This update covers key judicial decisions relating to GST, service tax and customs.

Goods and Services Tax (GST)

Gauhati High Court holds that refund of accumulated input tax credit is permissible in cases where the input tax is higher than tax on output supplies with the input and output supplies being the same

The Gauhati High Court, in BMG Informatic Pvt Ltd. v Union of India, held that if the input tax credit has accumulated on account of the rate of tax on input supply being higher than the rate of tax on output supply, the assessee would be entitled to a refund of the unutilised input tax credit even if the input and output supplies are the same.

Regarding the clarification issued by the Central Board of Indirect Taxes and Customs (Board) through Circular dated 31 March 2020 that refund of accumulated ITC on account of mere rate differential would not be available in cases where the input and output supplies are the same, the High Court observed that under Section 168(1) of the CGST Act, under which the Circular dated 31 March 2020 was issued, the Board is empowered to issue/orders or instructions, directions to the tax officer on the procedure to be followed for bringing uniformity in the implementation of the CGST Act. The said Section does not give power to the Board to read and give meaning to the provisions of the CGST Act.

The High Court ultimately held that the clarification issued vide Circular dated 31 March 2020 was in conflict with Section 54(3)(ii) of the CGST Act, which provides for refund in case of accumulation of credit on account of the rate of tax on input supply being higher than the rate of tax on output supply and therefore, the Circular needs to be ignored.

This should help businesses in trading sector where supplies of goods are made to government/agencies at a concessional rate.

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