Dilemma of Inverted Duty Refund – The Road Not Taken!

by | Sep 24, 2021 | Articles

NITYA Tax Associates is proud to present their recent write-up in the ‘Article’ series on trending Indirect Tax issues. A gist of the next article in the series is as under:

Article 77 – “Dilemma of Inverted Duty Refund – The Road Not Taken!”

GST was introduced with the objective of eliminating cascading effects of multiple taxes and other complexities of the earlier regime. However, while addressing many complexities of earlier regime, it did not fully address challenge of accumulation of ITC on account of ‘Inverted Duty Structure’. The issue snowballed into divergent judgments of the Gujarat and the Madras High Courts. The taxpayers challenged the exclusion of input services from purview of ‘Inverted Duty Structure’ refunds before multiple High Courts. All these cases went to the Supreme Court which has settled this issue recently in case of UOI v. VKC Footsteps India Private Limited, 2021-VIL-81 -SC. The Apex Court, whilst acknowledging the anomalies prevalent in the formula, has concluded that refund is admissible only on inputs and not input services and upheld the provisions of GST Law.

In a year marred with volatility in trade and rising costs, this issue has prominence for industry as significant funds remain blocked through accumulated ITC. Through this article, Our Managing Partner, Mr. Puneet Bansal, Senior Associate, Ms. Anshika Agarwal and Associate, Ms. Swati Goyal have examined the ruling in detail whilst also analyzing arguments put forth by the Taxpayer and Department.

Please click on the below link to read our latest article titled Dilemma of Inverted Duty Refund – The Road Not Taken!”.

NITYA | Dilemma of Inverted Duty Refund – The Road Not Taken! | Indirect Tax | Article 77