[FAQs] on Payment and Refunds under GST

Tax Collected at Source (TCS) under GST law

Under Section 52 of the CGST Act, 2017, every electronic commerce operator, not being an agent, shall collect an amount calculated at such rate not exceeding one per cent, as may be notified by the Government on the recommendations of the Council.

However, on the recommendations of the Council, the Government has issued notifications whereby it has fixed rate of TCS @ 0.5% under CGST Act and 0.5% under SGST Act, in case of intra-state supplies, and @1% under IGST Act, in case of inter-state supplies.

TCS would be calculated on the net value of taxable supplies made through the electronic commerce where the consideration with respect to such supplies is to be collected by the electronic commerce operator.

The net value of taxable supplies is the aggregate value of taxable supplies of goods or services or both made during any month by all registered taxable persons through the operator as reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

It has also been clarified that net value for the purpose of Section 52 shall not include TCS collected under the Income Tax Act.

TCS shall be collected by the Operator while paying to the supplier the price of the product/services.

Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application electronically in prescribed form before the expiry of 2 years from the relevant date.

A registered person, claiming refund of any balance in the electronic cash ledger in accordance with provisions of section 49(6), may claim refund in the return furnished under section 39, in such manner as may be prescribed.

Utilisation of ITC

Section 74 of the CGST Act, 2017 says that when a registered person has not paid tax or short paid or received erroneously refund or claimed input tax credit by reason of fraud or any wilful misstatement or suppression of facts, he shall be liable to pay such tax along with interest payable under section 50 of the Act. Presently, the rate of interest notified under Section 50 is 24% where undue or excess claim of ITC is done. Where the registered person pays such tax along with interest voluntarily before the service of notice under Section 74, it shall be liable to pay penalty at the rate of 15% of such tax in terms of Section 74(5) of the Act.

Section 49(4) of the CGST Act provides that the amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed.

Section 2(82) of the CGST Act defines the term “output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis;

Thus, the amount available in the electronic credit ledger i.e. input tax credit can be used only towards payment of output tax and the definition of output tax includes only tax chargeable on taxable supplies and excludes tax chargeable under reverse charge.

In light of above, input tax credit can be used only for the payment of tax and cannot be used for payment of interest, penalty and tax under reverse charge.

The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of IGST will be done using the following hierarchy, –

• First available ITC of IGST shall be used for payment of IGST;
• Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment of IGST;
• If both ITC of IGST and ITC of CGST are exhausted, then only the dealer would be permitted to use ITC of SGST for payment of IGST. Remaining IGST liability, if any, shall be discharged using payment in cash

Example:

IGST Liability: ` 1,00,000

ITC available:

• IGST: ` 50,000
• CGST: ` 20,000
• SGST: ` 20,000

Table showing order of setting off liability:

Figures in `

As per section 54 of CGST Act, 2017, in order to claim refund, the registered person should give the application for refund which should be accompanied by documentary evidence or other evidence as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person.

In given case, the company did not separately collect GST from the recipient of supply as is evident as selling price of the product when it was exempt from GST as well as selling price of the product after it becoming liable to GST is same.

In such cases, it is deemed that amount collected from customer/recipient of supply is inclusive of GST and accordingly registered person is liable to pay GST to the Government. Registered person not charging GST separately does not waive off its liability.

Hence, contention of the company to claim refund of GST by stating that there was no change in the price before and after imposition of tax & hence, burden of tax had not been passed on to the buyer will not be held as liability of the company continues under GST law. Therefore, it will not be granted refund.

As per section 54 of CGST Act, the amount of advance tax deposited by Casual Taxable Person or Non-Resident Taxable Person under section 27(2) shall be refunded only when such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39.

Further, refund of any amount, after adjusting the tax payable by the applicant out of advance tax deposited by him under section 27 at the time of registration, shall be claimed in the last return required to be furnished by him. (Rule 89 of CGST Rules.)

As state wise separate registration is to be obtained by a person under GST. Therefore, even a person with same PAN has to obtain different registrations in different states and is therefore deemed to be a distinct person under GST. Therefore, ITC balance of CGST in one state will not be able to be used in another state to pay output tax of CGST.

As the entire liability of GST will be on recipient of supply, the E-Commerce Operator making payment to the supplier should pay the entire amount without implications of TCS.

The amount deducted as tax under section 51 shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made.

Provisional Sanction of Refund under GST:-

Provisional refund is applicable in case of Zero-rated Supplies.

Zero-rated supplies include export of goods or services and supplies made to Special Economic Zone (SEZ) units and Developers.

In these cases, The GST officer shall grant the provisional refund to the extent of 90% of the Refund claimed. The Refund claimed will be excluding the amount of ITC that got adjusted if any in the Electronic Credit Ledger on applying for the refund in RFD-01A/01.

Provisional Refund shall be granted by the issue of Form RFD-04 within seven days of giving the Acknowledgement in RFD-02. This Provisional Refund amount is to be credited directly to the Bank account of the Refund applicant. Payment advice in RFD-05 is sent along for this payment.

Exception:

The Provisional Refund is not granted if the applicant was prosecuted for the offence under any Indian Laws where the tax evaded is more than ` 250 lakhs anytime in the last five years preceding the tax period for which refund is claimed.

Provisions of Tax Collection at Source (TCS) under GST (Section 52 of the CGST Act, 2017):-

1. The rate of TCS under CGST is 0.5% of net value of intra-State supplies; under SGST as well it is 0.5% of net value of intra-State supplies. Hence, it is effectively 1% of the said value. While under IGST, it shall be 1% of the net value of intra-State supplies.
2. TCS is applicable when a supplier supplies taxable goods or services through its portal and the payment for that supply is collected by the e-commerce operator.

Every e-commerce operator, not being an agent, has been mandated to collect tax at source on the net value of taxable supplies made through it by the suppliers, where the ECO collects the consideration on behalf of supplier for such supplies.

Cases where refundable amount shall be paid to the applicant, instead of being credited to consumer welfare fund under section 54(8) of CGST Act, 2017 i.e. cases where theory of unjust enrichment is inapplicable are as follows:

1. Refund of tax paid on export of goods or services or on inputs or input services used in making such exports.
2. Refund of unutilized ITC in case of zero-rated supplies made without payment of tax or accumulated ITC on account of inverted duty structure.