What Happens If You Pay Wrong GST On Supply

In Goods and Services Tax, Place of supply plays an important role to determine whether transaction is intra-state or inter-state. Goods and Services Tax is applicable in the state where the goods/services are consumed i.e., it is a consumption based tax. So the place of supply determines the tax to be charged on a supply. Based on whether the supply is of goods or services, specific rules have been laid down to determine the place of supply.

Wrong Goods and Services Tax paid can be understood in two different situations :

  1. Where CGST + SGST/UTGST has been collected and paid instead of IGST
  2. Where IGST has been collected and paid instead of CGST + SGST/UTGST

Situation 1 :  When Inter-State Sale is Wrongly Treated as Intra-State Sale

Let’s say a taxable person pays CGST/SGST on an inter-state supply transaction which he mistakenly treated as an intra-state supply. i.e., he should have collected IGST instead of CGST/SGST.

Situation 2:  When Intra-State Sale is Wrongly Treated as Inter-State Sale

This scenario occurs when a taxable person pays IGST on an intra-state supply transaction which he has mistakenly treated as an inter-state supply. Ideally, for an intra-state supply, the tax collected should be CGST/SGST instead of IGST.

You Can Follow The Given Steps To Rectify The Error In Payment Of Goods and Services Tax

1. Pay Correct Goods and Services Tax: A supplier who has collected and paid the wrong Goods and Services Tax on supply should first pay the correct tax to the Government. A major relaxation given is that no interest will be charged on the amount to be paid.

2. Apply for Refund of Incorrect Tax: Once the correct tax has been paid to the Government, the supplier should apply for refund of the wrong Goods and Services Tax paid.

Note 1 :  No interest will need to be paid when the taxpayer pays the correct tax later on. Penalty will not apply in these scenarios.

Note 2 : Forms for Refund:

·   Form GST RFD-01

Any person claiming the refund of the tax, interest, penalty, fees paid by him has to file form Goods and Services Tax RFD-01 electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

·  Form GST RFD-02

An applicant who is claiming the refund of the balance in the electronic cash ledger will be made available an acknowledgement in Form Goods and Services Tax RFD-02 electronically indicating the date of claim of refund.

The proper officer has to review and scrutinise the refund application within 15 days of the date of claiming the refund.

·  Form GST RFD-03

Once the application has been reviewed by the proper officer, he will share the discrepancies made by the applicant in the form GST RFD-03 through the common portal electronically.

Also Read : Panel Suggested to Put GST in MRP – A Mandatory Call