This Tax Alert summarizes recent ruling of the Gujarat High Court (HC) [1] on refund eligibility of unutilized input tax credit (ITC) on account of exports, in case of amalgamation, where statutory provisions under Goods and Services Tax law (GST law) had not been complied with.
The key observations of the HC are:
- Under GST law, upon
amalgamation, the transferee entity is required to obtain registration
first, followed by timely cancellation of the transferor’s registration.
Any deviation from this prescribed statutory sequence creates legal
inconsistencies and complications.
- The refund of unutilized ITC is
strictly governed by statutory provisions. Such refund can be availed only
in the manner prescribed under the GST law and cannot be claimed dehors
the statutory mechanism, even in cases of amalgamation.
- Where a specific mechanism
exists for transfer of unutilized ITC through FORM GST ITC 02, the same
must be strictly adhered to. Failure to comply with this mechanism
disentitles the transferor as well as the transferee from claiming refund
of such ITC.
- Applying the doctrine of pari
delicto, the High Court noted that the action of both the entities and the
jurisdictional officer failed to strictly follow the statutory provisions
regarding registration and cancellation.
- Consequently, the entities
cannot seek the benefit of refund.
Thus, HC dismissed the writ petition and
directed Revenue to issue appropriate instructions for following the mandate of
statutory provisions in cases of amalgamation, to avoid future complications.
Comments:
- While HC has strictly construed
the 30-day time limit to cancel registration, CBIC vide Circular No.
69/43/2018-GST had clarified that 30-day deadline may be liberally
interpreted and the taxpayers’ application for cancellation of
registration may not be rejected because of the possible violation of the
deadline.
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