Chennai: The Supreme Courtroom has held that enter tax refund is admissible solely with respect to enter items, and never for enter companies. Listening to the appeals in opposition to the contradictory judgements by Gujarat and Madras excessive courts, the highest court docket urged the GST Council to rethink the formulation and take a coverage choice on this.
In its judgment dated 24 July 2020, in a case filed by VKC Footsteps India, the division bench of the Gujarat Excessive Courtroom had directed the Union Authorities to permit the declare for refund made by the petitioners earlier than it, contemplating unutilised ITC on enter companies as a part of “net ITC” for the aim of calculating refund when it comes to Rule 89(5), in furtherance of Part 54(3) of the CGST Act of 2017.
It additionally held that Rule 89(5) by proscribing the refund solely to enter items had acted extremely vires Part 54(3).
Nonetheless, the division bench of the Madras Excessive Courtroom, whereas delivering its judgment on September 21, 2020 within the case filed by Tvl. Transtonnelstroy Afcons three way partnership, declined to observe the view of the Gujarat HC.
It discovered that refund is a statutory proper and the extension of the advantage of refund is just to the unutilised credit score that accumulates on account of the speed of tax on enter items being greater than the speed of tax on output provides by excluding unutilised enter tax credit score that accrued on account of enter companies.
The Supreme Courtroom concluded that the judgment of the Madras Excessive Courtroom must be affirmed and it dismissed the appeals difficult that verdict whereas the appeals in opposition to the judgment of the Gujarat Excessive Courtroom had been allowed. The court docket stated that the implications of Sec. 54(3) don’t seem to have been considered by Gujarat Excessive Courtroom aside from a short reference.
It additionally requested the GST Council to allow it to take a thought of view in accordance with regulation.
“The Apex Courtroom has handed a landmark judgement to take away the doubts that arose after the contradictory views by the Excessive Courts of Madras and Gujarat,” stated Abhishek Jain, Tax Accomplice, EY.