Under GST, 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. With GST being implemented on 1st July, 2017, it is expected that there will be situations where the wrong tax has been charged on a supply and the same has been paid to the Government. This can happen in 2 different situations:
[ Read: Types of GST ]
In this case, a supplier considers a supply to be intra state(within the state) and hence, collects CGST + SGST/UTGST. However, the right tax to be charged is IGST.
Example: CCD textiles Pvt ltd, a registered dealer, supplies apparel to a dealer, XYZ, in Tamil Nadu. The apparel are to be directly delivered by CCD textiles pvt ltd to a customer in Karnataka. ABC textiles pvt ltd charges CGST + SGST on the invoice, as the goods are delivered to a customer in Karnataka.
However, the correct tax to be charged on this supply is IGST since this is a bill-to ship-to supply, where the place of the supply will be the location of the person who directs the goods to be delivered to another person. In this case, the place of supply will be Tamil Nadu.
In this case, a supplier considers a supply to be interstate and hence, collects IGST. However, the right tax to be collected is CGST+SGST/UTGST
Example: ABC business hotel, registered in Himachal Pradesh, provides accommodation to employees of a corporate group, XYZ pvt ltd, for a conference. XYZ pvt ltd is registered in Delhi. ABC business hotel charges IGST in the invoice to XYZ pvt ltd, as ABC business hotel is registered in Delhi.
However, the correct tax to be charged on this supply is CGST + SGST, since this is a service related to an immovable property, where the place of supply is the location of the immovable property. In this case, the place of supply will be Himachal Pradesh.
You can follow the given steps to rectify the error in payment of GST:
A supplier who has collected and paid the wrong GST 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.
In the above examples, CCD textiles pvt ltd should pay IGST and ABC business hotel should pay CGST + SGST to the Government.
Once the correct tax has been paid to the Government, the supplier should apply for refund of the wrong GST paid.
Any person claiming the refund of the tax, interest, penalty, fees paid by him has to file form GST RFD-01 electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.
An applicant who is claiming the refund of the balance in the electronic cash ledger will be made available an acknowledgement in Form GST 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.
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.
[ Read: Refund Process under GST ]