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CA Intermediate · Taxation · Payment of Tax

Mehta Exports Ltd, Surat, files its return and finds that in the previous month it had mistakenly paid Rs 30,000 as CGST and Rs 30,000 as SGST on an intra-State supply that was in fact an inter-State supply liable to IGST. It has not claimed any refund of these amounts. Which course is correct under the CGST Act?

Mehta Exports must pay IGST of Rs 60,000 and then claim refund of the CGST and SGST wrongly paid. The law specifically provides this remedy for tax paid under the wrong head on a supply later found to be inter-State. Ledger adjustments between heads are not allowed.

  1. AIt may pay IGST of Rs 60,000 and claim refund of the CGST and SGST paidCorrect
  2. BIt may adjust the CGST and SGST against IGST by journal entry in the ledger
  3. CIt can only recover the amount by a Rs 60,000 reduction in the next month's output tax
  4. DIt must forfeit the CGST and SGST paid since tax once paid cannot be refunded

Explanation

Where tax is paid as CGST and SGST on a supply held to be inter-State, the taxpayer must pay the IGST due and may then claim a refund of the CGST and SGST wrongly paid. Ledger journal adjustment between heads is not permitted, and no forfeiture applies, since the refund provision covers this case.

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