FEBRUARY 15, 2019

By Lakshmi Ratna Kancherla

MANY assessees who are registered under the Goods and Services Tax ('GST') Law are engaged in supply of goods or services or both, which are taxable and exempted.

In this article, the author intends to address a short point on the remedy available where the assessee had paid an excess amount while determining the eligible input tax credit (proportionate credit) for the financial year 2017-18 but has not reclaimed the same in the return for the month of September 2018.

In a situation where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under the CGST Act or under the IGST Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies in terms of Section 17(2) of the CGST Act.

Rule 42 of the Central Goods and Services Tax Rules, 2017 ('CGST Rules') prescribes the methodology for reversal of credit on inputs and input services which is akin to Rule 6 of the erstwhile CENVAT Credit Rules, 2004 ('Credit Rules').

Broadly, Rule 42 of the CGST Rules covers the following -

- The registered person is required to reverse the credit based on the formula and methodology prescribed for every tax period.

- The registered person is required to reverse/pay an amount for each tax period on a provisional basis and thereafter finally assess the amount payable.

- The methodology prescribed for finally ascertaining the liability of the amount payable under Rule 42 is tabulated below.,

It is pertinent to note that insofar as the registered person who has paid an amount which is in excess of the amount to be paid for a tax period (2017-18), there is a time limit prescribed for reclaiming the said amount.

Insofar as input tax credit is concerned, the general time limit specified under the statute is not applicable for re-credit of the input tax credit in terms of Rule 37 of the CGST Rules. Unlike Rule 37 of the CGST Rules, Rule 42 of the CGST Rules, prescribes a time limit for re-claiming any excess amount paid during the tax period.

Considering the nascent stage of the law and prevailing confusion, many assessees have paid excess amounts during the period July 2017 to March 2018.

The question which arises is what is the option available to an assessee in the event the excess amount paid was not claimed within the stipulated time limit in the Return?

Principally, the amount paid rightfully belongs to the registered person. The Government cannot retain the amount as any such action goes against the mandate of Article 265 of the Constitution of India, which provides that no tax shall be levied or collected except by authority of law.

The assesses can definitely prefer a refund claim under Section 54 of the CGST Act under the residuary category, despite the time limit prescribed because the amount retained by the Government is without the authority of law.

In fact, it is onerous to expect the registered persons to avail the excess paid amount within the stipulated time limit.

Moreover, 'return' as mentioned under the Rules, does not cover GSTR-3B and hence it can be said that it is open for the registered person to avail the refund of the excess paid amount.

In the interest of the stakeholders concerned, it would be of prudence to amend the said provision and thus ensure that 'ease of doing business' is a reality.

(The author is Advocate & Principal Associate, Lakshmikumaran & Sridharan, Bangalore. The views expressed are strictly personal.)