India: Refund claims of GST by “special economic zone” unit

High Court of Judicature at Madras decision

High Court of Judicature at Madras decision

The High Court of Judicature at Madras issued a decision allowing a taxpayer—a “special economic zone” unit—to claim a refund of goods and services tax (GST) paid on the procurement of inputs and input services.  


  • Supplies provided to the taxpayer—an SEZ unit—were zero-rated. However, certain zero-rated supplies were made to the taxpayer and the invoice included central GST, state GST, and integrated GST. Even though it was not obligated to pay the invoiced GST, the taxpayer paid the invoices in full (and the GST on what were the zero-rated supplies).
  • The taxpayer filed claims for refund of the amounts of GST that were remitted.
  • The adjudicating authority denied the refund claims on the basis that only a supplier can claim a refund (and not the SEZ unit, or in this case, the taxpayer). The decision was upheld by the appellate authority.

High Court decision

The Madras High Court held for the taxpayer and concluded that:

  • Provisions of section 54 of the central GST law apply to “any person” who claims a refund, and the language of this provision is clear and impose no restrictions.
  • The language of Rule 89 echoes that of section 54, in that both use the phrase “any person.”
  • The second proviso refers to a supplier of an SEZ, which is only one kind of entity that may make an application under Rule 89; this does not exclude other applicants.

KPMG observation

This decision may resolve refund claims or refund litigation initiated by SEZ units; however, it is uncertain whether the government will appeal the decision to the Supreme Court.

Read an October 2021 report [PDF 311 KB] prepared by the KPMG member firm in India


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