The Supreme Court has confirmed a Madras High Court judgment which upheld a fiscal formula included in the Central Goods and Service Tax Rules to execute refund of unutilized Input Tax Credit (ITC) accumulated on account of input services.

What is Input Tax Credit?

• Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs.
• Say, you are a manufacturer – tax payable on output (FINAL PRODUCT) is Rs 450 tax paid on input (PURCHASES) is Rs 300 You can claim INPUT CREDIT of Rs 300 and you only need to deposit Rs 150 in taxes. See here:

Pc: Cleartax.in

The case in discussion

• The apex court Bench led, by Justice D.Y. Chandrachud, passed the judgment in the face of two contradicting judgments of Gujarat and Madras High Courts on the validity of Rule 89(5) of the Central GST Rules, 2017.
• Rule 89(5) provides a formula for the refund of ITC, in “a case of refund on account of inverted duty structure”.
• The Gujarat High Court had held that by prescribing a formula in sub-Rule (5) of Rule 89 to execute refund of unutilized ITC accumulated on account of input services.
• The Madras High Court, while delivering its judgment declined to follow the view of the Gujarat High Court.

Answer this PYQ in the comment box:

Consider the following items:

1. Cereal grains hulled
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspapers containing advertising material

Which of the above items is/are exempt under GST (Goods and Services Tax)?

(a) 1 only

(b) 2 and 3 only

(c) 1, 2 and 4 only

(d) 1, 2, 3 and 4

 

Post your answers here

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