Rule 89(4)(c) is ultra-vires to the provisions of GST law and held unconstitutional

Last updated: 03 April 2023

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The Karnataka High Court has ruled that Rule 89(4)(c) of the Central Goods and Service Tax Rules, 2017, is unconstitutional and invalid. This rule restricted refunds for exports made without payment of tax (using a Letter of Undertaking) to 1.5 times the value of similar goods sold domestically. The court found this restriction to be arbitrary, vague, and in conflict with the parent GST legislation, which aims to make exports tax-free. Consequently, the court directed the authorities to accept the refund claims of the petitioner.

Court :
Karnataka High Court

Brief :
The Hon'ble Karnataka High Court in M/s. Tonbo Imaging India Pvt Ltd v. Union of India [W.P.C No. 13185 of 2020] (T-RES) dated February 16, 2023] has held that, Rule 89 (4)(c) of the Central Goods and Service Tax Rules, 2017 ("the CGST Rules") which restricts the exports made without payment of tax (i.e., under Letter of Undertaking model ("LUT Model")) to 1.5 times value of like goods supplied domestically is unconstitutional and ultra vires of the provisions of the GST law.

Citation :
W.P.C No. 13185 of 2020

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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