SC upheld the validity of Rule 89(5) of CGST Rules i.e. Refund under Inverted Duty Structure restricted to Inputs only

Last updated: 14 September 2021

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The Supreme Court has upheld the validity of Rule 89(5) of the CGST Rules, which restricts refunds under the inverted duty structure to inputs only, excluding input services. This decision overturns the Gujarat High Court's ruling and affirms the Madras High Court's view. The Court acknowledged potential anomalies in the formula but stated that these do not invalidate the fiscal rule, which was framed under delegated legislation powers.

Court :
Supreme Court of India

Brief :
In the Union of India & Ors. v. VKC Footsteps India Pvt Ltd. [Civil Appeal No 4810, 4809, 4811, 4807, 4767, 4804, 4806, 4802, 4783, 4775-4781, 4769-4774, 4805, 4808, 4764-4765 of 2021 and Writ Petition (C) 489 of 2021 dated September 13, 2021], the current writ petition was filed following divergence in the rulings provided in VKC Footsteps India Pvt. Ltd. v. Union of India [R/ Special Civil Application No 2792 of 2019] and Tvl. Transtonnelstroy Afcons Joint Venture v. Union of India [Writ Petition Nos 8596, 8597, 8602, 8603, 8605 and 8608 of 2019] wherein validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules") was challenged.

Citation :
Writ Petition Nos 8596, 8597, 8602, 8603, 8605 and 8608 of 2019

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