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In GST, no one can get rich at cost of someone else
In GST, no one can get rich at cost of someone else
Somewhere in some obituary, I read ... "Honesty is not only the best policy, it is rare enough nowadays to make you pleasantly conspicuous." So... true... this is. And clearly, enough... through the doctrine of "unjust enrichment" ... given in section 54(5) of the CGST Act, our assiduous government... has rightfully sown the seed of honesty into the new GST law...
My dear sharp minded gentleman,
Why do you look so sad or forlorn?
If you are worried as your supplier has duped you... and charged you excess GST... then... Don't worry... and be happy... as... your supplier can't keep even a scintilla of tax with him... he has to deposit all that with the government...
And by virtue of section 54(5) of the CGST Act... even the government... has to consecrate... deposit it into the Consumer Welfare Fund...
This concept is called as doctrine of Unjust enrichment...
Ok... I will explain...
No... no... not like Dushyant of Sarabhai vs Sarabhai... he is so... expansive...
Nonetheless, below I speaketh...
The honorable Supreme Court of India, in its landmark judgment... in the case of Indian Council for Enviro-Legal Action v. UOI (2011) 8 SCC 161... has defined unjust enrichment as...
"a benefit obtained from another, not intended as a gift and not legally justifiable, for which the beneficiary must make restitution or recompose"
In simple language, unjust enrichment is an event, wherein one person gains a benefit from some other person, may be because of certain circumstances, which is legally not justified and for which the receiver of benefit must compensate the aggrieved party.
Under GST, this can happen when the supplier of Goods or Services collects excess GST from the receiver than what was required to be collected.
OK... let me simplify it... through an example...
Say... a trader deals in goods on which applicable tax rate is 5%.
But by mistake, he sells the goods to a buyer by charging 12% GST.
The buyer ends up paying more GST than what was required.
Now... obviously... the trader deposits this amount to the Government before the due date.
Say, sometime later while scrutinising his accounts, the seller finds his mistake.. and applies to the government for refund of the excess GST paid.
The government agrees. Govt says that only 5% of GST was required, you paid at 12% so righteously...we will refund the excess amount.
But would Govt be right by refunding this excess tax of 7% to the trader???
No... ofcourse not.... it will not be equitable to refund the duty to trader, as the trader has already recovered it from his customer...
This will be ‘Unjust Enrichment’ of trader.
so rightfully... this should be paid to the customer...
But how would govt. find... trace... that customer... it is not practicable to identify individual consumer and pay refund to him. At the same time, as the GST is illegally collected, the government can also not retain it...
So... honesty demands... and thus section 54(5) postulates... demands the government to deposit this in Consumer Welfare Fund...
This fund may be used for activities of protection and benefit of consumers.
If I have to say technically, then I would say.... that...
- If the supplier of goods and services has recovered GST from recipient, then it is clear that he has passed on the tax burden to the recipient and has already recovered GST from him. In such cases, refund of excess GST paid to the supplier will tantamount to excess and un-deserved profit to supplier of goods and service.
Wishing you best of luck...
PS: Historically, concept of unjust enrichment was introduced in Central Excise Act and Customs Act w.e.f. 20th September, 1991 and these provisions are being continued under GST also.
