QUESTION

Mr. A wrongly claimed Excess Refund of ITC. Q.1. Can Mr. A repay ITC if Yes, How?. Q.2. GST officer Verify and Pass the said Refund, in that case whether Mr. A has to Pay Interest or not?

ANSWER

FACTS OF THE CASE:

Excess refund has been claimed. To determine whether interest will be applicable on returning the excess refund.

LAW APPLICABLE:
1. Sub section (4) of section 49 CGST dictates that;
"(4) 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."

2. Section 73(1) of CGST is laid as under;
"(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder."

INTERPRETATION:

As per section 49(4) CGST, balance of electronic credit ledger can be utilized only towards payment of output tax liability.
Since payment of erroneous refund is not an output tax liability therefore the credit ledger can not be utilized and the payment must be made through cash ledger only.

The payment shall be voluntarily under section 73 to avoid levy of penalty. Section 73 dictates that interest under section 50 must be paid when making the voluntary payment under the said section.

CONCLUSION :

Payment of erroneous refund shall be made voluntarily under section 73 along with interest @ 18% under section 50.
The fact that a GST officer had verified, validated and sanctioned the refund will make no difference to the case. (Reply dt. 28/12/2021)