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Blocked Input Tax Credit (ITC) under GST: Key Points You Need to Know

editor — Thu, 25 Apr 2024 05:48:46 +0000

In the realm of Goods and Services Tax (GST) in India, understanding Input Tax Credit (ITC) is crucial for businesses to ensure compliance and optimize their tax liabilities. However, not all GST paid on purchases can be claimed as ITC. There are certain scenarios where the Input Tax Credit is blocked, preventing businesses from claiming it against their output tax liability. In this comprehensive guide, we delve into the concept of Blocked Input Tax Credit under GST, highlighting key points and recent rulings.

What is Blocked Input Tax Credit (ITC)?

Blocked Input Tax Credit, as per GST laws, refers to specific goods and services on which GST is paid but businesses are ineligible to claim them as Input Tax Credit. These items are deemed ineligible because they are not considered as inputs directly utilized in the production or provision of taxable goods or services.

Recent Rulings and Clarifications:

Introduction:

In the complex landscape of Goods and Services Tax (GST) in India, the eligibility of Input Tax Credit (ITC) plays a significant role for businesses. The recent ruling by the Maharashtra Appellate Authority for Advance Ruling regarding Las Palmas Co-Op. Housing Society sheds light on crucial aspects of ITC denial. Let’s delve into the details to understand the implications of this ruling.

Facts of the Case:

Las Palmas Co-Op. Housing Society sought to avail Input Tax Credit for lift installation charges paid to the lift contractor. However, the Maharashtra Appellate Authority upheld the ruling of the Maharastra Advance Ruling Authority, denying the society’s eligibility for ITC. Citing sections 16(2)(b), 17(5)(c), and 17(5)(d) of the CGST Act, 2017, the authority emphasized that ITC would only be available for tax paid on works contract services when such services are utilized as input for further supply of works contract service.

Issue:

The central issue revolves around the eligibility criteria for Input Tax Credit under the CGST Act. The appellant, Las Palmas Co-Op. Housing Society, failed to fulfill the conditions outlined for availing ITC on works contract services. The authority highlighted that the society, not being a works contract service provider, did not provide any works contract service to its members, thereby rendering it ineligible for ITC.

Held:

The Maharashtra Appellate Authority for Advance Ruling affirmed the decision of the Maharastra Advance Ruling Authority, ruling that Las Palmas Co-Op. Housing Society is not eligible to avail Input Tax Credit in respect of the GST paid on lift installation charges. The authority emphasized that the appellant did not meet the criteria outlined in sections 16(2)(b), 17(5)(c), and 17(5)(d) of the CGST Act, 2017. Consequently, the appeal filed by the appellant was deemed not maintainable and liable to be rejected.

Introduction

The case of Malabar Cements Limited, brought before the Authority for Advance Ruling in Kerala, sheds light on the complexities surrounding input tax credit under the Goods and Services Tax (GST) regime in India. This case revolves around the eligibility of Malabar Cements Limited to claim input tax credit on the GST charged by a service provider for hiring buses or motor vehicles with a seating capacity of more than 13 persons for employee transportation. Understanding the outcome of this case is crucial for businesses navigating the nuances of GST regulations.

Facts of the Case

Malabar Cements Limited, a government-owned Public Sector Company in Kerala, sought an advance ruling regarding the admissibility of input tax credit on GST charged by a service provider for providing transportation facilities to its employees. The company operates its factory round-the-clock in remote areas where public transportation is limited. To ensure the commuting needs of its employees are met, Malabar Cements Limited engages a service provider to provide non-air-conditioned buses with a seating capacity exceeding 13 persons. The service provider levies a GST of 5% on the hiring charges, leading to the question of whether Malabar Cements Limited can avail input tax credit on this GST.

Issue

The central issue in this case is twofold. Firstly, it concerns the eligibility of Malabar Cements Limited to claim input tax credit on the GST charged by the service provider for hiring buses or motor vehicles with a seating capacity exceeding 13 persons for employee transportation. Secondly, it delves into the extent to which the input tax credit can be availed by Malabar Cements Limited, particularly considering the portion of the transportation cost borne by the company itself.

Held

Upon thorough examination of the relevant legal provisions and the arguments presented by Malabar Cements Limited, the Authority for Advance Ruling concluded that the company is indeed eligible to avail input tax credit on the GST charged by the service provider. However, the extent of this credit is restricted to the cost of transportation borne by Malabar Cements Limited. This ruling provides clarity on an important aspect of GST compliance for businesses engaged in employee transportation services and underscores the need for meticulous adherence to statutory provisions.

Introduction

The recent ruling by the Authority for Advance Ruling (AAR) in Madhya Pradesh has significant implications for businesses in the amusement park industry, particularly regarding Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime. The case of Atriwal Amusement Park sheds light on the eligibility criteria for claiming ITC on various components and services utilized in the construction of water parks, offering crucial guidance to businesses operating in this sector

Facts of the Case

Atriwal Amusement Park, a company specializing in the construction of water parks, sought clarification from the AAR regarding the eligibility of Input Tax Credit (ITC) on several aspects of its construction activities. The key components and services under scrutiny included the purchase of water slides, site development services, and the construction of swimming pools or wave pools, all of which are subject to taxation under GST regulations.

Issue

The central issue in this case pertains to the eligibility of Atriwal Amusement Park to claim Input Tax Credit (ITC) on specific components and services utilized in the construction of water parks. The inquiry seeks clarification on whether these elements qualify as ‘Plant and Equipment’ under GST provisions, thus enabling the applicant to avail of ITC benefits.

Held

Upon careful consideration of the facts and legal provisions, the Authority for Advance Ruling (AAR) in Madhya Pradesh arrived at the following decisions:

Water Slides: The AAR ruled in favor of Atriwal Amusement Park, affirming its eligibility to claim Input Tax Credit (ITC) on the purchase of water slides made from durable PVC material. This decision is based on the classification of water slides as ‘apparatus, equipment, and machinery,’ thereby meeting the criteria for ITC under GST regulations.

Site Development Services: However, the AAR denied ITC claims on goods and services related to site development and preparation where water slides are installed. The rationale behind this decision lies in the exclusion of land-related services from the definition of ‘Plant and Equipment’ eligible for ITC benefits.

Swimming Pools or Wave Pools: Similarly, the AAR ruled against the eligibility of ITC on the construction of swimming pools or wave pools. Despite being integral components of amusement parks, these structures were deemed civil in nature and not considered part of the supportive framework or foundation of the plant, thus falling outside the scope of ‘Plant and Equipment’ for ITC purposes.

Introduction

The integration of solar power systems has become increasingly common as businesses seek to adopt sustainable and eco-friendly energy solutions. This article examines a specific case, the ruling in the matter of Unique Welding Products Pvt. Ltd. vs. GST AAR Gujarat, to explore the eligibility of Input Tax Credit (ITC) for the installation and commissioning of a roof-top solar system.

Facts of the Case

Unique Welding Products Pvt. Ltd., a welding wires manufacturing and sales company based in Anand, Gujarat, installed a roof-top solar system with a capacity of 440 KW on its factory roof for captive power generation. The company sought clarification on its eligibility for ITC under the Central Goods and Services Tax (CGST) Act, 2017.

Issue

The main issues raised in the case were whether Unique Welding Products Pvt. Ltd. is eligible for ITC on the purchased roof-top solar system with installation & commissioning and whether the roof-top solar system, along with its installation and commissioning, constitutes plant and machinery, making it eligible for ITC under section 17(5) of the CGST Act.

Held

The ruling authority concluded that unique Welding Products Pvt. Ltd. is eligible to avail ITC on the roof-top solar system with installation & commissioning under the CGST/GGST Act and the roof-top solar system, with installation and commissioning, qualifies as plant and machinery for the company, making it eligible for ITC under section 17(5) of the CGST/GGST Act.

Introduction

The West Bengal Appellate Authority for Advance Ruling recently tackled the question of Input Tax Credit (ITC) eligibility concerning the construction of immovable property subsequently leased out for commercial purposes. This article provides an overview of the ruling, its implications, and the legal context surrounding it.

Facts of the Case

M/s. Mindrill Systems and Solutions Private Limited, hereinafter referred to as “the Respondent,” constructed a warehouse and leased it to a commercial entity. GST was duly paid on this supply of service. Subsequently, the Respondent sought an Advance Ruling from the West Bengal Authority for Advance Ruling (WBAAR) regarding the availability of Input Tax Credit (ITC) for capital expenses incurred during the warehouse’s construction. The question pertained to whether these expenses could offset tax liabilities arising from renting out the warehouse.

Issue

The central issue at hand revolved around whether Input Tax Credit (ITC) could be claimed in relation to the construction of immovable property subsequently let out for commercial purposes.

Held

The West Bengal Appellate Authority for Advance Ruling, in Appeal No. 04/WBAAAR/Appeal/2023, deliberated on the matter. It observed that clauses (c) and (d) of sub-section (5) of Section 17 of the Central Goods and Services Act, 2017 (“the CGST Act”), dictate that ITC is not available for works contract services or goods or services received for the construction of immovable property. Therefore, such transactions fall within the purview of blocked credit.

Furthermore, the Authority noted that the explanation provided in clause (d) of Section 17 specifies that credit is also blocked for reconstruction, renovation, additions, alterations, or repairs capitalized in the books of accounts. However, it clarified that the condition of capitalization in the books of accounts applies solely to the mentioned activities related to immovable property.

In conclusion, the West Bengal Appellate Authority for Advance Ruling held that no Input Tax Credit (ITC) is available concerning the construction of the warehouse subsequently leased out by the Applicant.

Introduction

The recent ruling by the GST AAAR Tamilnadu has shed light on a crucial aspect of Input Tax Credit (ITC) concerning structural support for overhead cranes within an ‘Integrated Factory’ building. Coral Manufacturing Works India Private Limited brought forth an appeal challenging the existing orders of the Advance Ruling Authority, Tamil Nadu, seeking clarification on the applicability of ITC in this scenario.

Facts of the Case

Coral Manufacturing Works India Private Limited constructed a warehouse and let it out for commercial purposes, paying GST on the service provided. The company filed an application for Advance Ruling, questioning whether ITC could be availed for the capital expenses incurred on the construction of the warehouse. The West Bengal Authority for Advance Ruling held that ITC was not admissible for expenses capitalized in the books of account. Dissatisfied with this ruling, the Revenue Department appealed against it.

Issue

The primary issue revolved around the eligibility of Input Tax Credit (ITC) concerning structural support erected for overhead cranes within an ‘Integrated Factory’ building. Coral Manufacturing Works India Private Limited sought clarification on whether the Integrated Factory Building itself could be considered as plant and machinery under the CGST Act.

Held

The GST AAAR Tamilnadu held that while the overhead crane and its structural support qualified as plant and machinery, the Integrated Factory Building itself did not. Consequently, Coral Manufacturing Works India Private Limited was only eligible for an ITC proportional to the structural support for the overhead crane, but not for the construction of other civil structures like the building’s side walls and roof.

Introduction

In the case of Raminfo Limited, the GST AAR Telangana has made a significant determination regarding the eligibility of Input Tax Credit (ITC) on the purchase of a 7-seater vehicle, which will be converted into an ambulance for onward supply. This article explores the details of the ruling, its implications, and the broader context of GST regulations.

Facts of the Case

Raminfo Limited has secured a work order from the Government of Tripura to supply ambulances, specifically Mobile Common Service Centres. To fulfill this order, they are procuring Maruti Suzuki Eeco (7 seater) vehicles and modifying them in their workshop located in Hyderabad, Telangana State. Seeking clarity on GST rates and ITC admissibility, Raminfo Limited filed an advance ruling before the AAR Telangana.

Issue

The primary issue at hand is whether Raminfo Limited is eligible to claim Input Tax Credit (ITC) on the purchase of Maruti Suzuki Eeco (7 seater) vehicles, which will be transformed into ambulances for onward supply to the Government of Tripura.

Held

The AAR Telangana, in its order TSAAR Order No.02/2023, concluded that Raminfo Limited is indeed eligible to avail ITC on the purchase of vehicles used for further supply. Citing Section 17(5)(a) of the CGST Act, the AAR noted that ITC on such purchases is not blocked. Therefore, Raminfo Limited can claim ITC on the tax paid for the purchased vehicles. Additionally, the AAR clarified that GST at the rate of 28% will be applicable on the supply of ambulances to the Government of Tripura.

Understanding Blocked Input Tax Credit under GST is paramount for businesses to avoid unnecessary tax liabilities and ensure compliance. By staying updated with recent rulings and clarifications, businesses can make informed decisions regarding their tax planning strategies. It’s imperative to consult with tax experts to navigate the complexities of GST laws effectively.

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Tax Refunds: A Complete Guide

editor — Mon, 22 Apr 2024 08:17:52 +0000

Navigating tax refunds can be complex, especially with the evolving regulations and legal precedents. Section 54 of the tax code serves as a guiding light, offering provisions for individuals and entities to claim refunds under specific circumstances. Let’s explore the intricacies of tax refunds, from eligibility criteria to recent case laws shaping the landscape.

Overview of Section 54

Eligibility Criteria: Section 54 allows any person to claim a refund of tax and interest within two years from the relevant date. This provision ensures that individuals have ample time to initiate refund claims, providing a reasonable timeframe for compliance.
Timeframe for Claiming Refunds: The two-year window is crucial for taxpayers, emphasizing the importance of timely action. Failure to claim refunds within this period may result in forfeiture, highlighting the need for proactive measures.

Refund Process for Registered Persons

Unutilized Input Tax Credit: Registered persons have the privilege of claiming a refund of any unutilized input tax credit at the end of any tax period. However, certain conditions must be met to qualify for such refunds, ensuring compliance with regulatory norms.
Conditions for Claiming Refunds: While the refund process offers flexibility, it is subject to specific conditions aimed at preventing misuse and ensuring fair treatment. Adhering to these conditions is essential for a smooth refund experience.

Application Process

Documentation Requirements: Applying for a refund requires thorough documentation, including supporting evidence to substantiate the claim. This step is crucial for verifying the legitimacy of refund requests and maintaining transparency in the process.
Provisional Refunds: In cases of zero-rated supply of goods or services, the proper officer may refund 90% of the total amount claimed on a provisional basis. This provision aims to provide relief to taxpayers facing financial strain pending the final settlement of refund claims.

Verification and Settlement

Verification Process: Upon receiving refund applications, authorities conduct due verification to ensure compliance with regulatory requirements. This step involves scrutinizing the documents submitted and verifying the accuracy of the information provided.
Final Settlement: The final settlement of refund claims occurs after thorough verification, culminating in the issuance of refunds to eligible applicants. This stage marks the culmination of the refund process, providing closure to taxpayers awaiting reimbursement.

Recent Case Laws

Introduction

In the case of Usha Jaiswal Vs Senior Intelligence Officer, the Calcutta High Court addressed the issue of alleged forced GST recovery and directed the petitioner to apply for a refund. This article delves into the details of the case, the court’s directives, and its implications.

Facts of the Case

The petitioner sought relief from the court, alleging that the CGST/WBGST authority collected an amount through DRC-03 by the DGGI. The respondent authority contended that to claim such a refund, the petitioner must file an application under Section 54 of the CGST Act before the relevant authority.

Issue

The primary issue before the court was whether the petitioner was entitled to a refund of the amount allegedly collected by the DGGI.

Held

The court disposed of the writ petition by granting the petitioner the liberty to file an application for refund under Section 54 of the CGST Act within ten days. The court specified that if the petitioner complies with this directive, the application would be considered within two weeks from its receipt.

The court emphasized that before making any decision on the refund, the petitioner or its authorized representatives must be provided with an opportunity for a personal hearing. Additionally, they should be allowed to rely on any judicial decisions by other courts that are relevant to the matter.

Introduction

The Madras High Court recently issued a significant ruling regarding Integrated Goods and Services Tax (IGST) refund claims. This article provides an overview of the case involving M/s. Tulip Nilgiris Exports Pvt. Ltd. and the Additional Commissioner of Central Taxes and Central Excise (Appeals), highlighting the court’s decision and its implications.

Facts of the Case

The case revolves around a refund claim related to exports conducted between July 2017 and November 2017. The petitioner, M/s. Tulip Nilgiris Exports Pvt. Ltd., a tea exporter registered under GST laws, claimed a refund for Input Tax Credit (ITC) availed during this period. The petitioner argued that the refund application, filed on January 9, 2019, fell within the two-year timeframe specified by Section 54 of the CGST Act.

Issue

The main issue before the court was whether the petitioner’s refund claim, encompassing exports from July 2017 to November 2017, was valid within the statutory timeframe.

Held

Justice Senthilkumar Ramamoorthy’s bench ruled in favor of the petitioner, stating that the refund claim was indeed within the stipulated two-year timeframe from the relevant export date. The court emphasized that Section 54 of the CGST Act allows for a two-year window for filing refund claims, with the relevant date being the date of export. Therefore, the petitioner’s claim was deemed valid.

Introduction

In a significant legal development, the Madras High Court delivered a landmark judgment in the case of Afortune Trading Research Lab LLP vs. Additional Commissioner (Appeals I). The ruling addressed critical concerns regarding the eligibility of exporters receiving payments via PayPal for Goods and Service Tax (GST) refunds.

Facts of the Case

The case centered on the rejection of the petitioner’s refund applications by GST authorities. The rejection was based on the argument that export proceeds credited in Indian Rupees through PayPal did not qualify as foreign exchange earnings under GST regulations. The petitioner, Afortune Trading Research Lab LLP, received export proceeds in US Dollars through PayPal, which were later converted to Indian Rupees after deductions by PayPal’s bankers.

Issue

The key issue at hand was the interpretation of “export of services” under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). Specifically, the dispute revolved around whether receiving payments through PayPal, with subsequent conversion to Indian Rupees, met the criteria of foreign exchange earnings for GST refunds.

Held

The Madras High Court ruled in favor of the petitioner, emphasizing that transactions conducted via PayPal complied with Foreign Exchange Management Regulations. The court noted that PayPal acted as an intermediary, and the initial receipt of payment in foreign currency fulfilled regulatory requirements. The rejection by GST authorities was overturned, affirming the petitioner’s eligibility for GST refunds.

Introduction

In a recent judicial ruling, the Madras High Court deliberated on the case involving VSM Weavess India Private Limited against the Assistant Commissioner (ST). The dispute centers on the denial of a refund of unutilized Input Tax Credit (ITC), raising significant questions regarding the interpretation of GST laws.

Facts of the Case

VSM Weavess India, a textile manufacturing company, sought an ITC refund due to the inverted duty structure. The company argued that the tax paid on raw material (viscose yarn) at 12% exceeded the tax payable on the final product (viscose fabrics) taxed at 5%. Additionally, the petitioner engaged in export sales, claiming a refund of Integrated Goods and Services Tax (IGST) for zero-rated supplies.

The respondent issued deficiency memos, citing objections to the refund claims. These objections included contentions that the petitioner, having received a refund for zero-rated exports, was ineligible for an ITC refund under Section 54 of the GST Act. Furthermore, delays in making debit entries for the refund claims were highlighted.

Issue

The central issue addressed by the court was whether the petitioner’s eligibility for an ITC refund, in light of zero-rated exports and delays in procedural aspects, was justified under the provisions of the GST Act.

Held

The Madras High Court scrutinized the deficiency memos and ruled in favor of VSM Weavess India. It emphasized that a refund for zero-rated exports does not preclude a separate claim for unutilized ITC under Section 54 of the GST Act. The court highlighted the distinct provisions allowing refunds for both scenarios.

Regarding the delays in making debit entries, the court asserted that once statutory conditions are met, delays should not hinder legitimate refund claims. Additionally, the absence of debit entries cannot override valid refund claims.

The court also acknowledged the importance of supporting documents and directed the petitioner to submit necessary documents within a stipulated timeframe for reconsideration.

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To beat the last minute rush, some taxpayers start filing ITRs early

editor — Sat, 20 Apr 2024 10:40:49 +0000

To beat the last minute rush, at least some taxpayers have started filing their income tax returns for assessment year 2024-25 after the Central Board of Direct Taxes (CBDT) enabled functionalities for commonly used income tax returns from April 1 this year.

According to data with the income tax department, as many as 119,000 income tax returns for assessment year 2024-25 had been filed by April 10 and 109,000 returns had also been verified. As many as 2,940 returns for AY24-25 had also been verified.

To help taxpayers file their returns for AY24-25, the CBDT had made ITR-1, ITR-2 and ITR-4, which are commonly used by taxpayers, available on the e-filing portal from April 1. Companies can also to file their ITRs through ITR-6 from April 1 onwards.

Experts noted that this is the latest in a series of initiatives taken by the CBDT to facilitate the tax return compliance. It had earlier started initiatives such as prefilled tax return forms, or the expeditious processing of the tax returns, or quick issue of refunds particularly to the small taxpayers.

“This will help the taxpayers, who do not expect any deduction of tax at source (TDS) in the last quarter of FY 2023-24 and are not subject to any audit, in filing their returns immediately. Such taxpayers may consider filing their returns forthwith without waiting more and getting the tax refund, if any, sooner,” an expert said.

However, the taxpayers, who expect deduction of TDS in the last quarter – which are typically, the salaried taxpayers and the taxpayers expecting interest income in the last quarter, would be required to wait till June 2024 to file their tax returns, he noted.

The due date of deposit of TDS in the government kitty for the last quarter of FY 2023-24 is April 30, 2024, and the due date of filing the TDS return for the quarter is May 31, 2024. Considering this, the TDS deducted in the last quarter may not reflect in the taxpayers’ tax credit statement (Form 26AS) before June 1, 2024. Consequently, the returns filed before this may be processed with demands and taxpayers may have to file rectifications applications / revised returns later.

He noted that corporate taxpayers would be required to wait for completion of their statutory audit, followed by tax audit (if applicable), amongst others. Non-corporate taxpayers subject to tax audit would also be required to wait, unless they are able to get the tax audit done much before the due date for the same, he further said.

Source: https://www.businesstoday.in/personal-finance/tax/story/to-beat-the-last-minute-rush-some-taxpayers-start-filing-itrs-early-425778-2024-04-16

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Tax Authorities cannot retain the tax deposited under the cancelled GST registration

editor — Wed, 10 Apr 2024 05:38:08 +0000

Introduction:

In the case of Yogesh Rajendra Mehra v. Principal Commissioner of Central Goods and Services Tax [Writ Petition No. 1632 of 2024 dated February 20, 2024], the Hon’ble Bombay High Court addressed the issue of whether tax authorities can retain tax deposited under a cancelled GST registration. The court provided significant observations and rulings on this matter.

Facts of the Case:

Mr. Yogesh Rajendra Mehra, a scriptwriter, obtained GST registration on July 19, 2018. However, his registration was cancelled on January 01, 2019, due to non-filing of subsequent returns. Subsequently, Mr. Mehra applied for and obtained a fresh GST registration on March 26, 2022. During the first quarter of 2022, his chartered accountant mistakenly deposited Rs. 1,22,220/- as tax under the cancelled registration instead of the new one. Mr. Mehra then applied for a refund of the erroneously deposited tax.

Issue:

The central issue revolves around whether tax authorities can retain tax deposited under a cancelled GST registration.

Held:

The Bombay High Court held that tax authorities cannot retain tax deposited under a cancelled GST registration. The court emphasized that taxpayers cannot be expected to file returns and deposit tax under an invalid registration number. It was noted that the tax deposited under the cancelled registration was not valid as the registration itself was non-existent. The court also criticized the tax authorities’ rejection of the refund application on technical grounds, ruling that any deficiency in filing an appeal within the prescribed limitation period does not render the appeal barred by limitation. Therefore, the court ordered the refund of the erroneously deposited tax amount of Rs. 1,22,220/- along with permissible interest to Mr. Mehra within four weeks.

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Approval of outstanding refunds must be completed by April 30, Income Tax Department.

editor — Wed, 10 Apr 2024 04:45:35 +0000

The Income Tax Department has announced a positive development for individuals awaiting their income tax refunds. They have set a firm deadline of April 30 for the approval of all pending refunds.

Since the opening of the portal for the Assessment Year 2024-25 on April 1, there has been considerable activity, with over 46,000 income tax returns filed within the initial five days. Out of these, close to 3,000 returns have already undergone processing.

The Department has devised an interim action plan for the current fiscal year, outlining specific timelines for addressing various taxpayer-related matters. Immediate attention has been directed towards the approval of pending refunds, particularly those withheld under section 241A due to potential adverse effects on revenue, following the completion of scrutiny assessments and necessary orders. Despite the issuance of refunds exceeding ₹3.36 lakh crore in the fiscal year 2023-24, complaints persist regarding pending refunds from previous fiscal years.

Officials emphasize the importance of approving all pending refunds related to e-returns filed on the Income Tax Business Application (ITBA) for all assessment years by April 30. Additionally, a deadline of June 30 has been set for resolving penalties in at least half of the cases that will become time-barred by March 31, 2025.

Furthermore, attention has been drawn to cases involving Tax Deducted at Source (TDS), with a one-month timeframe provided for disposing of all pending applications as of April 1, 2024, for NIL or lower TDS/TCS. Additionally, orders are expected to be issued by June 30 for cases where TDS surveys were conducted up to March 31, 2024.

Source: https://www.thehindubusinessline.com/economy/it-department-sets-april-30-as-deadline-for-approval-of-pending-refunds/article68042765.ece

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Entitlement to Interest Commences After Sixty Days from Refund Application Until Credited to Bank Account

editor — Sat, 06 Apr 2024 05:35:52 +0000

In a significant ruling by the Hon’ble Delhi High Court, Raghav Ventures vs. Commissioner of Delhi [W.P.(C) NO. 12209 OF 2023 dated March 01, 2024], the issue of entitlement to interest on delayed GST refunds was examined. The case sheds light on the statutory provisions and clarifications regarding the payment of interest under the Central Goods and Services Tax Act (“the CGST Act”).

Facts of the Case:

M/s Raghav Ventures ("the Petitioner") engaged in exporting mobile phones and accessories to M/s AZ Logistic, Dubai, UAE, thereby paying Integrated Goods and Services Tax ("IGST").
During the Impugned Period (December 2022, February 2023, March 2023, and May 2023), the Petitioner paid IGST totaling significant amounts i.e. Rs. 1,63,16,851/-, Rs. 50,46,889/-, Rs. 17,26,288/-, and Rs. 13,85,382/-, respectively.
The Petitioner filed refund applications for the IGST paid during the Impugned Periods in accordance with the prescribed procedure under the CGST rules.
Despite receiving acknowledgments for the refund applications, the refunds were not processed within the stipulated time frame.
The IGST refunds were eventually sanctioned and credited into the Petitioner's bank account but without any accompanying interest.
The Petitioner subsequently filed an application to the Revenue Department seeking interest on the delayed refunds.

Issue:

Whether the Petitioner is entitled to interest on the delayed refund of IGST as per statutory provisions?

Held:

The Hon’ble Delhi High Court, in the Writ Petition (C) NO. 12209 OF 2023, held the following:

Interest becomes payable under Section 56 of the CGST Act if the refund ordered under Section 54(5) is not processed within 60 days from the date of the refund application.
The payment of interest under Section 56 is a statutory provision and does not rely on any claim made by the assessee.
Circular No. 125/44/2019-GST dated November 18, 2019, clarifies that interest accrues from the date immediately after the expiry of sixty days from the date of the refund application until the amount is credited to the applicant's bank account.
Consequently, the Petitioner is entitled to statutory interest at the rate of 6% from the date following the expiry of sixty days from the date of the refund application until the refund is credited to the bank account.
The Court directed the Revenue Department to process the refund of interest and credit the same into the Petitioner's account within four weeks.

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Decision by High Court Allows Refund of Reversed ITC When Supplier Pays Tax

editor — Tue, 02 Apr 2024 04:23:57 +0000

The Delhi High Court, in the matter of Pedersen Consultants India Pvt. Ltd. v. Union of India and Ors. [W.P. (C) 1039/2024 dated March 19, 2024], resolved the writ petition, permitting registered entities to submit refund applications for reversed Input Tax Credit (ITC) when the supplier has subsequently filed returns and paid taxes.

Facts of the case:

In the matter of Pedersen Consultants India Pvt. Ltd. v. Union of India and Ors. [W.P. (C) 1039/2024 dated March 19, 2024], the petitioner, Pedersen Consultants India Pvt. Ltd., filed a writ petition. The petition sought direction for granting Input Tax Credit (ITC) benefits on invoices where the recipient had filed subsequent returns and paid taxes.
The petitioner argued that they were compelled by the Revenue Department to pay taxes on invoices where the supplier hadn't filed returns on time. However, the supplier later filed returns and paid taxes, potentially leading to double taxation. Hence, the petitioner sought a refund for the taxes paid on such invoices.
Responding to objections, the petitioner proposed filing a refund application under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act). Additionally, they cited Notification No. 13/2022 dated July 05, 2022, advocating the exclusion of the period between March 1, 2020, and February 28, 2023, from the limitation for filing refund applications. The petitioner also requested exclusion of the period between filing the writ petition and the court's order.

Held:

The Delhi High Court, in W.P. (C) 1039/2024, dismissed the writ petition, allowing the petitioner to file a refund application under Section 54 of the CGST Act. The court directed the respondent to adjudicate the petitioner's claim in accordance with the law. Notably, the court recognized the petitioner's eligibility under the Notification, excluding the period from March 1, 2020, to February 28, 2022, for computing the limitation period for filing refund applications.

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Income Tax Dept. issued Updated TDS Rate Chart for FY 24-25/Ay 25-26

editor — Thu, 28 Mar 2024 04:20:53 +0000

The Income Tax Department has published a revised TDS Rate Chart for the Financial Year 2024-25 (Assessment Year 2025-26).

You can access the complete TDS rate chart at: https://www.nyca.in/wp-content/uploads/2024/03/IT_TDS-Chart_2024-25.pdf

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Assessee is entitled to interest from the date immediately after the expiry of sixty days from the date of receipt of the GST refund application

editor — Tue, 26 Mar 2024 06:28:11 +0000

The Hon’ble Delhi High Court, in the case of Raghav Ventures vs. Commissioner of Delhi [Writ Petition (Civil) No. 12209 of 2023 dated March 01, 2024], held that the payment of 6% interest under the Section 56 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is statutory and does not depend if the claim made by the Assessee. It is automatically payable if the GST refund is not made within 60 days from the date of receipt of the application.

Facts of the case:

Raghav Ventures, referred to as “the Petitioner,” engaged in exporting mobile phones and accessories to M/s AZ Logistic, Dubai, UAE, and paid Integrated Goods and Services Tax (IGST). The normal procedure for claiming GST refunds involved submitting shipping bills, which Customs processed through ICEGATE.

In December 2022, exports amounted to Rs. 9,06,49,174/- with IGST payment of Rs. 1,63,16,851/-. In February 2023, exports totaled Rs. 2,80,38,271/- with IGST payment of Rs. 50,46,889/-. Similarly, in March 2023, exports amounted to Rs. 95,90,489/- with IGST payment of Rs. 17,26,288/-, and in May 2023, exports of mobiles and accessories worth Rs. 76,96,568/- were made, with IGST payment of Rs. 13,85,382/-.

According to Sub-Rule (2) of Rule 96 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”), export invoice details from Form GSTR-1 are electronically transmitted to Customs. Once the system confirms export, GST refunds are processed through ICEGATE under Rule 96(3) of the CGST Rules.

The Petitioner submitted GST returns in Form-GSTR-3B and refund applications for the mentioned periods via Form-GST-RFD-01. Acknowledgments were received via Form-GST-RFD-02, confirming receipt of the GST refund applications.

While the writ petition was pending, the IGST refund for the period was credited to the Petitioner’s bank account on December 4, 2023, without any interest. On December 6, 2023, the Petitioner applied to the Special Commissioner, Department of Trade & Taxes (“the Respondent”), seeking 6% interest from the refund application date until December 3, 2023.

Therefore, aggrieved by these circumstances, the present writ petition was filed, requesting the Respondent to grant the total IGST refund of Rs. 2,44,75,410/- for the tax periods of December 2022, February 2023, March 2023, and May 2023, along with interest as per Section 56 of the CGST Act.

Issue:

Does the Assessee have a statutory entitlement to interest on delayed GST refunds?

Held:

The Delhi High Court, in Writ Petition (Civil) No. 12209 of 2023, ruled as follows:

It was observed that interest payment under Section 56 of the CGST Act is mandatory and not contingent upon the Assessee's claim. It automatically becomes due if the GST refund is not issued within 60 days from the date of application receipt. Denial of GST refund based on waiving interest claims in FORM GST-RFD-01 is unjustifiable. Additionally, interest is only applicable if the refund isn't granted within 60 days from the application date, making interest payment obligatory and automatic.
It was also noted that Circular No. 125/44/2019-GST dated November 18, 2019, clarifies that interest calculation starts from the day immediately following the 60-day period from the application receipt until the amount is credited to the applicant's bank account.
The court held that the Petitioner is entitled to statutory interest at a rate of 6%, starting from the day immediately following the expiry of the 60-day period from the application receipt until the refund is credited to the Petitioner's bank account. The Respondent was instructed to process the refund of interest and credit it to the Petitioner's account within four weeks. Consequently, the petition was resolved along with the pending application.

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