It has been proposed in 45th GST Council meeting to incorporate provision in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.
Now, Circular no. 162/18/2021-GST dated 25th September, 2021 read with NN 35/2021-CT dated 24.09.2021 has been issued to clarify issues in such respect, as explained in following paragraphs:
Section 77 of the CGST Act read with section 19 of the IGST Act provides that a registered person who has paid the Central tax and State tax/ Union territory tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply and vice-versa paid Integrated tax on a transaction considered as inter-state supply which is subsequently held to be an intra-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as prescribed in rule 89 of CGST Rules.
The term ‘subsequently held’ has been clarified in order to cover both the cases where the inter-State or intra-State supply made by a taxpayer, is either subsequently found by taxpayer himself as intra-State or inter-State respectively or where the inter-State or intra-State supply made by a taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer in any proceeding.
Also, sub-rule (1A) has been inserted in rule 89 of the CGST Rules, 2017 vide NN 35/2021-CT dated 24.09.2021, to provide refund under section 77 of the Act of any tax wrongfully collected & paid can be claimed before the expiry of a period of 2 years from the date of payment of tax in correct head, file an application electronically in FORM GST RFD-01 through the common portal. However, if any payment of tax in correct head has been made before coming into force of this sub-rule, be filed before the expiry of a period of 2 years from the date on which this sub-rule comes into force.
This can be understood with the help of illustration as tabulated below:
| Sl.no. | Scenario | Last date for filing the refund claim |
| 1. | Having realized on his own that the said transaction is an inter-State supply, “A” paid IGST in respect of the said transaction on 10.05.2021. | Since “A” has paid the tax in the correct head before issuance of notification No. 35/2021-Central Tax, dated 24.09.2021, the last date for filing refund application in FORM GST RFD-01 would be 23.09.23 (2 years from date of notification viz. 24.09.2021) |
| 2. | Having realized on his own that the said transaction is an inter-State supply, “A” paid IGST in respect of the said transaction on 10.11.2021 i.e. after issuance of notification No. 35/2021-Central Tax dated 24.09.2021 | Since “A” has paid the correct tax on 10.11.2021, in terms of rule 89 (1A) of the CGST Rules, the last date for filing refund application in FORM GST RFD-01 would be 09.11.2023 (2 years from the date of payment of tax under the correct head, i.e. integrated tax) |
| 3. | Proper officer or adjudication authority or appellate authority of “A” has held the transaction as an inter-State supply and accordingly, “A” has paid the IGST in respect of the said transaction on 10.05.2019 | Since “A” has paid the tax in the correct head before issuance of notification No. 35/2021-Central Tax, dated 24.09.2021, the last date for filing refund application in FORM GST RFD-01 would be 23.09.23 (2 years from date of notification) |
| 4. | Proper officer or adjudication authority or appellate authority of “A” has held the transaction as an inter-State supply and accordingly, “A” has paid the IGST in respect of the said transaction on 10.11.2022 i.e. after issuance of notification No. 35/2021- Central Tax dated 24.09.2021 | Since “A” has paid the correct tax on 10.11.2022, in terms of rule 89 (1A) of the CGST Rules, the last date for filing refund application in FORM GST RFD-01 would be 09.11.2024 (2 years from the date of payment of tax under the correct head, i.e. integrated tax) |
It has also been clarified that refund under section 77 of the CGST Act read with section 19 of the IGST Act would not be available where the taxpayer has made tax adjustment through issuance of credit note under section 34 of the CGST Act in respect of the said transaction.
