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TMI BlogClarification regarding removal of restriction of refund of accumulated ITC on fabrics - reg.X X X X Extracts X X X X X X X X Extracts X X X X ..... 4th August, 2018 has issued clarifications regarding the applicability and intent of the Notification No. 20/2018-Central Tax (Rate) dated 26.07.2018 (which seeks to amend Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017) regarding removal of restriction of refund of accumulated ITC on fabrics, which is annexed herewith. The corresponding State Notifications are 20/2018-State Tax (Rate) dated 28.07.2018 and 5/2017-State Tax (Rate) dated 29.06.2017 to the Notification No. 20/2018-Central Tax (Rate) dated 26.07.2018 and Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017 respectively. In exercise of powers conferred by section 168 of the Tripura State Goods and Services Tax Act, 2017 (Tripura Act No. 9 of 2017) for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the items notified under this notification are fabrics. A total 10 categories of fabrics covered in the notification are as follows: S. No. Tariff item, heading, sub-heading or Chapter Description of Goods (1) (2) (3) 1. 5007 Woven fabrics of silk or of silk waste 2. 5111 to 5113 Woven fabrics of wool or of animal hair 3. 5208 to 5212 Woven fabrics of cotton 4. 5309 to 5311 Woven fabrics of other vegetable textile fibres, paper yarn 5. 5407, 5408 Woven fabrics of manmade textile materials 6. 5512 to 5516 Woven fabrics of manmade staple fibres 6A# 5608 Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials 6B. 5801 Corduroy fabrics 6C# 5806 Narrow wove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the month of July, 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse. 5. The doubts raised, with reference to changes made vide notification No. 20/2018-Central Tax (Rate) are as follows: (1) Whether this notification seeks to lapse all the input tax credit lying unutilised after payment of tax upto the month of July. 2018? (2) Whether unutilised ITC in respect of services and capital goods shall also be disallowed? (3) Implication to fabrics like cotton and silk where there was no inverted duty structure? (4) Whether accumulated ITC in respect of exports shall also be made to lapse? 6. The matter has been examined. Section 54 of the CGST Act, 2017 provides for refund of accumulated credit on inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulated ITC lying unutilised after making payment of GST upto the month of July, 2018. In other words, in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases made on or before the 31st July, 2018) shall lapse. 8 As the notification No. 5/2017-Central Tax (Rate) does not put any restriction in respect of ITC on input services and capital goods, therefore the proviso now inserted in the said notification No. 5/2017-Central Tax (Rate) vide notification No. 20/2018 does not affect the ITC availed on input services and capital goods. 9. As regards, the legislative power of providing for lapsing of input tax credit, the same flows inh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 5 lakh. In other words, this manufacturer has accumulated ₹ 5 lakh on inputs on account of inverted duty structure during the said period. If ITC balance lying unutilized with him is more than this amount, say ₹ 10 lakh, the ITC equal to ₹ 5 lakh will only lapse. However, if for any reason, the ITC balance lying unutilized is less than ₹ 5 lakh, say ₹ 3 lakh, the ITC equal to ₹ 3 lakh will lapse. (2) A manufacture who produces, say, grey manmade fibre fabrics and cotton fabrics, had a turnover of ₹ 5 crore and 2 crore respectively for manmade fabrics and cotton fabrics for the months from July, 2017 to July 2018 [or for the relevant period for fabrics on which refund was blocked subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lapse in terms of said notification, has certain stock lying in balance as on 31.7.2018, the input tax credit involved in inputs contained in such stock ( including inputs lying as such) may be excluded for determination of Net ITC for the purposes of applying the said formula. For this purpose, the ITC relating to inputs contained in stock may be determined in the manner as provided in S. No. 7 of Form GST ITC-01. 12. As regards the applicability of said proviso to cotton, silk and other natural fibre fabrics, which do not suffer inverted duty structure, this is clarified that the said condition of lapsing of ITC would apply only if input tax credit on inputs has been accumulated on account of inverted duty structure. The aforesaid formul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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