PROVISION IN LAW
Tax and other dues payable by a registered person (viz., GSTIN holder) can be deducted by the Proper Officer from refund due to such person. This power is available under Section 54(10)(b) of the CGST Act. The following points are noteworthy in this regard:
- The amount payable by the taxable person could be tax, interest, penalty, fee or others. Thus, the ambit of amounts which could be deducted is wide.
- Such amount remains unpaid under the GST law or the erstwhile laws. Hence, amounts due under the erstwhile Central and State laws (relating to levy of tax on goods or services like Service Tax law, Central Excise Law, State VAT laws, etc.) can also be adjusted against GST refund.
- The tax, interest or penalty payable has not been stayed by any Court, Tribunal or Appellate Authority till the last date for filing an appeal under the GST law.
- Such deduction can be made only from refund of unutlised / accumulated input tax credit (arising from zero-rated supplies without payment of tax or from inverted tax rate structure).
ISSUES
Prior Intimation by Proper Officer: According to Rule 92(1) of CGST Rules, the amount adjusted against any outstanding demand under the GST law or the erstwhile law should be mentioned in Form GST RFD-06 (refund sanction / rejection order). However, if the amount of refund is completely adjusted against outstanding demand under the GST law or the erstwhile law, order should be passed in Part-A of Form GST RFD-07 giving details of such adjustment.
Perusal of the aforesaid sub-rule indicates no requirement for intimation by Proper Officer to the registered person before effecting such deduction. Nevertheless, the Hon’ble High Court of Karnataka, vide its Order dated February 11, 2020 in DPK Engineers Private Limited v. Union of India, observed that:
- a unilateral decision on appropriation should not have been made by the Revenue; and
- no case is made out for excluding an opportunity of hearing to the assessee before passing the impugned order.
GST Law v. Erstwhile Law: The amounts payable under either the GST law or the erstwhile law can be deducted from the refund due. However, such amount should not have been stayed till the last date for filing an appeal under the GST law (as per explanation to the aforesaid sub-section). It is incongruous that there is no reference to absence of stay till the last date for filing appeal under the erstwhile laws.
Registered Person v. Taxable Person: The above sub-section uses the terms “registered person” and “taxable person” inter-changeably. Taxable person means a person who is either registered or liable to be registered under the GST law. On the other hand, registered person means a person who is registered under the GST law but does not include a person having Unique Identity Number (UIN). Plausibly, the sub-section refers only to a registered person, since refund due to a person liable to be registered is unlikely. Hence, the reference to “taxable person” could have been avoided.
