TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1229
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....unutilized) in whole or part thereof. * Where the answer to above is negative, the Applicant wishes to understand how does the Notification 21 and 26 apply in a scenario where factually following financials may exist: A. Revenue streams Works contract services liable to 12% GST INR 1,000 Output GST@ 12% INR 120 Total Revenues incl. GST INR 1,120 B. Input Tax Credit Data Particulars Amount (INR) ITC on inputs 65 ITC on input services 90 Sub-total 155 Less: Total tax on outward supplies 120 Net balance remaining unutilized 35 The questions/ issues placed for determination before the Hon'ble Bench has to be appreciated in light of the following position of law and its applicability to the facts of the Applicant's business and activity as discussed above and detailed hereunder, as may be necessary. At the outset, we would like to make it clear that the provisions Of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier,....
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....lubricants, etc Inputs services 18% 13 Design, insurance and finance charges Input services 18% 14 Indirect cost such as site office, labour camp, IT infrastructure, land lease, vehicle rental, furniture, site running expenses, etc Input services 18% *The rate mentioned is total of CGST and State GST rates, as may be applicable, 10 supply of attendant goods and services. (vi) (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than i) zero rated supplies made without payment of lax; ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: Provided also that no refund of input tax ....
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.... 'goods'. Acknowledging this error, the formula was rectified by retrospective amendment whereby turnover of supply of service was also included. This amendment underlined the intent of Government to extend benefit in all cases, whether supply of goods or services. (b) Exclusion of 'input service from definition of 'Net ITC' - Prior to amendment, definition of 'Net ITC' was borrowed from sub-rule (4) of Rule 89 which included within its ambit 'inputs' as well as 'input services'. However, as per the amended definition, the definition of Net ITC only covers ITC availed on 'inputs'. Thus, the amendment has restricted the benefit of refund only to procurement of inputs which are used for inverted rated supply of goods or services. (xiii) Given the above, the Notification 21 & 26 leads to several ambiguities in its applicability. The relevant issues for determination have thus been, listed herein below. (xiv) In addition to above, it may be noted that the based on the nature of MTHL Project and its execution requirements & parameters, the Applicant envisages procurement mix of Daewoo-TPLIV shall tentatively comprise of 55% of materials....
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....oods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies ..... .... .... (10) Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may -- (a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be; (b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law. Explanation. For the purposes of this sub-section, the expression "specified date" shall mean the last date for filing an appeal under this Act. (iv). As per said Section, refund of unutilized ITC can be claimed in (2) instances as stated above. As per the said Section, in case of inverted duty structure, benefit of refund is available on unutilized balance of ITC. Notably, the Section provides a sweeping ....
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....said principle in the instant case, benefit available to Applicant by Section 54(3) of CGST Act should not be curtailed by Rule 89(5) of CGST Rules. (xi). Additionally, Applicant would also like to submit that in the event CGST Act intended certain condition or restriction to be placed on quantum of refund to be granted, the CGST Act itself would expressly provide for same. Alternatively, CGST Act would provide specific stipulation to the effect that condition prescribed in CGST Rules should apply for determining the amount of refund. However, Section 54 in no manner, provides or stipulates that amount of refund would be granted subject to restriction specified in rules. Given this, Applicant humbly believes that amendment to refund formula, effected by way of issuance of Notfn No 21/2018, should not apply in the instant case. (xii). Given this, it is prayed off the Hon'ble Bench that it may be ruled that the Applicant should be entitled to claim refund of unutilized balance of inputs as well as 'input services', on account of inverted duty structure and that the Notifications 21 and 26 should not be applicable to restrict the same. Issue 2 - The applicability of t....
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....d services Max Refund = (1000 X 65] - 30 1000 = 35 (xviii) The correct applicability of the Notifications may kindly be determined by the Hon'ble Bench. PRAYER I. The Hon'ble Bench may be pleased to take the aforesaid application on record and pronounce a ruling in light of attendant facts as well as legal/ judicial position. II. The ruling sought from the Hon'ble Bench is as follows: "The refund of ITC on input services could also be claimed in case of an inverted duty structure scenario." And/ or "In any case, the unutilized balance (so long it does not exceed) the gross ITC availed on inputs, could still be refunded in full."" 03. CONTENTION - AS PER THE CONCERNED OFFICER The questions / issues before Hon'ble Bench for determination are as follows: (i). The Applicant though eligible to claim for refund of inverted duty structure under Section 54(3) of the CGST Act, wishes to understand the in-principle applicability of Notification 21 and 26 in as much whether the same allow for refund of ITC availed on input services (and remaining unutilized) in whole or part thereof. (ii) Where the answer to above is negative, the Applicant wishes to u....
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....ocured by them on paying GST ranging from 18% to 28%. (v) The legal provisions are as follows * Section 54(3) of GST Act reads as follows. * Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period: Provided that no refund of unutilized input tax credit shall be allowed in cases other than -zero rated supplies made without payment of tax; where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. * Rule 89(5) of GST Rule reads as follows :- * In case of refund on account o....
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.... contract from MTHL in the form of works contract. The contract in the nature of services. Execution of construction of large projects such as MTHL Project entails procurement of various inputs, input services and capital goods such as cement, concrete, steel and steel structures, bridge accessories, formworks, plant and equipment, labour, etc. All such goods and services attract GST at varied rates, depending on the nature of such procurement. The ITC paid on the inputs and services are higher than output supply. Therefore, the transaction is covered under Inverted duty structure. In such cases as in the subject case, to avoid the cascading effect, Govt. has allowed relief in the form of Refund of unutilized Input tax Credit as provided in Section 54 of the CGST Act, and the relevant provision (3)(ii) of the said section is reproduced as under:- Section 54, Refund of Tax. 54 (13) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than i) ............; ii) where the credit has accumulated on....
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....ion 54 (3) (ii) and Notification No 21 of 2018 implies that the formula prescribed (for determination of eligible refund amount) under Rule 89(5) of CGST Rules i.e. for "Net ITC" only considers ITC on 'inputs', for computing the amount of eligible refund. Therefore any portion of the ITC availed on 'input services' is not available as refund under the said Rules. 5.4 The said refund formula was made retrospectively effective from 01.07.2017, vide Notification No. 26/2018-Central Tax dated 13.06.2018. Thus the effect of both the above Notifications i.e. Notfn Nos. 21 & 26 of 2018, taken together, has the effect of having introduced the above said refund formula with effect from 01.07.2017. 5.5 Section 54 (3) mentions that "Provided that no refund of unutilised input tax credit shall be allowed in cases other than (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Thus it is clea....
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.... a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare State. In modern times, it is not always possible for the legislatures to make laws providing every detail. In view of newer areas emerging, law-making today has become not only time consuming but also an increasingly complicated and technical affair. What a legislature can possibly do and actually does is that it lays down the policy and purpose of the legislation and leaves it to the executive, experts and technocrats to provide for working details within the framework of the enactment by way of rules, regulations, bye-laws or other statutory instruments. That is why, delegated legislation is increasingly assuming an important role in the process of law-making, comprising an important component of legislation. Powers have also been conferred under various provisions of the Constitution of India on the different functionaries to frame rules, regulations or schemes dealing with various aspects." Therefore, we do not see anything in the Rule 89 of the CGST Rules, 2017, as amended by the Notifications 21 and 26 of 2018, that overrides the Section 54 of the CGST Act, 2017 and they hav....