GST ITC on Stereo Systems Used in E‑Rickshaws Eligible for Refund u/s 54 of GST Act: Calcutta HC [Read Order]

In a recent ruling the Calcutta High Court has clarified that stereo systems used in e‑rickshaw manufacturing qualify as “inputs” under the GST framework and are eligible for refund of unutilised Input Tax Credit (ITC) under Section 54(3)(ii) of the GST Act, 2017.

Hooghly Motors Pvt. Ltd., the petitioners, had sought a refund of ₹8.94 lakh ITC accumulated on account of an inverted duty structure. The adjudicating authority rejected the claim in October 2023, holding that stereo systems were not “inputs” in the manufacturing process. The appellate authority upheld this decision in December 2024. Aggrieved, by this the company filed a writ petition before the High Court.

The Counsel for the petitioner contended that in May 2024, another appellate authority had allowed refund in an identical situation, recognizing stereo systems as inputs used in the course of business. The inconsistency between the two appellate orders formed the crux of the dispute.

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During the hearing, the State’s counsel produced instructions from the Additional Commissioner of Commercial Taxes (Law), dated July 1, 2025. The departmental clarification explicitly stated: “ITC involved in purchase of ‘stereo system’ to be used in e‑rickshaw would be eligible for refund vide clause (ii) of first proviso to sub‑section (3) of Section 54 of the GST Act, 2017.” The note stressed that inputs must be understood broadly from the perspective of business, not restricted to raw materials in the manufacturing process.

The Court examined Section 2(59) of the GST Act, which defines “input” as any goods other than capital goods used or intended to be used in the course or furtherance of business. It also referred to Section 2(17), which expansively defines “business” to include activities incidental or ancillary to primary functions. Based on these provisions, the Court held that stereo systems installed in e‑rickshaws clearly fall within the ambit of inputs.

Justice Om Narayan Rai observed that the rejection of the refund by the adjudicating and appellate authorities was unsustainable in light of the statutory definitions and departmental clarification. He noted that once the Revenue itself had admitted the eligibility of stereo systems as inputs, nothing further remained to be adjudicated.

Accordingly, the Court set aside the appellate order dated December 12, 2024, and directed the respondents to verify records and refund the eligible amount to the petitioner within six weeks.

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