Facts:
M/s Shree Royal Polyplast Industries (“the Petitioner”) has challenged the constitutional validity of the third proviso to Section 54(3) of the Central Goods and Services Tax Act, 2017 (“CGST Act”). Section 54(3) of the CGST Act deals with refund of unutilised input tax credit (“ITC”). As per third proviso to Section 54(3) of the CGST Act, no refund of unutilized ITC shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
Issue:
Whether third proviso to Section 54(3) of the CGST Act is constitutionally valid?
Held:
The Hon’ble HC, Gujarat in R/Special Civil Application No. 19386 of 2019 dated October 25, 2019 has issued notice to Attorney General, returnable on November 27, 2019. Further, by way of ad-interim relief, the Court has also restrained the Revenue from making any coercive recovery.
Relevant provisions:
Section 54(3) of the CGST Act : Refund of tax
“(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than––
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:
Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”