Refund of unutilised ITC on business discontinuance allowed, citing no express legal prohibition and affirmed that tax cannot be retained without authority of law – Sikkim High Court

In brief

n a recent judgement¹, the Sikkim High Court allowed refund of accumulated input tax credit (ITC) lying in the Electronic Credit Ledger of the petitioner, upon discontinuance of its business. The court relied on the Karnataka High Court decision on a similar case in the erstwhile regime in the case of Slovak India Trading Co. Pvt. Ltd.² and held that there is no express prohibition in section 49(6) read with section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) for claiming a refund of ITC upon discontinuance of business. It also acknowledged that although section 54(3) of the CGST Act deals only with two scenarios where refund is available, the statute does not provide for retention of tax without the authority of law.