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2019 (8) TMI 1350 - HC - GSTVires of Rule 89 (5) of the Central Goods and Services Tax (CGST) Rules, 2017 - whether contrary to the provisions of Section 54 (3) of the Central Goods and Services Tax (CGST) Act, 2017? - Refund of input tax credit - HELD THAT - Issue notice for final disposal of the matter, to the respondents, returnable on 09.10.2019.
Issues: Challenge to vires of Rule 89(5) of CGST Rules, 2017; Rejection of refund application based on Rule 89(5) and Notification No.5/2017; Interpretation of Section 54(3) of CGST Act, 2017; Exclusion of input service credit from Net ITC calculation under Rule 89(5).
In this judgment by the Bombay High Court, the petitioner challenged the validity of Rule 89(5) of the Central Goods and Services Tax (CGST) Rules, 2017, contending that it contradicts Section 54(3) of the CGST Act, 2017. The petitioner's refund application of ?39,28,339, representing Input Service Credit, was denied based on Rule 89(5) and Notification No.5/2017. The petitioner argued that Section 54(3) allows for refund of unutilized input tax credit, defined in Sections 2(63) and 2(62) of the CGST Act as the tax charged on supplies of goods or services. However, Rule 89(5) provides a formula for refund calculation and excludes input service credit from Net ITC, despite its inclusion in the turnover of inverted rated supply. The High Court issued notice for final disposal of the matter to the respondents, returnable on 09.10.2019. The learned ASGI for respondent no.1 and the counsel for respondent nos.4 and 5 waived the service of notice. The case involves a critical examination of the compatibility between Rule 89(5) and Section 54(3) of the CGST Act, focusing on the treatment of input service credit in the refund computation process. The judgment highlights the petitioner's argument that the exclusion of input service credit from Net ITC under Rule 89(5) is inconsistent with the statutory provisions of the CGST Act, warranting a closer scrutiny of the legal framework governing input tax credit refunds.
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