GST Update

 Desk of CA. Praveen Sharma – 858 Series (CAPS) 

The Gujarat High Court (Justice Pranav Trivedi) recently delivered an important judgment on SEZ refund of IGST ITC.

The petitioner, an SEZ unit engaged in manufacturing and exporting medicines from Dahej, challenged an order dated 18.02.2025 that denied its refund claim under Section 54(3) of the CGST Act and Rule 89(4) of the CGST Rules. The SEZ had received input services through its ISD, on which IGST was paid. Since its supplies were zero-rated, the accumulated ITC remained unutilized, prompting refund applications for FY 2023–24.

The Assistant Commissioner initially sanctioned the refund, later issuing corrigendums based on the Britannia Industries Ltd. v. Union of India ruling, which recognized SEZ units’ right to claim ISD-distributed ITC refunds. However, the Commissioner (CGST) appealed, arguing that only suppliers—not SEZ recipients—could seek such refunds under Sections 16(3) of the IGST Act and 54(3) of the CGST Act. The Appellate Authority accepted this and reversed the refund orders.

The High Court noted that Britannia Industries had already settled the issue—SEZ units can claim refunds of ISD-distributed ITC as no other entity is eligible to do so. Following this binding precedent, the Court quashed the appellate order and directed the authorities to process the refund within three months.

Link: CA. Praveen Sharma on Linkedin

Regards
CAPS