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TMI BlogBalancing Tax Provisions and Circulars: Insights from a Refund of Unutilized ITC due to an Inverted Tax Structure Case under CGST ActX X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of Section 54(3) of the Central Goods Services Tax Act, 2017 (CGST Act) concerning the refund of accumulated Input Tax Credit (ITC). The petitioner, a corporation involved in the oil industry, sought a refund of accumulated ITC, which was denied by the authorities on the grounds that the rate of tax on input and output supplies was the same. The central legal issue concerns the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being higher than the rate of tax on output supplies. Circular No. 135/05/2020-GST : This circular clarifies that the refund of accumulated ITC under Clause (ii) of Section 54(3) would not be applicable in cases where the input and the output supplies are the same. Analysis of the Case Application of Section 54(3) and Clause (ii) : Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal input and the output supply are similar, indicating a narrower application than what was concluded by the adjudicating authority. Legislative Intent and Inverted Duty Structure : The court noted the legislative intent behind the grant of refund of unutilized ITC due to an inverted tax structure. The intent was to confine the tax to the rate on output supplies. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (ii) of Section 54(3) by the authorities was deemed too restrictive and not in line with the legislative intent of the CGST Act. The Circular No. 135/05/2020 was found to be applicable in a narrower scope than applied by the authorities. The case reaffirms the principle that circulars issued by CBIC cannot override the express provisions of the CGST Act and that the legislative intent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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