Vaz]

Penalty is not applicable

Wrong payment under IGST instead of CGST+SGST is NOT an offence under Section 122. It is a classification error, expressly recognised under Section 77, and as it causes no revenue loss, neither interest nor penalty applies.

Multiple judicial rulings and CBICs interpretation support this.

Refund of IGST after registration cancellation is allowed directly to the bank account

When registration is cancelled, refund cannot be forced into the electronic cash ledger. Courts have directed refund to bank accounts of such taxpayers.

[Padmanathan KV]

Exactly under which provisions are the demands being raised now in Dec 2025? Also, under which provision exactly, the penalty is sought to be levied? Isnt the time limit for both section 73 and 74 proceedings already over for FY 2018-19? 
 

AI Summary

Depositing GST under the wrong head should not attract penalty; refunds payable to bank if registration is cancelled. Misclassification of GST payment (depositing IGST instead of CGST and SGST) is treated as a clerical classification error that causes no revenue loss and thus, under Section 77(2) and Section 19(2), interest and penalty are not chargeable; contributors cite Rejimon Padickapparambil Alex (Kerala HC, 2024), Board Circular No.192/04/2023, and Circular No.162/18/2021-GST. When registration is cancelled, Section 54(1) permits any person to claim refund and refunds should be paid to the taxpayer's bank account rather than credited to an electronic cash ledger reserved for registered persons.