Supreme Court upholds validity of Rule 89(5) of GST law

 







The Supreme Court on Monday upheld the validity of Rule 89(5) of the Central GST Rules, 2017 which prescribes a formula excluding the refund of ‘unutilised input tax’ paid on ‘input services’ as part of ‘input tax credit' (ITC).

The top court, however, asked the GST Council to take note of the anomalies in the present system and reconsider the assessment formula for claiming refunds as the practical effect of the formula might result in certain inequities.

A Bench led by Justice DY Chandrachud set aside a Gujarat High Court verdict that said Rule 89(5) of Central Goods and Service Tax Rules, 2017 was ultra vires Section 54(3) of the CGST Act as it restricted the refund only to input goods.

Section 54(3)(ii) of the Central Goods and Services Act excluded unutilised input tax credit that accumulated on account of input services, it said, agreeing with the Madras High court’s views on the issue.

“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, the court observed while rejecting the challenge against Section 54(3) on the ground that it violates equality doctrine under Article 14 of the Constitution,” it ruled

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