Supreme Court upholds provisions of CGST Act on ITC refund

A bench of Justices DY Chandrachud and MR Shah highlighted that legislative choices and fiscal policy decisions are based on a complex balance between political, economic and social needs and aspirations and are the result of careful analysis of data and information. . taxes and their collection.

“The fiscal policy should not be determined through the High Courts or the decisions of this Court. Because it is not the function of the Court in the fiscal sphere to compel Parliament to go ahead and do more, for example, to expand the scope of the law (for wine, stamp duty and petroleum) or to bring about uniformity of rates. . . This would constitute an undue judicial encroachment on the legislative power,” the bench said while deciding a bunch of related matters. central goods and services tax (CGST) Act 2017.

The SC was called upon to decide the validity of Section 54(3) of the Act, which provided for refund of unutilized input tax credit, where the rate of tax on inputs is higher than the rate of tax on output supplies. Several pleas have held that section 54(3) should be rendered unconstitutional if it should be interpreted as limiting refunds only for input goods and not for input services. Further, he argued that Rule 89(5) of the Act should also be declared ultra vires, as it excludes tax on input services from the purview of the refund formula. The petitions contend that the entire basket of unutilized input tax credit, whether traceable to goods or services, is eligible for refund. The matters had reached the SC after differing views were taken by the High Courts of Gujarat and Madras in the interpretation of the legal provisions.

The bench dismissed the challenges to the validity of both the provisions and upheld them saying that it is within the legislative competence of the government to provide interoperability for goods and services and refund under the provision applicable to goods only. limit the range.