India: Supplier entitled to refund of accumulated input tax credit under inverted tax structure (high court decision)

A high court decision concerning refund of accumulated input tax credit under inverted tax structure

A high court decision concerning refund of accumulated input tax credit

The Rajasthan High Court held that a taxpayer who supplied goods at a concessional goods and services tax (GST) rate to a company granted exclusive rights by the Indian government to carry out petroleum operations was entitled to a refund of accumulated input tax credit under the inverted tax structure.

The case is: Baker Hughes Asia Pacific Limited v. Union of India & Ors

Relying on Circular No. 135/05/2020—GST (31 March 2020), the tax authority denied the taxpayer’s refund claim on the ground that a refund under the inverted tax structure is not available when the input and output supplies are the same—leading to no value addition on the goods supplied.

The court held that Circular No. 135/05/2020 was a subordinate legislation in conflict with the parent legislation and thus could not be applied to deny the taxpayer’s refund claim. Moreover, the taxpayer’s refund claim related to a period prior to the issuance of Circular No. 135/05/2020 and thus the tax authority’s reliance on the circular in this case was invalid.

Read a July 2022 report [PDF 442 KB] prepared by the KPMG member firm in India


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