In Brief
The Supreme Court held that the Central Goods and Services Tax Rules 2017 Rule 89(5), which restricts refund of unutilised input tax credit to input goods and excludes input services, is validly within the terms of Section 54(3) of the Central Goods and Services Tax Act 2017. The Court interpreted the first proviso to Section 54(3) as a substantive restriction limiting refund to cases where credit accumulates due to input goods being taxed at higher rates than output supplies. The expression 'inputs' means input goods only, not input services. While acknowledging certain anomalies in the formula that may warrant GST Council reconsideration, the Court rejected challenges on constitutional and ultra vires grounds, emphasising Parliament's wide latitude in fiscal legislation to classify and differentiate.
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