Kerala HC Rules GST Refund Time Limit Starts From Date of Payment Under Appropriate Head
Case Background
In the matter of Pushpagiri Medical Society Vs State of Kerala, the Kerala High Court addressed a critical question regarding the computation of limitation period for filing GST refund claims where tax has been inadvertently deposited under an incorrect head.
The applicant in this case operates as a non-profit registered entity managing a hospital along with several medical education facilities within Kerala. The organization holds registration under both the Central Goods and Services Tax Act, 2017 (CGST Act) and the Kerala Goods and Services Tax Act, 2017. The dispute arose from the denial of refund claims submitted by the applicant for sums erroneously remitted towards the Kerala Flood Cess.
Introduction of Kerala Flood Cess
The Kerala State Government enacted the Kerala Flood Cess through the Finance Act, 2019, bringing it into effect from June 2019. This levy was implemented to address the financial burden arising from the devastating floods that struck Kerala during 2018. The intention was to generate resources for rehabilitation and reconstruction efforts in the aftermath of the natural calamity.
Factual Matrix of the Dispute
Erroneous Payment Procedure
During the period spanning August 2019 through July 2021, considerable ambiguity existed concerning the proper methodology for remitting the Kerala Flood Cess. Due to this procedural confusion, the applicant mistakenly deposited the cess amounts through GSTR Form-1 rather than utilizing Form KFC-A, which was designated as the appropriate mechanism for such payments.
Initiation of Proceedings
Because the remittances were not reflected in the proper account ledger, the tax authorities commenced proceedings against the applicant. Through official communication, the applicant was notified that payments relating to the Cess for the specified duration had not been properly executed.
Rectification and Correct Payment
Upon being informed of this discrepancy, the applicant immediately recognized the error and proceeded to make the correct payment on 10.03.2025. The State Tax Officer subsequently issued certificates on 28.07.2025 confirming that proper payment had been made.
Refund Applications and Rejection
Following the correction of payment under the appropriate head, the applicant submitted refund applications seeking recovery of the amounts mistakenly deposited through GSTR Form-1. However, the second respondent rejected these applications on the basis that they had been filed outside the two-year limitation period mandated under Section 77 of the CGST Act read with Section 19 of the IGST Act, 2017, thereby rendering them time-barred.
Legal Contentions Advanced
Petitioner's Arguments
Challenging the rejection orders through this writ petition, the applicant maintained that the denial was legally untenable. The primary submission relied upon a Circular issued by the Central Board of Indirect Taxes and Customs (CBIC). The applicant contended that according to this Circular, the appropriate date for computing the two-year limitation under Section 54 of the CGST Act should be the date when the correct tax payment was executed.
The applicant's position was straightforward: the entitlement to claim refund crystallized only when payment was made under the correct head. In this instance, that occurred on 10.03.2025. Therefore, calculating the limitation period from any earlier date would be incorrect.
Respondent's Position
The revenue authorities maintained that the applications were filed beyond the permissible timeframe and therefore could not be entertained under the statutory framework.