Design & Engineering Services to Foreign Entities Are Zero-Rated Supplies: Bombay HC Allows Refund of Unutilized ITC u/s 54 of CGST Act

The Bombay High Court has ruled that design and engineering services provided to foreign entities are "zero-rated supplies" under the GST regime. Consequently, the court allowed the service provider to claim a refund of their unutilized Input Tax Credit (ITC) under Section 54 of the CGST Act. The court held that the export of services is considered a zero-rated supply to ensure that domestic taxes are not exported, making Indian services more competitive globally. The principle of zero-rating allows exporters to claim a refund of the GST paid on their inputs and input services, even though no GST is charged on their final exported service. This judgment provides a significant relief to service exporters, affirming their right to claim ITC refunds and thereby improving their working capital and cash flow.