SEZ Unit Can Claim Refund of Unutilised ITC Distributed by Its ISD: GSTAT Rajkot

The Goods and Services Tax Appellate Tribunal, Rajkot dismissed eight Revenue appeals against refunds to Reliance Industries’ SEZ unit, following Gujarat and Madras High Court rulings on input tax credit distributed by an ISD.

The Goods and Services Tax Appellate Tribunal (GSTAT), Rajkot has held that a unit in a Special Economic Zone (SEZ) cannot be denied a refund of unutilised input tax credit (ITC) distributed to it by its input service distributor (ISD) merely because it is not the supplier [Commissioner of CGST & Central Excise, Rajkot v. Reliance Industries Ltd., 2026-juristway.com-3418-GSTAT(Rajkot)-GST].

The Bench of Pramod Kumar Rai, Member (Judicial), and Kishori Lal, Member (Technical) decided eight Revenue appeals on the same issue for different periods. An ISD is an office that receives invoices for common services and distributes the credit to its units. The refund, claimed under the category “any other”, was rejected on 16 Aug 2022 under Rule 92(3), on the ground that Section 54(3) allows refund of unutilised ITC only for zero‑rated supplies or an inverted duty structure. The First Appellate Authority allowed it on 2 Mar 2023, applying the Gujarat High Court’s ruling in IPCA Laboratories (Special Civil Application No. 638 of 2021).

The Revenue argued that supplies to an SEZ unit are zero‑rated, that Rule 89 lets only the supplier seek refund, that IPCA Laboratories bound only its parties, and that the Britannia Industries ruling it followed was under challenge before the Supreme Court.

The Tribunal relied on Gujarat High Court rulings in IPCA Laboratories and Britannia Industries and Madras High Court rulings in Platinum Holdings, Urjita Electronics and McKinsey Global Services India Pvt. Ltd. v. Joint Commissioner (WP No. 26469 of 2026). Since no supplier can claim refund of credit distributed by an ISD, the SEZ unit’s claim could not be refused on that ground.

A judgment, it held, remains binding until stayed, and the Revenue produced no stay or contrary ruling. Circulars No. 17/17/2017‑GST and 24/24/2017‑GST only prescribed manual refund procedures and did not curtail an SEZ unit’s right.

All eight appeals were dismissed and the appellate orders affirmed.

2026-juristway.com-3418-GSTAT(Rajkot)-GST