GST: HC allows adjustment of wrong payment


In relief to tax-payers, rules that tax paid mistakenly under one head can be transferred to the correct account

In what is seen as a major relief for GST assessees, especially dealers, the Kerala High Court has ruled that any GST mistakenly paid under one head can be adjusted under the correct head.

While noting that it sees no difficulty for the tax authorities to allow the petitioner’s request and get the amount transferred from the head ‘S-GST’ to ‘I-GST’, the court said it is inequitable for the authorities to let the petitioner suffer.

The court made these observations while disposing of a matter involving Saji S of Adithya and Ambadi Traders, Ranjith R of Ranjith Roadlines, and the State GST authorities.

Since the ruling is by a High Court, it can set a precedent for similar matters.

The said dealer bought goods from Chennai and transported them to Kerala. However, on way, the goods were seized, and a demand was made for tax and penalty. The payment was made under the head ‘State Goods and Services Tax’ (S-GST) and this became a matter of litigation.

The petitioner insisted that the payment was made on the instructions of the Assistant State Tax Officer (ASTO). But, by law, the remittance must have been made under the head ‘Integrated Goods and Services Tax’ (I-GST).

The petitioner submitted that even if the remittance was a mistake on the consignor’s part, the law empowers the authorities to transfer the deposit from one head to another, that is, from S-GST to I-GST.

But the tax authorities wanted the petitioner to pay the dues under I-GST and then claim refund under S-GST.

The court observed that there was no dispute on paying the tax and the penalty. Only, they had been remitted under the head S-GST, instead of I-GST. The court referred to Section 77 of the GST Tax and Rule 4(1).

Section 77 deals with tax refund of the tax mistakenly paid under one head. Rule 4(1) provides for an adjustment.

Preferring the adjustment route, the court asked the tax authorities to release the goods and the vehicle and ensure that the tax and penalty paid under S-GST get transferred to the I-GST.

Experts feel the ruling brings relief to tax-payers. Since the GST is a new law, many tax-payers have been struggling on this count of wrong payment of tax. The adjustment of tax paid under one head to another will save them the bother of paying again under the correct head and then claiming a refund.

Harpreet Singh, Partner at KPMG, said though the ruling reduces the complexity, it could lead to further litigation. “While the court has allowed the cross adjustment of tax under different heads, it would be interesting to see whether the ruling passes the muster of legal challenge, as the order relies upon subordinate legislation, that is, the Rules over the Act,” Singh added.

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