Delhi HC holds Tax Research Unit of the Department of Revenue lacks authority to issue GST circulars

This Tax Alert summarizes a recent ruling of the Delhi High Court (HC) [1]. The issue involved was whether the Tax Research Unit (TRU) under the Department of Revenue, Ministry of Finance, is authorized to issue circulars under the Goods and Services Tax (GST) law.

Taxpayer in the present case was aggrieved by Circular No. 80/54/2018-GST dated 31 December 2018 issued by TRU to the extent it purports to clarify that polypropylene woven and non-woven bags are classifiable as “plastic bags” under Tariff Heading 3923.

It preferred a writ petition before the HC challenging the authority and jurisdiction of TRU to issue such clarification.

Taxpayer contended that as per Section 168(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), the power to issue orders, instructions or directions to Central Tax Officers stands vested exclusively in the Central Board of Indirect Taxes and Customs (CBIC) and no such power stands conferred upon the TRU.

HC concurred with the views of the taxpayer and observed that there are no provisions under the CGST Act in terms of which TRU could be said to have been clothed with the authority or jurisdiction to render a clarification with respect to classification of goods and articles.

Accordingly, HC quashed the Circular. However, the issue of classification was left open for consideration of the competent authority in appropriate proceedings.

Comments:

Circulars issued by TRU which are unfavorable to the industry may be challenged basis above judgement.

[1]  TS-581-HC(DEL)-2023-GST