Punjab and Haryana High Court Allows Refund Of GST Paid Wrongly On The Pretext Of Sales Being Intra-State

Punjab and Haryana High Court Allows Refund Of GST Paid Wrongly On The Pretext Of Sales Being Intra-State

Punjab and Haryana High Court in its decision on October 8, 2021 allowed the refund of wrongly paid CGST and SGST, placing reliance on Section 77, CGST Act 2017 and Section 19, IGST Act 2017. [SBI Cards and Payment Services v. Union of India, CWP – 8108 – 2021]

Justice Ajay Tewari, while allowing the petition, observed, "… once the petitioner paid that extra amount on asking of the respondents under the IGST the liability of the respondents to refund the amount of Rs.108 crore odd wrongly deposited under CGST & SGST cannot be disputed. We cannot also lose sight of the fact that the money has now lain with the respondents for the past two and a half years."

The petitioner was engaged in the business of issuing credit cards to its customers and was duly registered with the Reserve Bank under Section 451A of the RBI Act, 1934 as a non-deposit taking and non-banking financial company.

During the initial stage of GST implementation, when complete break up of individual transaction was not available, an amount of Rs 108 Crore was paid (CGST+SGST) considering the transaction to be intra-state sales.

Later, it was found that it was actually an inter-state transaction.

It was in those circumstances that the petitioner applied for refund of the amount wrongly paid.

Section 77 of the CGST Act, 2017 reads as;

Tax wrongfully collected and paid to Central Government or State Government

(1) A registered person who has paid the Central tax and State tax or, as the case may be, the Central tax and the 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, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.

(2) A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the Central tax and the Union territory tax payable.

Section 19 of the IGST Act, 2017 reads as;

Tax wrongfully collected and paid to Central Government or State Government

(1) A registered person who has paid integrated tax on a supply considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall be granted refund of the amount of integrated tax so paid in such manner and subject to such conditions as may be prescribed.

(2) A registered person who has paid central tax and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any interest on the amount of integrated tax payable