Circular Clarifies GST Refund Eligibility for Accumulated Input Tax Credit Under Section 54(3)(ii)

The HC disposed of a writ petition challenging Circular No.135/05/2020-GST as ultra vires Section 54(3)(ii) of the CGST Act. During proceedings, respondents presented Circular No.173/05/2022-GST, which clarified that refunds for accumulated input tax credit are admissible where output tax rates are lower than input tax rates due to concessional notifications. Respondents conceded the petitioner's eligibility for the claimed refund of Rs.29,89,016.00. The court directed respondent No.4 to process the refund claim within eight weeks and disposed of the petition without costs.

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Issues:
Challenge to Circular No.135/05/2020-GST under Article 226 of the Constitution of India for being ultra vires Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017. Claim for refund of Rs.29,89,016.00 with interest under Section 54 of the CGST Act.

Analysis:
The petitioner filed a petition seeking a declaration that para 3.2 of Circular No.135/05/2020-GST is ultra vires Section 54(3)(ii) of the CGST Act and a direction for refund of a specific amount with interest. The respondents presented Circular No.173/05/2022-GST, dated 06.07.2022, clarifying refund provisions for accumulated input tax credit in cases of inverted tax structure due to concessional notifications. The circular allowed refunds where the rate of tax on output supplies is less than that on input supplies of the same goods, subject to certain conditions.

The new circular clarified that refunds for accumulated input tax credit are admissible in cases where the rate of tax on output supplies is lower than that on input supplies due to concessional notifications, provided that the goods or services are not excluded from refund eligibility. Respondents conceded that the petitioner would be eligible for a refund based on the new circular. Consequently, respondent No.4 was directed to process the petitioner's refund claim under Section 54 of the CGST Act within eight weeks from the date of the order.

The court disposed of the writ petition, and any pending miscellaneous applications were closed without any order as to costs. The judgment focused on the interpretation of provisions under the CGST Act and the validity of the circular in addressing refund claims related to inverted tax structures due to concessional notifications. The decision provided clarity on the eligibility criteria for refunds in such scenarios and directed the concerned authority to process the petitioner's refund claim accordingly.

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