Claim of GST Refund Wrongly Paid To The Government: Uttar Pradesh Govt. Issues Clarification

The department has received submissions requesting clarity on matters pertaining to the refund of incorrectly paid taxes, as mentioned in sections 77(1) of the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act) and section 19(1) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).

Section 77 of the UPGST Act and Section 19 of the IGST Act, 2017 provide that if a supply previously considered intra-state or inter-state by a taxpayer is later held to be intra-state or inter-state, respectively, the amount of central and state tax paid or integrated tax paid on the supply shall be refunded in the prescribed manner.

Sub-rule (1A) has been inserted after sub-rule (1) of rule 89 of the Uttar Pradesh Goods and Services Tax Rules, 2017 to prescribe the manner and conditions for refund under sections 77 of the UPGST Act and section 19 of the IGST Act, vide notification dated January 07, 2022.

The amendment to rule 89 of the UPGST Rules, 2017 clarifies that the refund under section 77 of the UPGST Act/section 19 of the IGST Act, 2017 can be claimed within two years of the date of payment of tax under the correct head, i.e. integrated tax paid in respect of subsequently held inter-State supply, or central and state tax paid in respect of subsequently held intra-State supply, as the case may be.

However, if the taxpayer made the correct head payment prior to the date of issuance of the notification dated January 7, 2022, the refund application under section 77 of the UPGST Act or section 19 of the IGST Act can be filed before the expiry of two years from the date of issuance of the notification, i.e., September 24, 2021.

The state government has clarified the issues with the help of various scenarios.

Firstly, suppose the taxpayer "A" submitted an invoice dated March 10, 2018 charging UPGST and SGST on a transaction and paid the necessary tax (UPGST and SGST) in the March 2018 tax period. "A" paid IGST in respect of the transaction on May 10, 2021, after realising on his own that it was an inter-State supply.

The state clarified that since "A" had paid the tax in the correct head before the issuance of notification dated January 07, 2021, the last date for filing a refund application in FORM GST RFD-01 would be September 23, 2023 (two years from the date of notification).

Secondly, having realised on his own that the transaction is an inter-State supply, "A" paid IGST in respect of the said transaction on November 10, 2021, i.e., after the issuance of notification dated January 07, 2022.

The state explained that since "A" had paid the correct tax on November 10, 2021, in terms of rule 89 (1A) of the UPGST Rules, the last date for filing a refund application on FORM GST RFD-01 would be November 09, 2023 (two years from the date of payment of tax under the correct head, i.e., integrated tax).

Rule 89 (1A) of the UPGST Rules would be applicable to section 19 of the IGST Act also, where the taxpayer has initially paid IGST on a specific transaction which is later on held as an intra-state supply and the taxpayer accordingly pays UPGST and SGST on the transaction.

Circular No. 2223005

Date: April 20, 2022