The Karnataka High Court’s ruling in the South Indian Oil Corporation case is expected to provide relief to businesses seeking GST refunds. According to experts, the judgment could benefit sectors such as edible oils, textiles, packaging-intensive fast-moving consumer goods businesses, and electronics, where accumulation of Input Tax Credit (ITC) is common. This is largely due to a rate mismatch, as GST on inputs such as containers, seals, labels and consumables is often higher than the GST rate on the output product.
Tax experts said that the judgment reiterated that refund claims could not be denied merely because the principal input and output supplies were the same — a ground frequently used by the tax authorities.
In an order dated December 12, 2025, the Karnataka High Court set aside refund rejection orders against South Indian Oil Corporation and directed the GST authorities to grant refund of the unutilised ITC. The court held that Section 54(3)(ii) of the Central GST (CGST) Act does not prohibit inverted duty structure (IDS) refund merely because the input and output goods were identical. The detailed order was released recently.
