1. Introduction
In the administration of the Goods and Services Tax (GST), inadvertent overpayments of tax are not uncommon. The question of how such excess tax can be regularised-whether by way of adjustment or refund-has acquired considerable importance in recent years.
In this case, Aayra Kapoor Ltd., a registered entity under the CGST Act, 2017, accidentally paid more GST than owed during FY 2023-24. This mistake went unnoticed during the relevant period, and no corrective measures were taken at the time. It was only during the FY 2025-26 internal audit that the company detected the overpayment and inquired whether this excess GST could be offset against current liabilities or audit liabilities.
The issue, therefore, pertains to the interpretation of Sections 39(9) and 54(1) of the CGST Act, 2017, in conjunction with the constitutional prohibition under Article 265 of the Constitution of India.
2. Statutory Framework and Legal Analysis
2.1. Rectification of Returns under Section 39(9)
Section 39(9) of the CGST Act, 2017 reads as under:
(9) [1][Where] any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars [2][in such form and manner as may be prescribed], subject to payment of interest under this Act:
Provided that no such rectification of any omission or incorrect particulars shall be allowed after [3][the thirtieth day of November] following [4][the end of the financial year to which such details pertain], or the actual date of furnishing of the relevant annual return, whichever is earlier.
The Finance Act, 2022, which came into effect on October 1, 2022, amended the proviso to Section 39(9) to specify a new time limit-extending from the original due date for filing the return for September or the second quarter to November 30 of the following financial year-for correcting returns.
Accordingly, in respect of FY 2023-24 any correction or modification in returns was permissible only up to 30 November 2024, unless the annual return was filed earlier. Once this statutory window has expired, neither the taxpayer nor the Department has the authority to reopen, revise, or amend past returns.
Under the Goods and Services Tax (GST) Law, which operates on a self-assessment basis, each submitted return corresponds to a specific tax period. The legislation does not permit retrospective modifications once the prescribed time frame has expired. Consequently, rectification pursuant to Section 39(9) for the financial year 2023-24, to be carried out in the fiscal year 2025-26, is legally inadmissible.
2.2. Adjustment of Excess Payment Against Current Liabilities
The CGST Act lacks any provision that authorizes a taxpayer to offset excess tax paid in a previous period against liabilities of a subsequent period or against demands arising from audits.
Each return filed under Section 39 is independent and self-contained. The lack of a specific statutory provision allowing inter-period adjustments indicates legislative intent that tax payments and liabilities are limited to their respective tax periods.
Even when both overpayments and underpayments pertain to the same fiscal year (e.g., FY 2023-24), the discovery of such a discrepancy in a subsequent year (FY 2025-26) does not reinstate any entitlement to adjustment. The Department is likewise not authorized to permit such a set-off during audit proceedings, as the audit process merely identifies discrepancies and does not grant jurisdiction to override statutory time limits.
Hence, the only recourse available to Aayra Kapoor Ltd in the present example is to discharge any shortfall independently (for instance, through Form DRC-03) and claim a refund of the excess tax separately under Section 54(1) of the Act.
2.3. Refund of Excess Tax - Section 54(1)
The refund mechanism under the CGST Act is governed by Section 54, the relevant portion of which provides:
54(1) 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 before the expiry of two years from the relevant date in such form and manner as may be prescribed."
This provision permits any individual to request a refund of excess tax or other payments made pursuant to the Act, within a limitation period of two years from the "relevant date." As outlined in Explanation 2(h) to Section 54, the term "relevant date" refers to the date of tax payment. Accordingly, the refund claim must be submitted within two years from the date of such payment.
Although the statute prescribes a strict time limit, several High Court judgments have held that, where an overpayment is discovered subsequently due to reconciliation or audit, the period of limitation should be reckoned from the date of discovery of the mistake, particularly in cases of payment under a mistake of law.
The taxpayer may, therefore, submit a refund application under Section 54(1) supported by documentary evidence, invoking equitable principles to prevent retention of tax without legal sanction.
2.4. Constitutional Safeguard - Article 265
The constitutional mandate under Article 265 stipulates that:
"No tax shall be levied or collected except by authority of law."
Thus, Article 265 prohibits the State from retaining any amount not lawfully due. Accordingly, where a refund claim is denied solely on the grounds of limitation despite the overpayment being genuine, the taxpayer may invoke the jurisdiction of the Hon'ble High Court under Article 226 by filing a writ petition, seeking relief under the principles of equity and constitutional protection. Judicial precedents have consistently upheld that the retention of tax amounts beyond the statutory period is unjustifiable. authority constitutes unjust enrichment of the State and is violative of Article 265.
2.5. Payments Made Under Protest
It is also pertinent to note that when the tax was remitted under protest, the limitation period stipulated in Section 54(1) would not be applicable. Such payments remain contested and are eligible for refund upon final resolution. Preservation of documentary evidence or correspondence indicating that the tax was paid under protest can therefore protect the taxpayer's right to seek a refund at a subsequent time.
3. Legal Position Summarised
On the basis of the foregoing discussion, the legal position may be summarised as follows:
(A) The taxpayer cannot rectify or revise returns for FY 2023-24 after 30 November 2024, in view of the statutory restriction under Section 39(9).
(B) The CGST Act does not permit adjustment of excess tax paid in an earlier year against current or future liabilities.
(C) The taxpayer's only legal remedy is to claim a refund under Section 54(1) of the CGST Act, 2017.
(D) In the event of rejection of the refund claim as time-barred, recourse lies before the High Court under Article 226, invoking Article 265 of the Constitution.
(E) Where tax has been paid under protest, the limitation under Section 54(1) does not operate as a bar.
4. Conclusion
The Goods and Services Tax (GST) framework, as a self-assessment system, is regulated by strict statutory timelines and adherence to precise compliance standards. Once the rectification period specified under Section 39(9) has expired, neither the rectification nor the adjustment of prior excess payments is permitted.
The only lawful course for a registered person who discovers such excess payment belatedly is to seek a refund under Section 54(1) of the CGST Act, 2017. Should the department decline the claim on limitation grounds, the taxpayer may invoke constitutional jurisdiction to prevent unjust retention of tax.
The underlying principle remains anchored in Article 265 of the Constitution - no tax can be retained or collected except by authority of law. Accordingly, any excess payment identified after the statutory rectification window must be refunded rather than adjusted.
- [1] Substituted for "Subject to the provisions of sections 37 and 38, if" by the Finance Act, 2022, w.e.f. 1-10-2022.
- [2] Substituted for "in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed" by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. a date to be notified.
- [3] Substituted for "the due date for furnishing of return for the month of September or the second quarter" by the Finance Act, 2022, w.e.f. 1-10-2022.
- [4] Substituted for "the end of the financial year" by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. a date to be notified.
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