|
|
|
Refund for unutilised Input Tax Credit can't be claimed on input services: SC
|
|
|
|
Top Stories |
 |
|
|
|
SME Times News Bureau | 14 Sep, 2021
The Supreme Court on Monday upheld the validity of a rule of the Central
Goods and Service Tax, which prescribes a formula excluding the refund
of unutilised input tax paid on input services as part of input tax
credit (ITC).
A bench comprising Justices D.Y. Chandrachud and
M.R. Shah upheld the validity of Rule 89(5), overturning a 2020 Gujarat
High Court judgment which had held that Rule 89(5) was ultra vires
Section 54 (3) of the CGST Act, 2017. Rule 89(5) of the CGST Rules
provides for the computation of the refund of ITC on account of an
inverted duty structure. The rule was amended on April 18, 2018, with
prospective effect, to ensure that refund of unutilised ITC can only be
availed on input goods.
The bench said: "When there is neither a
constitutional guarantee nor a statutory entitlement to refund, the
submission that goods and services must necessarily be treated at par on
a matter of a refund of unutilised ITC cannot be accepted." Such an
interpretation, if carried to its logical conclusion, would involve
unforeseen consequences, circumscribing the legislative discretion of
Parliament to fashion the rate of tax, concessions and exemptions, it
added.
The bench noted that in the field of taxation, the top
court has only intervened to read down or interpret a formula if the
formula leads to absurd results or is unworkable.
"In the
present case however, the formula is not ambiguous in nature or
unworkable, nor is it opposed to the intent of the legislature in
granting limited refund on accumulation of unutilised ITC. It is merely
the case that the practical effect of the formula might result in
certain inequities," said the top court, in its 140-page judgment.
The
bench noted the purpose of the formula in Rule 89(5) is to give effect
to Section 54(3)(ii) which makes a distinction between input goods and
input services for grant of refund. "Once the principle behind Section
54(3)(ii) of the CGST Act is upheld, the formula cannot be struck down
merely for giving effect to the same," it said.
The top court
said, however, given the anomalies pointed out by the assessees, "we
strongly urge the GST Council to reconsider the formula and take a
policy decision regarding the same".
It observed the formula
makes a presumption that the output tax payable on supplies has been
entirely discharged from the ITC accumulated on account of input goods
and there has been no utilisation of the ITC on input services.
The
top court also upheld the Madras High Court ruling in a separate
connected matter. "We have come to the conclusion that the judgment of
the Madras High Court needs to be affirmed by dismissing the appeals
challenging that verdict while the appeals against the judgment of the
Gujarat High Court by the Union of India should be allowed," it said.
|
|
|
|
|
|
|
|
|
|
|
|
|
Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
84.35
|
82.60 |
UK Pound
|
106.35
|
102.90 |
Euro
|
92.50
|
89.35 |
Japanese
Yen |
55.05 |
53.40 |
As on 12 Oct, 2024 |
|
|
Daily Poll |
 |
 |
Do you think Indian businesses will be negatively affected by Trump's America First Policy? |
|
|
|
|
|
Commented Stories |
 |
|
|
|
|
|
|
|