Refund Eligibility in Case of Subsequent Compliance with Rule 86B

[PRATIK BHIMANI]

One of the dealers did not comply with Rule 86B of the CGST Rules, which mandates payment of at least 1% of output tax liability in cash, at the time of filing GSTR-3B.

The entire liability was discharged through the Electronic Credit Ledger (ITC).

Subsequently, the dealer voluntarily paid the required 1% through the Electronic Cash Ledger to comply with Rule 86B.

The issue is whether the dealer can now claim a refund of the GST earlier paid through the Electronic Credit Ledger

[KASTURI SETHI]

Yes. You can apply for refund by way of re-credit. The dealer has paid tax twice. It is excess payment of tax. 

[PRATIK BHIMANI]

thanks sir for your reply. But as per department there is no section under the act which allows the refund of tax paid twice in above manner.so can you please give reference to the section which can be referred at the time of filing refund claim. or say under which category the refund application can be made.

Thanks in advance.

[Ashish Rawat]

Yes since tax has effectively been paid twice once through itc and again in cash due to rule 86b it becomes excess payment so the dealer can claim refund or seek recredit of the amount that was earlier paid through the electronic credit ledger

[Shilpi Jain]

You can give ref of Article 265 of the Constitution as per which no tax can be levied without authority of law. GST does not provide any authority to the dept to collect tax twice to the extent of 1% paid inadvertently by credit.

[YAGAY and SUN]

Section 54(1) of the CGST Act, 2017 expressly permits refund of “any tax and interest, if any, or any other amount paid” by a person, subject to the prescribed conditions and limitation. In the present case, the output tax liability for the relevant tax period stood discharged through the Electronic Credit Ledger, and the subsequent payment of 1% through the Electronic Cash Ledger, made to comply with Rule 86B of the CGST Rules, 2017, resulted in payment of tax in excess of the legally enforceable liability for that period. Such excess payment squarely falls within the ambit of Section 54 as tax paid in excess or erroneously paid, and is therefore refundable upon satisfaction of the doctrine of unjust enrichment.

Further, Article 265 of the Constitution of India mandates that “no tax shall be levied or collected except by authority of law.” Once the lawful tax liability already stood discharged, retention of an additional amount by the Revenue, without corresponding statutory liability, would amount to collection and retention without authority of law. Accordingly, the assessee is entitled to seek refund under Section 54 of the CGST Act, 2017, read with Article 265 of the Constitution of India, by filing an application in Form GST RFD-01 under the category “refund of excess payment of tax.”

[Hitesh Jain]

Based on the issue discussed, the first step is to carefully examine the exact wording of the relevant section, along with any applicable rules and recent amendments. Many disputes arise due to interpretation rather than non-compliance.

Also review supporting documents such as agreements, invoices, payment proofs, and correspondence, as factual clarity is crucial in tax matters. If there is conflicting judicial view, check the latest High Court or Supreme Court rulings applicable to your jurisdiction.

Before taking any position, assess potential interest and penalty exposure. If the matter involves significant amounts, consider obtaining a written professional opinion to strengthen your stand during assessment or appeal. Proper documentation and timely response to notices can make a major difference in outcome.

[KASTURI SETHI]

In case of excess payment of tax (double payment) by mistake, the following judgements are very useful:- (issue is different)

(i) GST refund limitation period will start from the date of correct payment of tax.---------Patna High Court in the case of Sai Steel Vs. State of Bihar - 2025 (8) TMI 235 - PATNA HIGH COURT

(ii) GST-2 year limitation period is not applicable for refund claim if tax paid in excess by mistake--------Andhra Pradesh High Court in the case of Nspira Management Services P. Ltd. - 2025 (10) TMI 107 - ANDHRA PRADESH HIGH COURT

(iii) Time limit for 2 years not applicable where tax deposited (double) by mistake 2026 (2) TMI 1101 - ORISSA HIGH COURT - Rajendra Narayan Mohanty Versus Joint Commissioner of State Tax, CT & GST Circle, Cuttack, CT & GST Officer, Cuttack I East Circle.---------Orissa High Court judgement dated 18.2.26 passed under Article 265 of Constitution of India.

AI Summary

Excess tax payment refund permitted where cash payment duplicates input credit under Rule 86B; seek refund or recredit.
A duplicate cash payment made to comply with Rule 86B after discharging liability through the Electronic Credit Ledger creates an excess tax payment refundable under the CGST statutory refund regime, subject to unjust enrichment principles; the practical remedy is a refund claim or administrative recredit filed in the prescribed form/category (Form GST RFD 01), supported by documentation and with attention to potential interest or penalty exposure.