2026 (3) TMI 1683 - HC - GST

Retrospective GST on SEZ insurance supplies stayed where prima facie jurisdiction and statutory interpretation issues were raised.

A prima facie challenge was raised to retrospective GST demands on insurance policies supplied to SEZ units for the period from 1 July 2017 to 30 ... Prima facie absence of jurisdiction to retrospectively levy tax - interim protection against retrospective GST demandPrima facie absence of jurisdiction to retrospectively levy tax - zero-rated supply to SEZ units - prospective operation of amendment - Interim protection was warranted against the demand seeking to tax, with retrospective effect, insurance policies subscribed by SEZ units for the period prior to the amendment to section 16 coming into force. - HELD THAT: - The Court held that the petitions raised arguable issues requiring final consideration, particularly on the competence of the designated officer to retrospectively levy tax for the period prior to 01 October 2023 on supplies of insurance services made to SEZ units. Prima facie, the Court found substance in the contention that the amendment inserting the words 'for authorised operations' could not be used to retrospectively tax supplies which had earlier been treated as zero-rated. The Court also noted the statutory definition of recipient under section 2(93) of the CGST Act and observed that, in the present case, the SEZ units had subscribed to the policies and paid consideration, even if the cover was for the benefit of employees. [Paras 8, 11, 12]Pending final hearing, the impugned orders arising from the show cause notices were stayed.Final Conclusion: The Court found that the challenge to the retrospective GST demand raised substantial and arguable questions on jurisdiction and the effect of the amendment to section 16 of the IGST Act. Rule was issued and, pending final disposal of the petitions, the impugned orders were stayed. Issues: Whether the petitioners made out a prima facie case for interim protection against retrospective demand of GST on insurance policies supplied to SEZ units, pending final adjudication.Analysis: The challenge was to show cause notices and consequential orders seeking to levy GST retrospectively for the period from 01 July 2017 to 30 September 2023 on the footing that the amendment inserting the words 'for authorised operations' into Section 16 of the Integrated Goods and Services Tax Act, 2017 came into force only from 01 October 2023. The Court recorded that, prima facie, the designated officer may not have jurisdiction to retrospectively levy tax on the supplies in question, and noted that Section 2(93) of the Central Goods and Services Tax Act, 2017 defines the recipient by reference to the person liable to pay consideration. The Court found that arguable issues were raised requiring consideration at final hearing.Conclusion: Interim protection was warranted and the impugned orders arising from the show cause notices were stayed pending final hearing.