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Budget 2024: Allowing Refunds for Excess CGST Payments

Introduction of Section 11A
At the GST Council meeting held in June 2024, the Council decided on an amendment to the Central Goods and Services Tax Act 2017 (CGST Act). The introduction of Section 11A is intended to help the government legalize circumstances where GST was not paid or was paid at a lower rate because of standard business practices. This change aims at righting all the past GST imbalances that have been registered in the past.

Current Provisions and Limitations
Currently, Section 11(1) of the CGST Act empowers the government to exempt either absolutely or conditionally through notifications any taxable goods or services or both. Further, Section 11(2) allows for making special orders in certain conditions to exclude some goods and services from the scope of the act. However, these provisions do not specifically enable the government to bring normalization of past practices where the GST was short-paid or not paid. While Section 11(2) is comprehensive enough to accommodate such situations, the section does not specifically deal with the matter hence the need for a new provision.

The Issue of Excess Payments
One of the main issues of taxpayers is the lack of the opportunity to recover the additional amount of GST. However, the current framework, as recommended, does not include a system for the refunding of overpaid taxes under CGST. This situation puts financial pressure on business organizations and individuals who have overpaid their taxes and are not able to recover the excess amount.

Proposed Solution
So, the Budget 2024 should consider removing the provision of a refund under section 77 of CGST for excess taxes paid. This would equally afford the taxpayers some relief as well as guarantee the desired equity in the taxation system. In this way, the government should modify the framework of such refunds to improve compliance and confidence in the GST system. By making refund claims for excess payment possible, tax administration will be efficient and free from any form of corruption.


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