IGST Remitted Inadvertently Under Wrong Major Head Must Be Appropriated Towards CGST and SGST Liabilities

IGST Remitted Inadvertently Under Wrong Major Head Must Be Appropriated Towards CGST and SGST Liabilities

Issue

Whether a taxpayer who inadvertently paid its entire tax liability under the IGST head instead of splitting it between CGST and SGST can seek direct adjustment/appropriation of the IGST payment towards CGST and SGST liabilities instead of paying fresh CGST/SGST and filing a refund claim.

Facts

• The petitioner filed its GSTR-3B return and inadvertently deposited its entire output tax liability under the IGST major head instead of allocating it under CGST and SGST heads.

• The tax authority issued an assessment order demanding payment of CGST and SGST dues along with applicable interest/penalty.

• In the subsequent rectification order, the Revenue acknowledged that the aggregate tax liability stood fully discharged under the IGST head.

• However, the Revenue insisted that the petitioner must first deposit the fresh CGST and SGST amounts and thereafter file a claim for refund of the excess IGST paid.

• The Revenue relied upon Section 19 of the IGST Act, Section 77 of the CGST Act, and Rule 89(1A) of the CGST Rules to enforce the “pay first, seek refund later” mechanism.

• The petitioner filed a writ petition seeking direct appropriation/adjustment of the IGST funds already remitted towards its CGST and SGST liabilities.

Decision

• Section 77 of the CGST Act and Section 19 of the IGST Act govern cases where a transaction treated as inter-State is later determined to be intra-State (or vice-versa), not cases of simple inadvertent accounting error under wrong major tax heads.

• Since the petitioner’s total tax liability was fully discharged within the prescribed timeline, forcing the assessee to pay twice and then pursue a refund claim is uncalled for and legally unsustainable.

• The tax authorities were directed to directly adjust and appropriate the IGST payment towards the outstanding CGST and SGST dues.

• The conflicting portion of the rectification order demanding fresh payment of CGST and SGST was set aside in favour of the assessee.

Key Takeaways

• Direct Adjustment Allowed for Head Discrepancy: Inadvertently paying tax under the wrong head (IGST instead of CGST/SGST) does not constitute non-payment of tax if the overall liability was remitted within time.

• Inapplicability of Section 77 / Section 19: Provisions under Section 77 CGST Act and Section 19 IGST Act pertain to transaction re-classification disputes, not simple clerical errors in allocating funds across tax heads in GSTR-3B.

• No Double Payment Mandate: Tax authorities cannot compel a taxpayer to make fresh cash deposits under correct heads and seek refunds when the Revenue already holds the required tax amount under an alternate head.