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April 11, 2021

GST Taxpayers will get Refund of Inverted Duty on Input Services?

by facelesscompliance in GST

GST Taxpayers will get Refund of Inverted Duty on Input Services?

A a large number of petitions are pending in the various High Courts on the issue if there is Refund of Inverted Duty on Input Services in GST. Recently SC held on the issue of ‘ Validity of Refund of Inverted Duty on Input Services’ which SC do by posting the cases for final hearing on 28 April 2021

In VKC Footsteps India Pvt. Ltd. Vs. Union of India (Gujarat High Court) it was held that respondents are allow the claim of the refund made by the petitioners considering the unutilised input tax credit of “input services” as part of the “net input tax credit”(Net ITC) for the purpose of calculation of the refund of the claim as per Rule 89(5) of the CGST Rules,2017 for claiming refund under Sub-section 3 of Section 54 CGST Act,2017.

Recently a ruling has been passed by Madras High court in the case of Tvl. Transtonnelstroy Afcons Joint venture, wherein it has been held that 54(3)(ii) does not infringe Article 14 and thus refund of only inputs is available under inverted duty structure (“IDV”) (section 54(3)(ii). This judgement is in contrast to the judgement of Gujarat high court in case of VKC Footsteps

As the above two rulings of High Court are contradicting. It would be interesting to see the how to SC respond to this. Further if it is favorable to Taxpayers and they are entitled for refund, it would be interesting to see if CBIC and FM do not change the law retrospectively.

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FULL TEXT OF THE SUPREME COURT ORDER

  1. This batch of petitions arises from the judgments of the High Court of Gujarat and of the High Court of Madras. The Gujarat High Court has held that Explanation (a) to Rule 89(5) of the CGST Rules 2017 is ultra vires, while a contrary view has been taken by the High Court of Madras. Since a large number of petitions are pending in the High Courts on the same issue, it is appropriate that we list the present batch of cases at an early date, which we do by posting the cases for final hearing on 28 April 2021. The entire batch of petitions shall be listed at the top of the Board on that date.
  2. In order to facilitate the learned counsel and the Court in appreciating the gamut of the matter, certain house-keeping directions are required, which are issued as follows:

(i) Counter affidavits, if any, shall be filed within a period of two weeks from today and no adjournment shall be granted on the next date of hearing;

(ii) Mr Balbir Singh, learned Additional Solicitor General shall, within a period of ten days, circulate an index of statutory provisions as well as circulars on which the Revenue would seek to place reliance at the final hearing. Within three days of the receipt of the e-mails, all the learned counsel shall indicate to the Additional Solicitor General the additions which they request to be made to the index so that a common compilation can be filed;

(iii) As regards case law and precedent, it has been agreed that Mr Sujit Ghosh, learned senior counsel appearing on behalf of the first respondent in some of the cases, shall likewise circulate an index of the case law on which he seeks to place reliance. All the learned counsel who wish to make any additions to the case law shall indicate this to Mr Sujit Ghosh within three days of the receipt of the emails;

(iv) In the above manner, two separate common compilations shall be made available to the Court in the soft form, one containing the statutory provisions and circulars and material associated with it and the second consisting of the precedent on the subject; and

(v) Written submissions shall be filed by all the learned counsel appearing on behalf of the contesting parties at least two weeks before the date of hearing.

  1. The Registry shall ensure that the PDF format together with consecutive pagination is circulated to all the learned counsel appearing in the matter so as to ensure that the page references which are made available to the Court are also made available to all the learned members of the Bar for facilitating their submissions.
  2. In the event that there is any difficulty experienced by the learned counsel in accessing the PDF files, they may contact the Court Masters of this Court, Mr Sanjay Kumar or Mr Chetan Kumar, as the case may be.
  3. List the Special Leave Petitions on 28 April 2021 at the top of the Board.

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