The Central Board of Indirect Taxes & Custom (CBIC) has issued a circular clarifying the limitation period for excess cash lying in Electronic Cash Ledger (ECL). Experts feel this will have an impact on the number of litigations in numerous courts all over the country.

A GST assessee needs to file a refund application to the GST authorities within two years from the ‘relevant date.’ This date is defined according to various scenarios such as in the case of export by sea or air the relevant date is the date on which ship/aircraft leaves India. The residuary clause of this definition provides the relevant date as the ‘date of payment of tax.” This date is critical determine the time limit for claiming the refund.

Now, one of the issues was whether the provisions realting to period within which an application for refund can be filed, would be applicable in cases of refund of excess balance in ECL? CBIC has replied in the negative.

“The registered person is at full liberty to discharge his tax liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debit in electronic cash ledger, as per his choice and availability of balance in the said ledgers. Any amount, which remains unutilised in electronic cash ledger, after discharge of tax dues and other dues payable under CGST Act and rules made thereunder, can be refunded to the registered person as excess balance in electronic cash ledger as per provision to sections under law,” CBIC said.

According to experts, practically, one may notice that there exist cases where taxpayers have deposited excess amount in their ECL which could not be utilised against any tax liability. At times this amount may remain in ECL for more than two years. Field formations were rejecting refund applications relating to such amount arguing that the two-year limit has lapsed. Now, there may not be problem as Sunil Kumar, DGM with Taxmann, said: “It would remove the ambiguities relating to applicability of limitation period of 2 years for refund of excess cash balance lying in ECL. “

Further he said that the CBIC view would also be beneficial for the ongoing litigations relating to excess payment of tax under various cases such as amount paid during investigation stages, amount wrongly paid by the taxpayers, levy which later held as unconstitutional by the Judiciary, etc. It can be argued that the limitation period will not be applicable in these cases also,” Kumar explained

Another issue was whether refund of TDS/TCS deposited in electronic cash ledger can be refunded as excess balance in ECL? Here CBIC has said that collection through such provisions is equivalent to cash deposited in electronic cash ledger. It is not mandatory for the registered person to utilise the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability.