Retrospective Rule 89(5) amendment governs ITC refund claims and removes the refund-formula bar for input services.

The Gujarat HC treated the amendment to Rule 89(5) of the CGST Rules, introduced by Notification No. 14/2022-Central Tax, as retrospectively applicable in light of later Supreme Court and coordinate bench authority on refund of unutilised input tax credit under Section 54(3) of the CGST Act. On that basis, the restriction in the refund formula was not treated as a bar to the claim for input-service credit, and the deficiency memo in Form GST RFD-03 was quashed. The refund claim was directed to be processed under the amended rule and the governing law.

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Issues: Whether the deficiency memo in Form GST RFD-03 for refund of unutilised input tax credit attributable to input services was liable to be quashed, and whether the refund claim had to be processed in light of the amended Rule 89(5) of the Central Goods and Services Tax Rules, 2017.

Analysis: The amendment to Rule 89(5) introduced by Notification No. 14/2022-Central Tax dated 05.07.2022 was treated as applicable retrospectively, following the binding effect of the later Supreme Court and coordinate bench decisions dealing with the scope of refund under Section 54(3) of the Central Goods and Services Tax Act, 2017. On that basis, the restriction in the refund formula was not treated as a bar to consideration of the petitioner's claim in accordance with the amended rule and the governing refund provision.

Conclusion: The deficiency memo was quashed and the respondents were directed to process the refund claim in accordance with the amended Rule 89(5) and the applicable law.

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