免税通知を適用し軽減税率で外向き供給に対して支払われたGST| 蓄積されたITCは「逆転税率構造」の下では還付不可

Decided by Hon’ble Commissioner (Appeals) CGST, Jaipur

In the matter of M/S ATCG INDIA VERSUS ASSISTANT COMMISSIONER , CENTRAL GOODSAND SERVICE TAX DIVISION- C, BHIWADI (109 & 110 (JPM)/CGST/JPR/2020)

M/s ATCG India (“The Appellant”) is engaged in trading business of Scientific and Technical Instruments, Apparatus, Equipments etc.. The Appellant procured such goods by paying GST @ 18%. However, the appellant sold such goods to Public Funded Research Institute @ 5% by claiming benefit of exemption notification. The appellant claimed refund of ITC accumulated under “Inverted Duty Structure”, i.e., GST rate on Input is higher than GST rate on output.

The Appellant contended that goods under questions are qualified as “Input” and also Section 54(3) of CGST Act places no restrictions on granting refund to trading concerns. 

The Hon’ble Commissioner Appeals held that in the given case. goods are supplied as such without carrying out any further processing and without any value addition. GST on outward supply is paid at reduced rate by claiming benefit of exemption notification. Therefore, ITC got accumulated as GST rate on outward supply was less than GST rate on inward supply. However, such accumulated ITC is not eligible for refund under section 54(3)(ii) of CGST Act, 2017  as such goods can not be treated as Inputs and does not qualify the criteria prescribed under Inverted rated duty structure as provided under Section 54 (3) (ii) of CGST Act, 2017.

1. Facts of the Case

1. M/s ATCG India (“The appellant”) is a registered person under GST and engaged in trading business of Scientific and Technical Instruments, Apparatus, Equipment etc. 

2. GST is applicable on such goods at the rate of 18%. 

3. The Appellant procure such goods from various suppliers by paying GST @ 18% and further sales the same without even changing packing to various Public Funded Research Institutes and other purchasers. 

4. Goods are sold to other purchasers by paying GST @ 18%. 

5. However, supply is made to research institutes by paying GST @ 5% by availing benefits of exemptions under Notification No.47/2017-IGST(rate) dated 14.11.2017 and 45/2017-CGST(rate)dated 14.11.2017.

6. Supplies made at reduced rate resulted in accumulation of ITC.
7. The appellant filed an application under Section 54(3)(ii) of CGST Act, 2017 for refund of ITC accumulated on account of rate of tax on input being higher than rate of tax on outward supplies.

8. However, the respondent rejected the refund claim on ground that such goods are not covered under definition of “Input” under section 2(59) of CGST Act, 2017.

9. Therefore, The appellant filed ann appeal against the impugned order.

2. Legal Extract

Relevant extract of the CGST Act is reiterate below:

1. Definition of Input as per Section 2(59) of CGST Act, 2017 is as follows:

““Inputs” as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business”

2. Definition of Goods as per Section 2(52) of CGST Act, 2017 is reiterated below:

““Goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;“

3. Relevant extract of Section 54-Refund of Tax is reiterated below:

“(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: 

Provided that no refund of unutilised input tax credit shall be allowed in cases other than–– 

….

(ii) 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: 

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: 

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”

3. Contention of the applicant

The applicant filed the appeal on following grounds:

1. As per plain reading of definition of “Inputs”, goods used by appellant falls under definition of “Input” as the same are not capital goods and have been used for the purpose of furtherance of business. 

2. Contention of the respondent that goods can’t be held as “Inputs” as they are removed as such is not correct. No such explanation is given in the definition of “Inputs”.

3. Further, Following conditions are required to be satisfied to qualify any goods as “Inputs”:
   • It should be Goods other than capital goods and
   • Same should be used in course or furtherance of business.

4. All kinds of movable property excluding security and money are considered as Goods. Therefore, in the given case, Scientific and Technical Instruments, Apparatus, Equipment are goods.

5. The appellant has procured goods to sell them to their customer to earn profit or for the purpose of commerce. Therefore, this activity is included in the definition of business.

6. As per Section 54(3) of the CGST Act, 2017, refund of Input Tax Credit shall be allowed only if ITC is 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). There is no limitation for granting refund to trading concerns.

7. Refund under Section 54(3) shall not be granted in either of the following situations:
   • When goods exported out of India are subject to Export Duty or
   • If the exporter has claimed either drawback or refund of IGST

8. As neither of the above mentioned cases is applicable and also goods are sold at reduced rate because of notification issued by the government itself. Therefore, denial of ITC is bad in law.

4. Contention of the respondent

The adjudicating authority found that the appellant has sold such goods to various institutions by paying GST @ 5% without even repacking it.

The adjudicating Authority contended that since goods are sold as such without even changing packing, therefore, condition given under section 53(3)(ii) that refund of accumulated credit (ITC) on account of rate of tax on input being higher than the rate of tax on output supplies is not satisfied as such goods are not covered under the definition of input as defined under Section 2(59) of the CGST Act, 2017 for the outward supplies.

5. Finding by Hon’ble Commissioner (Appeals):

国税不服審判所長（控訴審）は次のように判断しました：

1. 控訴人は商社として活動しており、通知No.47/2017-IGST（税率、2017年11月14日付）およびNo.45/2017-CGST（税率、2017年11月14日付）に基づく免税措置を適用し、公的資金による研究機関に対して5%の軽減税率で商品を供給しています。同一商品は、他の購入者に対しては18%のGSTを課して供給されています。

2. また、控訴人は当該商品に対して、検品、試験、検査といったいかなる追加工程も行っておらず、商品に対する付加価値の創出もありません。

3. したがって、当該商品は「インプット（投入物）」とはみなされず、2017年CGST法第54条(3)(ii)に規定される逆転税率構造の要件を満たしません。

以上の理由により、控訴を棄却します。