December 26, 2022

GST Payment Under Wrong Head

There is no mechanism in the GST provisions that allows the taxpayer to adjust the tax amount paid under the incorrect head with the correct head. For example, if a taxpayer paid tax under the CGST and SGST but later discovered that tax should have been paid under the IGST, the taxpayer has no choice but to claim a refund for the tax paid under the incorrect head, subject to first paying tax under the correct head. 

For Example: 

For instance, a seller in Kolkata (West Bengal) might sell to a buyer in Hyderabad (Telangana). The buyer in Hyderabad instructs the seller to send the goods to Khargapur (West Bengal). Even though the goods end up in the same state, West Bengal, this is an interstate transaction. However, this can be confusing, and the tax calculation can be complicated. Taxpayers may end up paying the incorrect GST. As a result, the GST law includes provisions to address these scenarios.

Will you be penalized for filing under the wrong head? 


In these cases, the person concerned will have to pay the GST under the right head and get a refund of the amount paid under the wrong head.

It should be noted that no interest will be required if the taxpayer later pays the correct tax. In these cases, the penalty will not be imposed.

These refunds for incorrect tax calculations and payments will be provided separately in order to reclaim the incorrect tax payment. The procedure for this is distinct from the standard GST refund procedure. The GST Bill includes a new provision stating that interest will not be charged if the correct tax is paid later.

Will you be penalized if tax is not deposited at all even after collecting? 


Anyone who collects GST is required to deposit it with the Centre or State Governments. This applies whether or not the supply (on which the GST was collected) is taxable. As a result, a taxpayer cannot collect GST and not deposit the tax with the appropriate authorities because their goods or services are exempt. 

In this case, the penalty will be imposed regardless of any order from a tribunal or court. A show-cause notice will be issued by the appropriate officer. If the taxpayer requests it in writing, they will be given the opportunity for a personal hearing.

Issue of the order of payment and penalty

Procedure for issuing an order for payment of tax due and the penalty for:

1. The proper officer will first issue an order to the person in question to pay the amount owed, as well as the penalty.

2. The individual must pay the amount collected as GST as well as interest on late payments.

3. The interest period will run from the date of tax collection to the date of payment. Interest rates will be set at a later date.

4. The order must be issued within one year of the date the show cause notice was issued.

5. If the Tribunal or court issues a stay order then the period of such stay shall be excluded from the period of one year.

6. If any surplus amount remains after payment of all dues, it will be refunded to the person who bore the amount (i.e. the buyer) or credited to the GST Consumer Welfare Fund. The buyer has 6 months from the date of the public notice to request a refund. 


Read More: GSTR-1 JSON file upload, GSTIN, Union Budget.

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