In re Saket International (GST AAR Gujarat)
Gujarat Authority for Advance Ruling (AAR) has refused to issue a ruling on a question concerning the restriction of Input Tax Credit (ITC) refund related to outward supplies where a specific notified product is used as an input. The authority held that the question raised by the applicant falls outside the defined scope of matters on which an advance ruling can be sought under the Goods and Services Tax (GST) law.
M/s. Saket International, a firm based in Rajkot engaged in the supply of clay, had approached the AAR seeking clarification on the admissibility of refund of accumulated ITC. The applicant stated that their principal outward supply is clay, which is subject to GST at the rate of 5 percent. For producing this outward supply, they utilize various inward supplies, including Clay/Felspar/Slary Powder taxed at 5 percent, Soda ash/Sodium meta silicate taxed at 18 percent, and Coal taxed at 5 percent.
The core of the applicant’s query stemmed from certain notifications issued under the GST regime concerning the refund of unutilized ITC that accumulates due to an inverted duty structure – a situation where the rate of tax on inputs is higher than the rate of tax on outward supplies. The applicant specifically referred to Notification No. 5/2017-Central Tax (Rate) dated June 28, 2017, read with Notification No. 9/2022-Central Tax (Rate) dated July 13, 2022. These notifications outline scenarios where refund of accumulated ITC is restricted. The applicant noted that coal is one of the products specified in these notifications for which no refund of unutilized ITC is allowed if the credit accumulation is on account of the input tax rate being higher than the output tax rate on the supply of goods (excluding nil-rated or fully exempted supplies).
