HC ruling could carry enter tax readability for ecommerce, meals firms

Many e-commerce and meals supply firms may get readability on non-refundable enter tax credit score below the Items and Providers Tax (GST) framework after a excessive courtroom ruling just lately mentioned that refunds ought to be obtainable even in instances the place tax fee on enter is greater than output.

Many e-commerce and meals supply gamers use uncooked supplies or enter providers which have greater GST fee however are unable to go this on to prospects both because of provided reductions or as a result of the GST relevant to prospects is decrease.

Beneath the GST framework, tax needs to be handed on to prospects. In instances of mismatch, enter tax credit score is accrued on the books. Enter tax credit score is a mechanism below GST the place tax paid on uncooked materials and enter providers may both be set off towards future tax legal responsibility.

Calcutta Excessive Court docket has held that refund arising out of inverted tax construction can’t be denied on the bottom that enter and output provides will not be completely different. The Excessive Court docket held that Part 54(3) of CGST Act is obvious because it doesn’t present for refund solely when enter and output are completely different and refund is obtainable in all instances the place tax fee on enter is greater than that of output.

“The Excessive Court docket has made a really fascinating commentary i.e. refund is permissible in respect of all courses the place the enter tax is greater than the output tax. Whereas some could argue that that is solely an obiter dicta, taxpayers specifically within the e-commerce sector, could need to take a look at this judgment to see if this can assist in getting them a refund of their blocked credit,” mentioned Harpreet Singh, Companion, Oblique taxes at KPMG in India.

Tax consultants say that whereas the excessive courtroom’s ruling was within the case of LPG, the courtroom has debated the rules of the GST framework that would assist a number of different sectors.

Within the case of e-commerce gamers a number of the enter providers they render are taxed at the next fee. Additionally, the margins of most gamers are wafer skinny, and to draw prospects additionally they dole out reductions.

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