Unutilized ITC on input services cannot be claimed as refund under inverted duty structure option

• Writ petitions filed (Tvl. Transtonnelstroy Afcons Joint Venture & Oth. Vs. Union of India- W.P No.8596 of 2019 Batch etc. & Oth.) against restriction imposed by Rule 89(5) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) on claiming refund of unutilised input tax credit (‘ITC’) on input services under inverted rate structure scheme are dismissed by the Hon’ble Madras High Court
• The Hon’ble High Court held that Section 54(3)(ii) of CGST Act does not violate Article 14 of the Constitution of India. Also, it is held that the extension of the benefit of refund only to the unutilised ITC that accumulates on account of input goods thereby excluding unutilised ITC accumulated on account of input services in case of inverted rate structure is valid.
• Contrary to the above judgment, the Hon’ble Gujarat High Court in the case of VKC Footsteps India (P.) Ltd. [2020] held that denial of refund on 'Input Services' as per Rule 89(5) of the CGST Rules under Inverted Duty Structure Scheme is ultra vires to Section 54 (3) of the CGST Act.

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