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Need equitable GST refunds: SC

NEW DELHI: The Supreme Court on Monday “strongly urged” the GST Council to reconsider and tweak the refund formula but refused to judicially correct the anomalies pointed out by petitioners, who alleged that the refund formula was causing an iniquitous situation among different business and industry sectors.
Refusing the petitioner’s request for expanding the refund categories by prescribing an order of utilisation, a bench of Justices D Y Chandrachud and M R Shah said that the exercise would take the court “down the path of recrafting the formula and walk in the shoes of the executive or the legislature, which is impermissible”.
“Accordingly, we shall refrain from replacing the wisdom of the legislature or its delegate with our own in such a case. However, given the anomalies pointed out by the assessees, we strongly urge the GST Council to reconsider the formula and take a policy decision regarding the same,” said Justice Chandrachud, who wrote the 140-page judgment.
The bench said the refund formula is neither ambiguous in nature or unworkable, nor is it opposed to the intent of the legislature in granting limited refund on accumulation of unutilised input tax credit (ITC).
Parliament, while enacting the Central Goods and Services Tax Act, 2017, has incorporated a provision for refund of tax in Section 54. Sub-Section (3) embodies a provision for refund of unutilised ITC in cases involving: (i) zero-rated supplies made without payment of tax; and (ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies”.
While envisaging a refund in the latter of the above two situations, Parliament envisaged a specific situation where the credit has accumulated due to an inverted duty structure, that is, where the accumulation of ITC is because the rate of tax on inputs is higher than the rate of tax on output supplies. Taking legislative note of this situation, a provision for refund has been provided for in Section 54(3), the bench said.
Justice Chandrachud said, “There is no constitutional entitlement to seek a refund.”

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