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CMA Intermediate · Direct and Indirect Taxation · Introduction to GST Law

Kiran Traders, a registered person in Pune, paid CGST and SGST on a service import, treating it as intra-State. It is later held to be inter-State. Under Section 77 of the CGST Act, 2017, what is the consequence?

The registered person is refunded the central and State tax paid. Section 77(1) of the CGST Act provides that where tax paid on a supposed intra-State supply is later held to be inter-State, the amount is refunded in the prescribed manner and subject to prescribed conditions.

  1. AThe taxes paid are forfeited to the Government
  2. BThe taxes paid as central and State tax are refunded, in the prescribed manner and subject to prescribed conditionsCorrect
  3. CThe taxes paid are adjusted automatically as integrated tax with no refund
  4. DThe registered person must pay interest on the amount refunded

Explanation

Section 77(1) provides that a registered person who paid central and State tax on a transaction considered intra-State, later held inter-State, shall be refunded the taxes so paid in the prescribed manner and subject to conditions. Nothing in it provides for forfeiture or interest on the refund.

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