J&K HC issues notice to Centre, state officials over blocked IGST refunds

The Jammu & Kashmir high court has asked the Centre, the state government and tax officials to file counter-affidavits within two weeks to petitions over non-payment of Integrated Goods and Services Tax (IGST) refunds.

Else, says the court, it might provide interim relief to the petitioner companies. Seven petitions had been filed by companies that no refunds are being paid under the GST system for intra-state movement of goods, contrary to the previous rules. They contend Centre and state should pay 100 per cent IGST refund, as promised in the previous tax regime. The present rule allows only 29 per cent of IGST as refund; even this is not being paid, contend the petitioners. 

“It is ridiculous that not even a penny has been granted in some cases,” says Abhishek Rastogi, counsel for the petitioners and partner at Khaitan & Co.  

The authorities are linking the issue with personal ledger accounts (PLA). In the earlier tax regime, companies gave the cash portion of the taxes through these. In the new regime, they have to pay through TRANS forms. Since there was a systemic problem in linking of PLAs with TRANS cash forms, the companies are linking it to TRANS credit forms. 

This has been objected to by the state tax authorities. They are asking companies to reverse the PLA balance and other cash benefits. “The local authorities have gone berserk,” Rastogi argues. He says many units would become unviable if immediate relief is not granted. He said the GST Council had written to the state authorities that refunds should be granted but this is not taking place. 

An order in this case might have implications for Himachal Pradesh, Uttarakhand and Sikkim which also have incentive schemes. J&K’s industrial policy of 2002 promised 100 per cent refund on excise duty paid for 10 years to companies setting up manufacturing units in the state. This was then reduced to 75 per cent, against which petitions were filed in courts. The case is pending in the Supreme Court. Under the GST regime, refunds for intra-state movement of goods were reduced to 29 per cent of the Integrated GST paid.