Bombay HC Asserts State GST Dept. Lacks Authority to Retain Tax on Export Transactions

In a significant ruling, the Bombay High Court has pronounced that the authorities responsible for the collection of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) lack the legal authority to withhold tax amounts pertaining to export transactions.

The honorable bench, comprising Justice G. S. Kulkarni and Justice Jitendra S. Jain, has issued a directive to the state government, instructing them to transfer said tax amounts to the Central Government.

The petitioner, in this case, had been obliged to remit tax for the particular export transaction to the authorities functioning under the CGST Act and/or the SGST Act. However, the petitioner firmly maintained that these authorities did not possess the jurisdiction to levy any tax on the export of services.

Consequently, the petitioner submitted applications for tax refunds to the CGST, SGST, and other relevant authorities. Unfortunately, these refund applications were subsequently dismissed through orders issued on October 15, 2020, and November 27, 2020, respectively.

In response, the court has ruled that the tax amount deposited by the petitioner, along with the applicable statutory interest, must be transferred by the state authorities to the Central Authority, which possesses jurisdiction in accordance with the Integrated Goods and Services Tax (IGST) Act.

Moreover, the court has invalidated the order issued by the Deputy Commissioner of Sales Tax, which denied the petitioner's refund application.

The recent landmark ruling by the Bombay High Court has established that CGST/MGST authorities lack jurisdiction to retain tax amounts on export transactions. In a directive to the state government, the court ordered the transfer of the tax amount to the Central Government, affirming the petitioner's position that no tax should be imposed on the export of services. This decision not only protects the rights of taxpayers but also sets a significant precedent for future cases, ensuring clarity and fairness in the interpretation and application of tax laws.(alert-success)