Business Closure And Unutilized ITC – Is It A Rightful Refund?

The taxpayers often hesitate to shut down the business operations since the input tax credit ('ITC') sitting in the credit ledger is often considered as a sunk cost. Instead, they tend to pursue alternative feasible legal solutions and processes, which could drag for months and may ultimately yield limited or no results.

The recent Sikkim High Court verdict in SICPA India Private Limited and Another v. Union of India and others [WP(C) No.54 of 2023] seems to have opened an avenue for such taxpayers by allowing refund of unutilized ITC in such cases. This Article emphasizes the impact of this ruling on business decisions of scaling down the business operations along with the soundness of the decision.