Relying on the recent GST circular dated 6th July 2022, where the Central Board of Indirect Taxes and Customs (CBIC) has clarified the refund under inverted duty structure where supplier is supplying goods under concessional notification, the Telangana High Court has directed the GST department to consider a refund claim by the assessee.
The Petitioner, Micro Systems and Services Sole, is a proprietary concern established in the year 2005 engaged in the business of assembling and supply of computers and computer parts. The petitioner is a registered person as per provisions of the Central Goods and Services Tax Act, 2017. It is also a registered supplier to all the Defence, Research & Development Organisation (DRDO) Laboratories and affiliates across the country.The petitioners claim for refund was rejected on the ground of CBIC circular dated 31.03.2020.
A coram of Chief Justice Ujjal Bhuyan and Justice C.V.Bhaskar Reddy observed that as per the Circular No.173/05/2022-GST dated 06.07.2022. Board has clarified that it was not the intent of paragraph 3.2 of Circular dated 31.03.2020 to cover the cases where the supplier is making supply of goods under a concessional notification and the rate of tax on output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under a concessional notification.
“Therefore, it has been clarified that in such cases, refund of accumulated input tax credit on account of inverted structure would be allowed in cases where accumulation of input tax credit is on account of rate of tax on output supply being less than the rate of tax on inputs (same goods) at the same point of time as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions,” the Court observed.
Noting that the above Circular dated 06.07.2022 is clarificatory in nature, the Court held that Circular dated 06.07.2022 inserting the above clarification would have the effect from the date when Circular dated 31.03.2020 came into effect.
Allowing the petition, the Court observed that “If this be the position, then the claim of the petitioner is liable to be re-considered on the basis of the Circular dated 31.03.2020 as clarified by the Circular dated 06.07.2022.Consequently, we set aside the orders dated 04.01.2021 of respondent No.6 and dated 09.04.2021 of respondent No.5. The matter is remanded back to respondent No.6 for re-consideration in terms of the Circular dated 06.07.2022 as extracted above. Let the above exercise on remand be carried out by respondent No.6 within a period of eight weeks from the date of receipt of a copy of this order.”
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