Higher GST on Packing Materials Entitles Tea Supplier to Inverted Duty Refund: GSTAT Kolkata

Pr. Commissioner CGST & CX Vs Dalmia Tea Packaging Private Ltd. (GSTAT Kolkata)

Summary: The GST Appellate Tribunal, Kolkata Bench dismissed the Revenue’s appeal and upheld the respondent’s entitlement to refund of accumulated Input Tax Credit under Section 54(3)(ii) of the CGST Act arising from the higher GST rates applicable to packing materials used for packaged tea. M/s Dalmia Tea Packaging Private Limited purchased bulk tea taxable at 5% and packing materials such as plastics, cartons and jars taxable at 12% or 18%, while its output supply of packaged tea attracted GST at 5%. The respondent had claimed refund of Rs.19,99,283 for the period 01.05.2020 to 30.06.2020, against which the original authority sanctioned Rs.16,80,024.

The Revenue contended that refund under Section 54(3)(ii) of the CGST Act, 2017 was unavailable because the principal input and output were both tea taxable at 5%. It also relied upon Circular No. 135/5/2020-GST dated 31.03.2020 and Circular No. 173/05/2022-GST dated 06.07.2022. According to the Revenue, the higher rate applicable only to packing materials could not justify an inverted-duty refund.

The respondent argued that its inputs were not confined to bulk tea. Packing materials were also inputs within Section 2(59), packaging was integral to the supply of packaged tea, and those materials attracted higher rates of GST. It relied upon Circular No. 79/53/2018-GST dated 31.12.2018, which recognises packing materials as eligible inputs. The respondent further submitted that Circular No. 135/5/2020-GST dealt with accumulation resulting from a reduction in the GST rate on the same goods and therefore did not govern the present situation.