Section 12 of UTGST Act 2017: Tax Collected Wrongfully and paid to Central/ UT Govt

Provisions under Section 12 of the Union Territory Goods and Services Tax (UTGST) Act, 2017 relating to “Tax wrongfully collected and paid to Central Government or Union territory Government”, are as under:

Section 12 of UTGST Act 2017: Tax wrongfully collected and paid to Central Government or Union territory Government CHAPTER VI – DEMAND AND RECOVERY)

(1) A registered person who has paid 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.

(2) 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 the central tax and the Union territory tax payable.

Amendments History:

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Commentary on Section 12 of UTGST Act, 2017

Section 12 of the Union Territory Goods and Services Tax (UTGST) Act, 2017, deals with the issue of tax wrongfully collected and paid to the Central Government or Union territory Government. This section addresses situations where a registered person has mistakenly paid taxes under the wrong classification of supply, i.e., intra-State supply or inter-State supply. It provides remedies in the form of refunds and interest waivers. The section can be explained in two subsections:

Section 12(1) of UTGST Act, 2017: Refund for wrongly paid taxes on intra-State supply

In cases where a registered person has paid both central tax and Union territory tax on a transaction they considered to be an intra-State supply, but it is later determined to be an inter-State supply, the person will be eligible for a refund. The process for obtaining this refund and any conditions that may apply will be prescribed in the rules and regulations.

Section 12(2) of UTGST Act, 2017: No interest on wrongly paid taxes for inter-State supply

If a registered person has paid integrated tax on a transaction they considered to be an inter-State supply, but it is later determined to be an intra-State supply, the person will not be required to pay any interest on the amount of central tax and Union territory tax payable. This provision offers relief to taxpayers who have made honest mistakes in classifying their transactions, as they won’t be penalized with additional interest charges.

In summary, Section 12 of the UTGST Act, 2017, provides relief to taxpayers who have mistakenly classified their supplies as intra-State or inter-State and have paid the wrong taxes. It offers a refund mechanism for overpaid taxes in the case of intra-State supplies and waives the interest on wrongly paid taxes for inter-State supplies.

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Note: The UTGST Act 2017 has been notified vide GOI Notification dated 12/04/2017, which has subsequently been amended  through UTGST (Amendment) Act 2018, Finance Act 2019, Finance Act 2020, Finance Act 2021, Finance Act, 2022 and Finance Act, 2023 including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective UTGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.