Supreme Court Upholds ₹2.9 Crore SAIL GST Refund for Unutilised ITC

(INDIA) — The Supreme Court of India on February 2, 2026, shut down Jharkhand’s attempt to block a ₹2.9 crore refund to Steel Authority of India Limited (SAIL), drawing a bright line between a “normal” GST refund and a refund that flows automatically after a successful appeal.

For many taxpayers, including NRIs who run India-facing businesses, the key distinction is simple: a refund of a mandatory pre-deposit made to file a GST appeal is not treated like a routine refund under Section 54 of the CGST Act. That means the tax office cannot deny it by arguing the taxpayer missed the usual Section 54 time limits.

The ruling matters beyond SAIL’s coal credit dispute. It affects any taxpayer who had to make a statutory pre-deposit to access the appellate process and later won.

1) Case overview and decision: what the Supreme Court did

In SAIL vs. Jharkhand GST authorities, the Supreme Court dismissed Jharkhand’s appeal on February 2, 2026, and upheld a GST refund of ₹2.9 crore to SAIL.

The refund related to unutilised ITC on coal purchases. SAIL, a large steel producer, was not able to fully use those credits against output tax, and the dispute moved through appeal.

The court’s operational result was clear: SAIL is entitled to the refund with interest, and the state could not resist payment by invoking the standard refund framework that applies to ordinary GST refunds.

2) Legal principle clarified: pre-deposit refunds are “appellate mechanism” refunds

The court clarified a principle that is often confused in practice.

• Mandatory pre-deposits are amounts paid to meet the statutory condition to file or maintain a GST appeal.
• If the taxpayer succeeds in appeal, the resulting refund arises from the appellate mechanism itself.
• Such refunds are not governed by Section 54 of the CGST Act, and not bound by Section 54’s limitation period.

That is the core holding. The Supreme Court treated pre-deposit refunds as a different category from standard refund claims.

For taxpayers, this difference changes how you frame your request. It also changes what defenses the department can rely on.

3) Case specifics and financials: who, what, and how much

Here are the essentials the court dealt with:

• Parties: Steel Authority of India Limited (SAIL) vs. Jharkhand GST authorities
• Amount: ₹2.9 crore
• Subject: unutilised ITC linked to coal purchases
• Outcome: Jharkhand’s appeal dismissed; SAIL entitled to refund with interest

In real terms, ₹2.9 crore equals ₹29,000,000. For cash-flow planning, that is not a rounding error.

It can affect working capital, borrowing needs, and year-end tax positions.

4) Side-by-side comparison: pre-deposit refund vs Section 54 refund (with criteria)

This case is best read as a classification guide. The table below shows the practical differences.

A quick numeric example (with SAIL-style facts)

A company pays a mandatory pre-deposit of ₹50,00,000 to file an appeal. The appellate authority later rules for the company.

The refund is not a discretionary “claim” under Section 54 in the usual sense. The company should press for return of ₹50,00,000 plus interest, as directed by the appellate outcome.

Now compare that to a standard refund: a company accumulates unutilised ITC of ₹50,00,000 due to rate structure or exports and files a Section 54 refund application with supporting statements.

The tax office can scrutinize eligibility, completeness, and timeliness under the standard rules.

5) Why this matters for taxpayers, including NRIs

Relief from “time-barred” pushback after winning an appeal

The Supreme Court’s clarification blocks a common tactic: denying payment even after a taxpayer wins, by arguing the taxpayer missed a Section 54 deadline.

If you already succeeded in appeal, the department should not re-litigate the matter through the refund gatekeeping used for ordinary refunds.

Better cash-flow certainty

A pre-deposit can be a large, forced outlay. Businesses often treat it as locked capital until the dispute ends.

This ruling supports faster release, at least in law, once the taxpayer wins.

NRI angle: India GST disputes can ripple into U.S. tax filings (tax year 2026)

Many NRIs and recent immigrants file U.S. returns while running India operations. If you are a U.S. tax resident in tax year 2026 (filed in 2027), you generally report worldwide income.

U.S. residency is determined under the Green Card Test or Substantial Presence Test. See IRS Publication 519 (U.S. Tax Guide for Aliens) at https://www.irs.gov/pub/irs-pdf/p519.pdf.

A GST refund may affect your U.S. reporting in a few common ways:

• If your India business deducted GST-related costs, a later refund can change net income timing.
• If you claimed a foreign tax credit, later adjustments can matter. The foreign tax credit rules are primarily on Form 1116 for individuals.
• If the refund sits in foreign accounts, reporting may be triggered.

Foreign account reporting is a separate issue. If your aggregate foreign account balances exceed $10,000 at any time, FBAR reporting may apply (FinCEN Form 114).

IRS’s international portal is at https://www.irs.gov/individuals/international-taxpayers.

6) Common mistakes taxpayers make after a favorable appeal

1. Treating a pre-deposit refund like a Section 54 refund claim
   This invites procedural objections. Frame it as a consequential refund from the appellate order.
2. Not preserving the “paper trail” of the pre-deposit
   Keep bank proofs, challans, appeal acknowledgments, and the final order. Missing proof slows payment.
3. Ignoring interest language in the order
   If the order or governing rules provide interest, claim it clearly. Track the period precisely.
4. Mixing up unutilised ITC refund eligibility with pre-deposit refund entitlement
   These are different disputes. SAIL’s amount related to unutilised ITC on coal. The court’s key point was the pre-deposit refund route after appeal.
5. For NRIs in the U.S.: skipping cross-border reporting checks
   If you are a U.S. filer, confirm whether the refund affects business income, foreign tax credit calculations, or foreign asset reporting. IRS Publication 901 covers treaty concepts, but business facts still control. Publication 901 is at https://www.irs.gov/forms-pubs/about-publication-901.

7) Case identifiers and reference point

The ruling aligns with reported references including 2026 LLBiz SC 5 (Diary No. 56452/2025). the classification: mandatory pre-deposit refunds are not boxed into Section 54.

“You are [X] if…” final classification guide

You are a “pre-deposit refund” case if:

• You paid a mandatory statutory amount to file or maintain a GST appeal, and
• You later won the appeal, and
• Your refund demand flows directly from that appellate outcome.

You are a “Section 54 GST refund” case if:

• You are claiming refund of excess tax paid or eligible refund of accumulated/unutilised ITC, and
• You must follow the standard refund application process, including documentation and limitation rules.

Action items for February 2026 planning

• If you won an appeal and made a mandatory pre-deposit, press for refund as a consequential appellate refund, not a standard Section 54 claim.
• If you are an NRI who is also a U.S. tax resident for tax year 2026, confirm whether the India-side refund changes U.S. income timing, Form 1116 positions, or foreign reporting.