SBI Cards And Payment Services Limited VS Union Of India

The petitioner in this case is contesting an order dated February 19, 2021, issued by the Additional Commissioner (Appeals). The order in question rejected the petitioner’s request for a refund of CGST and SGST, amounting to approximately 108 crores, which were incorrectly paid on April 5, 2019, for the period from April 2018 to December 2018. The denial was based on Section 77 of the Central Goods and Services Tax Act, 2017, which deals with refunds.

To provide context, the petitioner is part of a joint venture with the State Bank of India (SBI), with SBI holding a significant stake. The petitioner claims that the excess payment was a result of a calculation error or some oversight, and they seek the refund for the disputed period covered by the payment. The core of the dispute revolves around whether the payment made exceeded the actual tax liability as stipulated under the relevant sections of the CGST Act.

The petitioner argues that the rejection of their refund claim by the Additional Commissioner (Appeals) was not justified, possibly due to a misunderstanding or misapplication of the law. They are seeking a reassessment of their claim and a favorable ruling that would allow them to recover the excess amount paid. The case underscores issues related to tax compliance, procedural fairness in the tax assessment process, and the appropriate application of the CGST Act’s provisions regarding refunds.

The petitioner has challenged the order dated February 19, 2021, issued by the Additional Commissioner (Appeals), which denied the refund of CGST and SGST amounting to approximately Rs. 108 crores. This amount was erroneously paid on April 5, 2019, for the disputed period from April 2018 to December 2018, exceeding the tax due under Section 77 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The case involves a petitioner who is a joint venture with the State Bank of India (SBI), with SBI being a major stakeholder in the venture. The petitioner operates in the credit card business, issuing cards to customers and is registered as a non-deposit-taking and non-banking financial company with the Reserve Bank of India under Section 451 A of the Reserve Bank of India Act, 1934.

The business model includes the issuance of credit cards to the public, with the petitioner being a member of a Card Association dominated by global corporations Visa and MasterCard. Customers using the credit card at various locations are processed through these associations, which ensure that payments are made to vendors, and then claim the amount from the issuing bank. The transactions are extensive and involve complex data processing by Visa and MasterCard’s servers in Singapore, with daily net balances sent to all member banks for necessary payments to other banks in their debit network.

Before the implementation of the GST regime, the petitioner operated under a single Service Tax registration. Following the GST rollout, the petitioner obtained separate registrations in all 28 states. Initially, the petitioner did not have a detailed breakup of individual transactions, which created issues in reconciling and accounting for the tax payments, especially for the period from April 2018. This lack of detailed transaction data complicated the tax filings and led to the disputed refund claim for the GST paid in excess. The Additional Commissioner (Appeals) has thus denied the refund, prompting the petitioner to challenge the decision through this petition.

The petitioner, a joint venture between a private entity and State Bank of India (SBI), specializing in issuing credit cards, has challenged an order issued on February 19, 2021, by the Additional Commissioner (Appeals). This order denied the refund of approximately Rs. 108 crores paid as Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) for the period from April 2018 to December 2018, on the grounds that these payments were erroneously classified as intra-state sales under Section 77 of the CGST Act.

The petitioner, registered with the Reserve Bank of India as a non-deposit-taking, non-banking financial company, was involved in transactions facilitated through global Card Associations, primarily Visa and MasterCard. These associations manage the processing and netting of transactions across multiple banks worldwide, using servers based in Singapore. This system led to daily settlements where banks had to pay vendors and then reclaim the amounts from the issuing banks, often involving numerous transactions.

Prior to the GST implementation, the petitioner used a single registration number for Service Tax, which continued into the GST regime. Initially, the petitioner did not have detailed transaction data for the new GST reporting requirements. Consequently, they reported transactions as Business to Customer (B2C) intra-state sales, as the GST registration numbers of acquiring banks were unknown. The petitioner relied on monthly reports from the Card Association, which lacked crucial details like GSTIN and place of registration, and therefore used the Daily Settlement Reports to estimate tax payments.

It was later discovered that the transactions were actually inter-state, not intra-state as previously reported. Following this realization, the petitioner sought a refund of the Rs. 108 crores paid under the mistaken belief of intra-state sales. The authorities required the petitioner to first pay the correct Integrated GST (IGST) on these inter-state transactions before considering the refund request. The petitioner complied and deposited another Rs. 108 crores as IGST. Despite this, the refund was denied, with the decision citing that the term ‘subsequently held’ in Section 77 of the CGST Act could only apply if an adjudicating authority had reclassified the transactions post-payment, which was not deemed applicable in this case.

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