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Supreme Court: Inverted duty refund not admissible for input services

Supreme Court: Inverted duty refund not admissible for input services

Referring to the anomalies pointed out by assessees in computation of input tax credit in value chains involving inverted tax structures, the Supreme Court on Monday urged the Goods and Service Tax (GST) Council to reconsider the relevant formula and take a policy decision on the matter.

However, the SC upheld the Madras HC judgement in favour of Central GST (CGST) rules that inverted duty refund is admissible only with respect to inputs for goods and not for input services. The top court also set aside the Gujarat HC judgement which declared that Rule 89(5) of CGST Rules as ultra vires Section 54(3), for restricting the refund only to input goods.

The GST Council, which will meet on September 17, will likely discuss the inverted duty structure. Inverted duty structure arises in products such as footwear and ready made garments due to higher taxes on input and lower rates on final products.

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