A recipient of goods or services cannot file GST refund application

The Hon'ble Madras High Court in the case of Tvl. Norton Granites & Properties Private Ltd. v. Assistant Commissioner (ST) [Writ Petition No. 13522 of 2024 dated June 12, 2024], held that the refund application for excess tax paid must be filed by the registered service provider, not by the recipient of services.Since M/s KG Foundation was the registered entity, the Assessee's direct refund claim was deemed invalid. Consequently, the writ petition was dismissed.

Facts:

M/s. Tvl. Norton Granites & Properties Private Ltd. ("the Petitioner"), had entered into an agreement for development/sale with KG Foundation Private Limited. Under this agreement, KG Foundation provided construction services and collected GST at 18% from the Petitioner. The Petitioner contended that the GST rate for the services should have been 5% and therefore, filed a refund application for the excess GST paid.

However, the Assistant Commissioner (ST) ("the Respondent") rejected the refund application by an Order dated November 24, 2022 ("the Impugned Order") for assessment period 2018-19,stating that only KG Foundation was the registered service provider, had the authority to file the refund claim.

Hence, aggrieved by the Impugned Order, the Petitioner filed the present writ petition before the Hon'ble Madras High Court.

Issue:

Whether a recipient of a service can file GST refund application?

Held:

The Hon'ble Madras High Court in Writ Petition No. 13522 of 2024 held as under:

Held that, the GST on construction services was levied on a forward charge basis, meaning the service provider is responsible for tax collection. Consequently, the refund application should have been filed by KG Foundation, the registered service provider, rather than the recipient of the services. Hence, the writ petition was dismissed.

Our Comments:

Section 54 of the CGST Act discusses about"Recovery of tax". Section 54(1) of the CGST Act states that 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, provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of section 49(6) of the CGST Act, may claim such refund in manner as may be prescribed.

Further, Section 77 of the CGST Act discusses about"Tax wrongfully collected and paid to Central Government or State Government". It states that a registered person who has paid the Central tax and State tax or, as the case may be, the central tax and the Union territory tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed. Further, a registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the central tax and the Union territory tax payable.

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