On September 13, 2021, a Division Bench of the Supreme Court in the case of, Union of India v. VKC Footsteps India Private Limited, [Civil Appeal No. 4810 of 2021] has upheld the validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 (‘the CGST Rules’), thereby disallowing the refund of ‘input services’ under inverted duty structure. Consequently, the earlier judgment of the Gujarat High Court reported in case of VKC Footsteps India Private Limited v. Union of India, [R/ Special Civil Application No. 2792 of 2019], which had held that Rule 89(5) of the CGST Rules is ultra-vires Section 54 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), has been overruled and the decision of the Madras High Court reported in the case of, Transtonnelstroy Afcons Joint Venture v. Union of India, [WP No. 8596 of 2019), disallowing the refund of input services, has been affirmed.
The Supreme Court vide its afore-mentioned judgment, has thus, observed and held as follows:
With due respect to the aforesaid decision of the Apex Court, the issue that, Section 54(3) of the CGST Act read with Rule 89(5) of the CGST Rules places manufacturer/ traders at an advantageous position vis-à-vis the service provider and therefore, the same being in violation of Article 14 and Article 19(1)(g) of the Constitution of India, have not been argued before the Court. Hence, in our view, the refund provisions have not attained finality and are liable to be tested again before the Apex Court.
Please find attached a copy of the judgment.
This update has been contributed by Ajay Sanwaria (Counsel) and Shreya Mundhra (Senior Associate).
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