Refund of unutilized input tax credit under GST under inverted duty structure

Refund refers to an amount that is due or refundable to the payer from the tax administration or department. Like any other taxation law, under GST regime also, there can be no. of cases wherein amount is due or refundable from the department like

Case 1) Refund of tax paid on Zero rated Supplies of goods or services or both

Case 2) Refund of tax paid on input or input services used in making such Zero rated Supplies.

Case 3) Refund of tax on the Supplies of goods regarded as deemed exports

Case 4) Refund of Unutilized Input Tax Credit as provided under sub section 3 of section 54. Refund of Unutilized Input tax Credit permissible in following two situations

In this article we will discuss the Case 4B in detailed manner;

No Refund of accumulated ITC of Input Services and Capital Goods arising on account of inverted duty structure

As per Circular No. 79/53/2018-GST dated 31.12.2018 under Section 54(3) clearly mentioned that Credit accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (Other than nil rated or fully exempt supplies)

Further as per Section 2(59) of CGST Act Inputs as any goods other than Capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus Inputs do not Include Services or Capital goods.

Further as per notification no. 26/2018-Central tax dated 13.06.2018 Net ITC, as used in the formula for calculating maximum amount of refund shall mean input tax credit availed on inputs.

In View of above Refund of Input Services and Capital Goods not available on account of inverted duty structure

Calculation of eligible amount of refund on inerted duty structure

As Per rule 89(5) of CGST Rule Calculation of amount of claim eligible for refund is provided as per following formula

Maximum refund amount = {[Turnover of Inverted rated Supply of goods & services * Net ITC]/Adjusted Total Turnover}- tax payable on such inverted rated supply of goods & services

Net ITC: Input tax credit availed in inputs during the relent period other than the input tax credit availed for which refund is claimed under sub rule 4(A) or 4(B) or both (i.e. related to export & deemed export)

As per Circular No. 79/53/2018-GST dated 31.12.2018 where there are multiple inputs attracting different rates of tax; in the formula provided in rule 89(5) of CGST rule, the term Net ITC covers the ITC availed on all inputs in the relevant period irrespective of their rate of tax.

Adjusted Total Turnover: The Sum Total of Amount

during the relevant period

Relevant period: Period for which the claim has been filed

Example:
Particulars Amount (INR) Tax Amount (INR)

Maximum Refund Amount = {[150*12]/150}-7.5 = 4.5 No Refund of Input Service available.

Time Period for filing of Refund

Any Person Claiming Refund of any tax and interest, if any paid on such tax may make an application before the expiry of 2 years from the relevant date in the form and manner prescribed

Relevant Date:

Relevant date in case of Unutilized Input Tax Credit under sub-sec (3) 'clause (ii) of first proviso to sub-sec (3)” vide clause 23(b)(ii) of CGST Amendment Act, 2018 w.e.f. 01.02.2019 is The end of financial year due date of furnishing of return under section 39 for the period vide clause 23(b)(ii) of CGST Amendment Act, 2018, w.e.f. 01.02.2019.

Form and Manner of filing Refund Claim:

As per Circular no. 17/17/2017-GST dated 15.11.2017 further clarified vide circular no. 24/24/2017-GST dated 21.12.2017 registered person need to file the refund claim with the jurisdictional tax authority to which the taxpayer has been assigned as per the administrative order issued by Chief Commissioner of Central tax and Commissioner of State Tax.

Furthermore, in case of refund claim arising due to inverted duty structure, the prescribed statements- Statement 1 and Statement 1A of Form RFD-01A have to be filled

Statement 1 [rule 89(5)]

Statement-1A [Rule 89(2)(h)]

Some Practical Aspects in respect of Statement-1A:

1) Data Related to Input should be filled in Statement 1A not Input Service or Capital goods in respect of Inward Supplies.
2) Inward Supply Data must be available in GSTR-2A as System reconcile the data with GSTR-2A before filling application
3) Date Should be stored in Text format as per recent utility
4) Amount and Date Should be exactly matched with GSTR-2A.

Annexure:

Notified Goods or Services where refund of unutilized input tax credit on account of inverted duty structure is not permissible

A) Notified Goods:

As Per notification no. 05/2017- central tax (rate) dated 28.06.2017 following goods has been notified in respect of which no refund of unutilized input tax credit shall be allowed:

B) Notified Services:

As per notification no. 15/2017-central tax(rate) dated 28.06.2017 no refund of unutilized input tax credit shall be allowed in respect of

'Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.