SC Gave Decision To Resolve The Matter Of Refund Of CGST
SC gave decision to resolve the matter of refund of CGST. Supreme decision on CGST, Now there will be ease in GST refund.
The Supreme Court allowed the Centre’s plea that goods and services cannot be treated as equal in the matter of refund of Input Tax Credit (ITC) not availed of under the CGST Act and Rules.
The court said that seeking a ‘refund’ is not a constitutional right but it is governed by law. The top court upheld the validity of Section 54(3) of the Central Goods and Services Tax (CGST) Act.
The SC gave a big decision to resolve the matter of refund of CGST: This section deals with the refund of unutilized ITC. Experts say that this will help in resolving refund issues.
The court said that the court should not interfere in matters like tax rate, concession, and exemption 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 pronounced this judgment while hearing various petitions on the conflicting judgments of the Gujarat and Madras High Courts related to the matter.
Both the High Courts had given different judgments on whether the rules for refund of input tax credit under CGST would apply equally to goods and services.
The apex court quashed the Gujarat High Court’s decision which had struck down Rule 89(5) of the Central Goods and Services Tax (CGST) Rules as illegal.
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 a 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 a case where the rate of tax on raw material (input) exceeds the rate of tax on product (output) supply due to credit Has happened.”
“When there is no statutory guarantee for the refund nor is there any right in law, the contention that in case of a refund of unutilized ITC, the goods and services shall not be treated as equal,” the judgment said.
Referring to the earlier judgments in this context, the court said that in the field of taxation, “the apex court has intervened in the interpretation of the formula only when its analysis does not seem to be correct or is impractical. .”
“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 a limited refund on the accumulation of ITC unutilized.
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”.
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.
