Circular No. 162 dated 25th September 2021

CA. Parth Nagda

Circular No. 162/18/2021-GST dated 25.09.2021 provides clarification in respect of refund under Section 77 of the CGST Act/ Section 19 of IGST Act, 2017  for transactions considered as Inter-State instead of Intra State supply or vice versa which are summarised as under:

Sub-rule (1A) has been inserted after sub-rule (1) of rule 89 of the CGST Rules, 2017 vide notification No. 35/2021-Central Tax dated 24.09.2021. The said sub-rule (1A) of rule 89 of CGST Rules, 2017 reads as follows:

(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on which this sub-rule comes into force.

Accordingly, the said refund can be claimed before the expiry of two years from the date of payment of tax under the correct head, i.e. IGST paid correctly in respect of the transaction subsequently held as inter-State supply, or CGST and SGST paid correctly in respect of the transaction subsequently held intra-State supply, as the case may be. However, in cases, where the taxpayer has made the payment in the correct head before the date of issuance of Notification No. 35/2021-Central Tax dated 24.09.2021, the said refund application can be filed before the expiry of two years from the date of issuance of the said notification. i.e. from 24.09.2021 till 23.09.2023.

Points to be noted:

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

  2. It is also clarified that any refund applications filed, whether pending or disposed of off, before issuance of notification No.35/2021-Central Tax, dated 24.09.2021, would also be dealt with in accordance with the provisions of rule 89 (1A) of the CGST Rules, 2017.

  3. The said refund would not be available where the taxpayer has made tax adjustment through the issuance of credit note under section 34 of the CGST Act in respect of the said transaction.

  4. Please refer to the illustrations/scenarios mentioned in the attached circular for better understanding.

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