Goods and services cannot be treated as equal in GST input tax credit refund case: Court
The top court upheld the validity of section 54(3) of the Central Goods and Services Tax (CGST) Act. This section deals with refund of unutilized ITC.
The court said that the judiciary should not interfere in matters like tax rates, concessions and exemptions as these are subject to Parliament’s jurisdiction. If this happens, it would encroach on the legislative options as well as policy decisions which are the prerogative of the executive.
A bench of Justice DY Chandrachud and Justice MR Shah delivered the judgment while hearing various petitions on conflicting judgments of the Gujarat and Madras High Courts relating to the matter. Both the High Courts had given separate judgments on whether the rules for refund of input tax credit under CGST would apply equally to goods and services.
The apex court set aside the Gujarat High Court’s decision which had held rule 89(5) of the Central Goods and Services Tax (CGST) Rules as invalid.
Justice Chandrachud, writing the 140-page judgment, concurred with the findings of the Madras High Court. The High Court had upheld the validity of the rule.
The top court said, “The refund claim is governed by rules. There is no constitutional right to seek refund. Parliament has allowed refund of unutilized ITC in case of nil-tax related supplies without payment of tax in clause (i) of the first provision. Under clause (ii) of the first provision, Parliament has envisaged refund of unutilized ITC in case where the rate of tax on raw material (input) exceeds the rate of tax on product (output) supply due to credit credit Has happened.”
“When there is no statutory guarantee for refund nor is there any right in law, the contention that in case of refund of unutilized ITC, the goods and services shall not be treated as equal,” the judgment said. should be considered as such.”
Referring to the earlier judgments in this context, the court said that in the field of taxation, the apex court has intervened for interpretation of the formula only when its analysis does not seem to be correct or is impracticable.
“However, in the present case, the formula is not vague in nature or impractical nor does it conflict with the intention of the Legislature to grant limited refund on accumulation of ITC unutilized,” the Court said.
However, the top court accepted the contention that there may be some discrepancies in the formula as a result of practical implications.
“We should therefore refrain from interfering in the jurisdiction of the legislature in such a matter,” the bench said. However, in view of the discrepancies reported by the taxpayers, we urge the GST Council to reconsider the formula and take a policy decision in this regard.
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