GST Latest Case laws-2020

GST Latest Case laws-2020

Sec. 54 (Refund of Tax)

(3) Subject to the provisions of sub-section (10), a registered person may claim a refund of any unutilized input tax credit at the end of any tax period.

Provided that no refund of the unutilized input tax credit shall be allowed in cases other than—

I. zero-rated supplies made without payment of tax;

II. where the credit has accumulated on account of the rate of tax on

inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of the input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

N.N. 5/2017 for goods
N.N. 15/2017 for services(Services as specified in 5(b) of schedule II)( construction)

Related Topic:
Refund of unutilized ITC compensation cess

Recent Case Laws on Refund

[2020] 118 taxman 81 (Gujarat) VKC Footsteps India (P.) Ltd. v. Union of India

Explanation (a) to Rule 89(5) of CGST Rules, 2017 which denies the refund of “unutilized input tax “ paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is held to be ultra vires the provisions of subsection (3) of section 54 of CGST ACT, 2017

Refund – Tax – Rule 89(5) as originally introduced was substituted vide Notification No. 21/2018-Central Tax, dated 18-4-2018 prescribing a revised formula for determining refund on account of inverted duty structure; revised formula inter alia excluded input services from the scope of ‘net input tax credit’ for computation of refund amount under the rule and, thus, substituted rule 89(5) denied a refund on input tax credit availed on input services and allowed relief of refund of input tax credit availed on inputs alone –

• Section 54(3) allows refund of any unutilized ITC but Rule 89(5) restricts refund to Inputs. [Para 23]

• Clause (ii) of the proviso to section 54(3) also deals with both supply of goods and services and not only the supply of goods [Para 23].

• Law in section 54(3) has been wrongly interpreted in Circular No. 79/53/2018 dated 31-12-2018 to deny a refund of ITC on input services. [Para 24]

• Explanation (a) to Rule 89(5) which denies refund of unutilized Input tax on input services is ultra vires the provisions of section 54(3) [Para 25].

• Therefore refund of input services be also allowed under inverted duty structure [Para 27].

• Court drew support from a first discussion paper on GST issued by empowered committee dated 10-11-2009 [Para 16]; International VAT/GST Guidelines published on Feb 2006 [Para 17]; FAQ on GST dated 31-03-207 {Para 18].

• Court also drew support from Delhi High Court in Intercontinental Consultants & Technocrats affirmed by Supreme Court to hold that rule which goes beyond statute is ultra vires.

• Supreme Court decision in Lohara Steel Industries quoted to lay down that offending portion which is severable can be struck down.

Related Topic:
GST Case 6- Saji s. v. Commissioner, State GST Department

No Refund on entire unutilized ITC accumulated on account of being subjected to an Inverted Duty Structure

Tvl. Transtonnelstroy Afcons Joint venture v. Union of India [Madras High Court]

(1) Section 54(3)(ii) does not infringe Article 14.

(2) Refund is a statutory right and the extension of the benefit of refund only to the unutilized credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilized input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power.

(3) Therefore, there is no necessity to adopt the interpretive device of reading down so as to save the constitutionality of Section 54(3)(ii).

(4) Section 54(3)(ii) curtails a refund claim to the unutilized credit that accumulates only on account of the rate of tax on input goods being higher than the rate of tax on output supplies. In other words, it qualifies and curtails not only the class of registered persons who are entitled to refund but also imposes a source-based restriction on refund entitlement and, consequently, the quantum thereof.

(5) As a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). Consequently, it is not necessary to interpret Rule 89(5) and, in particular, the definition of Net ITC therein so as to include the words input services.

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