Section 77 – Tax Wrongly Collected and Paid to the Government
Section 77 of CGST Act, 2017 – Tax Wrongly Collected and Paid to the Government
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective of Section 77
Section 77 provides relief to a registered person who has wrongly paid CGST and SGST on a transaction which was subsequently held to be an inter-State supply.
It prevents double taxation and removes hardship caused due to wrong classification of supply.
2. Statutory Provision – Section 77
Section 77(1):
A registered person who has paid
central tax and State tax
on a transaction considered by him
to be an intra-State supply,
but which is subsequently held to be
an inter-State supply,
shall be entitled to a refund
of the amount of central tax and State tax paid.
Section 77(2):
The registered person shall be liable to pay
integrated tax
on such supply,
but no interest shall be payable
on the amount of integrated tax
payable.
3. When Does Section 77 Apply?
Section 77 applies when:
- Supply is treated as intra-State
- CGST + SGST are paid
- Later held to be inter-State supply
- IGST becomes payable
Refund of wrongly paid CGST & SGST is allowed.
4. No Interest Liability
A key benefit of Section 77 is that:
- IGST becomes payable
- No interest is payable on IGST
This is because tax has already been paid to the Government though under the wrong head.
5. Procedure for Refund
Refund is claimed under Section 54 of the CGST Act.
The relevant date for refund:
- Date of payment of IGST
Time limit:
- 2 years from the relevant date
6. Related Rules
7. Corresponding IGST Act Provision
Section 77 of CGST Act corresponds with:
- Section 19 of IGST Act – Tax wrongly collected and paid
Both provisions operate in a reciprocal manner.
8. Comparison with Section 76
| Section 76 | Section 77 |
|---|---|
| Tax collected but not paid | Tax paid but under wrong head |
| Strict recovery provision | Relief provision |
| No refund until deposit | Refund expressly allowed |
9. Practical Examples
- Supplier treated supply as intra-State
- Paid CGST + SGST
- Department later holds supply as inter-State
- Supplier pays IGST
- CGST + SGST refundable under Section 77
10. Judicial View
Courts have consistently held that:
- No interest is payable on IGST in such cases
- Refund cannot be denied on technical grounds
- Substantive compliance prevails
11. Important Compliance Points
- Pay IGST first
- Then claim refund of CGST & SGST
- Maintain proper documentation
- Avoid unjust enrichment issues
12. Professional Insight
Section 77 ensures that tax paid under a wrong head does not become a permanent cost. Correct classification of supply is critical, but genuine errors are protected by law.
Disclaimer: This article is prepared based on the CGST Act, IGST Act, Rules, notifications and prevailing legal position as applicable till date. Refunds are subject to procedural compliance and verification by tax authorities.
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