Payment of tax under CGST and SGST instead of IGST does not amount to short payment; excess in one head may be set off against the shortfall in another: GSTAT Thiruvananthapuram

The Tribunal, applying the jurisdictional High Court's unified-wallet approach to the electronic credit ledger, held that no proceedings under Section 73 can lie where the tax has been paid to the Government under the wrong head due to a clerical mistake.

The Goods and Services Tax Appellate Tribunal, Thiruvananthapuram Bench, has allowed the appeal of a steel dealer and set aside a demand confirmed under Section 73 for alleged short payment of IGST, holding that payment under the wrong tax head — CGST and SGST instead of IGST — does not constitute short payment of tax [Sunil Steels v. Commissioner of Keralam State GST].

The appellant had, by clerical mistake, reported and paid tax relating to IGST under the CGST and SGST heads in its GSTR-3B for the Financial Year 2018-19. The resulting excess under CGST and SGST heads and the corresponding shortfall under IGST were noticed during departmental scrutiny. A demand of ₹5,57,957 was raised under Section 73 and upheld through the first appellate stage. The appellant contended that the total tax liability had been fully discharged and the error was confined to the head under which it was remitted.

The Bench of Vice-President Subramanya Rayaprol and Ramamoorthi Sriram (Technical Member) traced the jurisprudence of the jurisdictional Kerala High Court through a series of decisions beginning with Saji S. v. Commissioner of State GST (2018) and culminating in the Division Bench's approval in Rejimon Padickapparambil Alex v. Union of India (WA No. 54 of 2024). The Tribunal noted that the Kerala High Court had specifically endorsed the approach of an Assistant Commissioner of Central Tax, Bengaluru, who had applied CBIC Circular No. 192/04/2023-GST to treat the electronic credit ledger as a unified wallet — where the total balance combining IGST, CGST and SGST compartments must be considered, not just individual compartments. The High Court had commended this approach as representing effective justice dispensation and a welcome reduction in litigation.

Applying this principle, the Tribunal held that payment under CGST and SGST instead of IGST does not amount to non-payment or short payment of tax, and no action lies under Section 73 for such a clerical error. The excess credit available in the CGST and SGST account was directed to be set off against the shortfall in IGST through the electronic credit ledger. However, the Tribunal also noted the Revenue's submission that even after full set-off, a residual shortfall of ₹15,049 would remain unpaid, and directed that any amount still due after the set-off must be recovered in cash with applicable interest. The decision provides clear authority that a wrong-head payment is a procedural error, not a substantive tax default.

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