Top Stories Madras HC Directs to Allow Refund of Wrongly Paid GST under RCM, treating it as supply of “service” [Read Order] It was observed that activity of granting of liquor license is neither a supply of service nor supply of goods so as to attract the levy of tax under Section 9(3) of the respective GST enactments By Yogitha S. Yogesh – On February 19, 2025 2:40 pm – 3 mins read In a recent case, the High Court of Madras has directed to allow refund of wrongly paid Goods and service tax ( GST ) under the Reverse Charge Mechanism ( RCM ) treating it as supply of service. M/s.United Breweries Limited,the petitioner challenged the Impugned Order-in-Appeal No.03/2021 dated 21.01.2020 passed by the 1st respondent Joint Commissioner of GST & CE (Appeals II).

The petitioner is engaged in the manufacture and sale of “Beer” from its Brewery.  As is required under the Excise Policy of the State Government, the petitioner has to affix “holographic stickers” on every bottle of Beer which is sold in the retail market through TASMAC.  It is intended to ensure that no spurious liquor is sold in the market. It also indicates payment of State Excise on every bottle of Beer sold by the petitioner. Want a deeper insight into the Income Tax Bill, 2025? Click here The 2nd respondent as the Original Authority had earlier rejected the refund claims of the petitioner.

It is the case of the petitioner that the “holographic stickers” purchased by the petitioner from the Prohibition and Excise Department was supply of goods and not service and therefore not liable to tax in terms of Notification No.13/2017 Central  Tax (Rate) dated 28.06.2017.  It is further submitted that service by way of grant of alcoholic liquor licence, against consideration in the form of license fee or application fee or by whatever name it is called by the State Government in which it is engaged as public authorities shall be treated neither as a supply of goods nor a supply of service in terms of Notification No.25/2019 – Central Tax (Rate) dated 30.09.2019.

It is therefore submitted that the petitioner was entitled to refund of the amount paid on tax on Reverse Charge Basis under Notification No.13/2017 Central Tax (Rate) dated 28.06.2017.   Want a deeper insight into the Income Tax Bill, 2025? Click here As per Section 7(2) of the respective GST enactments, certainactivities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities shall be treated neither as a supply of goods nor supply of services. It has to be notified by the Government on the recommendation of the GST Council.

The GST Council in its 37th GST Meeting held on 28th September 2019 had belatedly issued a clarification at Sl.No.8, pursuant to which Government had also issued Notification No.25/2019 – Central Tax (Rate) dated 30.09.2019, whereby in the exercise of powers under Section 7(2) of the respective GST Enactments of 2017, the Government had notified certain activities / transactions undertaken by the Central Government, State Government, Union Territory and Local Authority in which they are engaged as public authorities to be treated as neither supply of goods nor services for payment of GST.  Want a deeper insight into the Income Tax Bill, 2025? Click here A single bench of Justice C.Saravanan observed that activity of granting of liquor license is neither a supply of service nor supply of goods so as to attract the levy of tax under Section 9(3) of the respective GST enactments.

It was submitted that the tax that was paid on Reverse Charge Basis (RCB) pursuant to Notification No.13/2017 Central Tax (Rate) dated 28.06.2017 was a mistake and therefore the petitioner was entitled to refund under Section 54 of the respective GST enactment of 2017. It was held that “If the petitioner has paid tax on Reverse Charge Basis (RCB) by mistake, it is entitled to claim refund under Section 54 of the respective GST enactments.”  The court directred the 2nd respondent to process the refund claims of the petitioner and refund the amounts paid by the petitioner, strictly in accordance with Section 54 of the respective GST Acts read with Rule 89 of the respective GST rules in the light of the above observations, within a period of 3 months from the date of receipt of a copy of this order.  To Read the full text of the Order CLICK HE