Introduction

During a recent discussion at a Chartered Accountant CPE Study Circle, an important issue regarding excess GST interest paid due to a technical limitation in the GST Portal came to light. Many taxpayers who filed delayed GST returns during FY 2018-19 and FY 2019-20 unknowingly paid excess interest, even though the actual tax liability existed only under one tax head.

Subsequent judicial decisions have clarified that such excess interest was not legally payable. Taxpayers who were affected may now have an opportunity to claim a refund, subject to the provisions of the GST law.

What Was the GST Portal Glitch?

During the initial years of GST implementation, the GST Portal automatically calculated interest separately under both CGST and SGST whenever returns were filed after the due date.

The system assumed that if there was a liability under one tax head, there would be an equivalent liability under the other tax head as well. This assumption resulted in incorrect interest computation.

Example

Suppose a taxpayer had:

• CGST Tax Liability: ₹1,00,000
• SGST Tax Liability: Nil

Since the return was filed late, the GST Portal charged:

• Interest on CGST: Correct
• Interest on SGST: Incorrect

As a result, the taxpayer paid excess interest without any actual SGST tax liability.

This issue affected several taxpayers during the early years of GST implementation.

Why Was This Incorrect?

Interest under GST is compensatory in nature. It is payable only when tax under a particular head remains unpaid beyond the prescribed due date.

If there is no outstanding tax liability under SGST, charging interest under SGST has no legal basis.

Therefore, the automatic computation by the GST Portal exceeded the provisions of the law.

Who May Be Eligible?

The issue may apply to taxpayers who:

• Filed GSTR-3B belatedly during FY 2018-19 or FY 2019-20.
• Had tax liability only under one tax head (CGST or SGST).
• Paid interest under both CGST and SGST through the GST Portal.
• Have documentary evidence supporting the excess payment.

Each case should be examined individually before initiating the refund process.

Can a Refund Be Claimed?

Where excess interest has been paid without any legal liability, taxpayers may explore filing a refund application under the CGST Act.

Before filing a refund application, it is advisable to:

• Review all GSTR-3B returns for the relevant period.
• Verify the actual tax liability under each tax head.
• Reconcile the interest paid with the legally payable interest.
• Prepare a detailed working showing the excess amount.
• Support the claim with judicial precedents and relevant legal provisions.

Proper documentation plays a crucial role in obtaining a successful refund.

Disclaimer: This blog is intended for educational and informational purposes only. Eligibility for refund depends upon the specific facts of each case, applicable statutory provisions, judicial precedents, and departmental interpretation. Professional advice should be obtained before filing any refund application.

https://www.cpcco.in/casestudy/refund-of-excess-gst-interest-paid