Flipkart Wins Big: Karnataka HC Orders ₹16.11 Cr ITC Pre-Deposit Made Before 2020 to Be Refunded in Cash with Interest [Read Order]

In a recent ruling, the Karnataka High Court held that Flipkart is entitled to a cash refund of Rs. 16.11 crore, which it had deposited using Input Tax Credit (ITC) as a pre-deposit before the year 2020. The court also ordered to pay interest on the entire pre-deposit amount of Rs. 23.01 crore from the date of deposit until the date of refund.

Flipkart India Private Limited had challenged the refusal of the Commercial Tax Department to refund 70% of the pre-deposit amount, which it had paid using ITC in July 2019 while filing appeals under the Karnataka Value Added Tax (KVAT)Act.

Although the appellate proceedings were decided in Flipkart’s favour, and the department refunded the 30% cash component, it withheld the ITC portion, stating that such payments could not be refunded in cash.

The company’s counsel argued that both the cash and ITC components of the pre-deposit were made under statutory requirement to file an appeal, and once the liability was set aside by the tribunal and affirmed by the High Court, the entire pre-deposit became refundable. They further argued that the refund must be paid in cash, as provided under Sections 142(7)(b) and 142(8)(b) of the Karnataka Goods and Services Tax (KGST) Act.

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The government counsel argued that only the amount paid in cash could be refunded in cash, and that the ITC portion, if refundable, should be re-credited to the electronic credit ledger. They also argued that the petitioner had not filed any application seeking re-credit of ITC, and that the refund in cash was not permissible.

The bench comprising Justice S.R. Krishna Kumar observed that the relevant provisions of the KGST Act clearly provide for refund in cash where amounts become payable to the taxpayer after appeal or adjudication. The court explained that Section 142(7)(b) and Section 142(8)(b) specifically state that such refunds must be paid in cash, without making any distinction between payments made through cash or ITC.

The court pointed out that the department had accepted the ITC-based pre-deposit without any objection at the time of appeal and cannot now deny refund on that ground. The court also observed that Rule 92(1A) of the KGST Rules, which allows refund of ITC through re-credit to the ledger, came into effect only in March 2020 and does not apply to Flipkart’s payment made in July 2019.

The court held that Flipkart is entitled to receive Rs. 16.11 crore in cash for the ITC portion of the pre-deposit, along with interest on the total amount of ₹23.01 crore from the date of deposit until the date of refund.

The court directed the respondents to refund the amount and interest in cash within six weeks from the date of receipt of the order. The writ petition was accordingly allowed.

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