GST rate rationalisation aims to simplify compliance and reduce disputes—but for businesses, it presents a pressing challenge: stranded Input Tax Credits under the inverted duty structure.
Here's What You Need to Know –
‣ Practical Concern – Inventory procured at higher GST rates risks creating unutilised ITC, disrupting cash flows & pricing
‣ Legal Framework – Section 54(3) allows refunds in IDS cases, but only for input goods, not services or capital goods
‣ Judicial Relief – Courts have clarified the retrospective benefit of the amended refund formula and struck down arbitrary restrictions
‣ CBIC Guidance – Circulars have evolved, shifting from outright denial to nuanced acceptance of IDS refund claims
‣ Way Forward – Transitional relief measures are needed so GST reforms don't create fresh litigation or working capital blockages
