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TMI BlogRefund of unutilized ITC on account of accumulation due to inverted tax structure [Section 54(3) read with Rule 89 ]X X X X Extracts X X X X X X X X Extracts X X X X ..... lly exempt supplies). [ Read with Clarification on refund related issues Circular No. 197/09/2023- GST dated 17th July 2023 ] * No refund of unutilized input tax credit shall be allowed * in case where the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies, and * in cases where the goods exported out of India are subjected to export duty. [ Omitted vide Finance (No. 2) Act, 2024 ] [ w.e.f. 01.11.20224 vide N.No. 17/2024 dated 27.09.2024 ] * As per Notification No. 15/2017-Central Tax (Rate) dated 28.06.2017 [ w.e.f 01.07.2017 ] * From 20.10.2023 No refund of unutilised input tax credit shall be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d process through FORM GST RFD-01, for refund of ITC on account of inverted duty structure in the the Master Circular No. 125/44/2019-GST Dated 18.11.2019. * Declaration/Statement/Undertaking/Certificates to be filled online and Supporting documents to be additionally uploaded are specified in the Master Circular No. 125/44/2019-GST Dated 18.11.2019. Computation of Refund in case of Inverted Duty Structure [ Rule 89(5) ] (a) In the case of refund on account of inverted duty structure, refund shall be granted as per the following formula: Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - {tax payable on such inverted rated supply of goods and services x (Net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of turnover of inverted duty rated goods only. Notification No. 26/2018 dated 13-06-2018, further reiterated the above amendments in formula for inverted duty rated refunds and also made it applicable retrospectively w.e.f. 01-07-2017. * Guidelines for refunds of unutilized Input Tax Credit [ Para 36 to 40 of Master Circular No. 125/44/2019-GST Dated 18.11.2019 ] * Para 36 - Applicants of refunds of unutilized ITC, i.e. refunds pertaining to items listed at (a), (c) and (e) in para 3 of the Circular No. 125/44/2019-GST, shall have to upload a copy of FORM GSTR-2A for the relevant period (or any prior or subsequent period(s) in which the relevant invoices have been auto-populated) for which the refund is claimed. * The proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undable amount as the least of the following amounts: * a) The maximum refund amount as per the formula in rule 89(4) or rule 89(5) of the CGST Rules [formula is applied on the consolidated amount of ITC, i.e. Central tax + State tax/Union Territory tax +Integrated tax]; * b) The balance in the electronic credit ledger of the applicant at the end of the tax period for which the refund claim is being filed after the return in FORM GSTR-3B for the said period has been filed; and * c) The balance in the electronic credit ledger of the applicant at the time of filing the refund application. * After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplier of goods or services or both avails of drawback in respect of Central tax. It is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017, he shall be eligible for refund of unutilized input tax credit of Central tax/ State tax/ Union Territory tax / Integrated tax/ Compensation cess. It is also clarified that refund of eligible credit on account of State tax shall be available if the supplier of goods or services or both has availed of drawback in respect of Central tax. * Clarification in respect of section 54(3) of CGST Act [ clarification 160/16/2021-GST dated 20th September 2021 ] * Issues:- Whether the second proviso to section 54(3) of CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of availment of refund of accumulated ITC. Important Case laws * The adjudicating authority ruled that the tax rate on the major inputs used and the final product manufactured is the same, at 5% (with the exception of certain consumable items). As a result, the accumulated input tax credit was not deemed to arise from an inverted tax structure, leading to the disallowance of the refund claim. [ M/S Ajanta Soya Limited Vs AC, CGST Division-C, Alwar, 2020 (10) TMI 946 Commissioner (Appeals) CGST, Jaipur ] * The claim for a refund was rejected on the grounds that the input and output supplies made by the assessee involved the same goods or materials. Although the rate of tax on the input supply was higher than that on the output su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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