Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India
38. Refund in case of accumulated Credit where input tax credit amount is higher than tax liability.
Section 54(3)(ii) of CGST Act provides that no refund of unutilised input tax credit shall be allowed in cases other than where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.
Issue:
A manufacturer or a service provider may have accumulated credit balances for the reason that he is availing input services which attract at higher rate of GST (say, 18% or 28%) whereas the final product or output service attracts GST rate of 18% or 28%. However, the authorities may deny refund on the ground that the provision allows refund benefits only if the input is subject to higher rate of GST and not in case where the input service attracts higher rate of GST. If a strict interpretation is taken that refund would be allowed only if the GST rate of input is higher
without considering the rate of input service, then the very object of the provision would stand defeated.
Suggestion
It is suggested that:
the word ‘inputs’ be replaced with the phrase ‘inputs and input services’
Also, the word ‘Output Supply’ be replaced with the word ‘Outward Supply’.
Read ICAI Suggestions on GST Act to Govt : July 2017
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