DENIAL OF ITC (INVERTED DUTY STRUCTURE) INVALID

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DENIAL OF ITC (INVERTED DUTY STRUCTURE) INVALID

31/07/2020

DENIAL OF ITC (INVERTED DUTY STRUCTURE) INVALID

A landmark judgement on Refund of Inverted Duty Structure in the case of VKC FOOTSTEPS INDIA PVT. LTD. v/s UNION OF INDIA & 2 other(s)

We are of the opinion that Explanation (a) to Rule 89(5) which denies the refund of “unutilised input tax” paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is ultra vires the provision of Section 54(3) of the CGST Act, 2017.
In view of the above, Explanation (a) to the Rule 89(5) is read down to the extent that Explanation (a) which defines “Net Input Tax Credit’ means “input tax credit” only. The said explanation (a)of Rule 89(5) of the CGST Rules is held to be contrary to the provisions of Section 54(3) of the CGST Act. In fact the Net ITC should mean “input tax credit” availed on “inputs” and “input services” as defined under the Act.

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