The Inverted Duty Structure (IDS) continues to be one of the most misunderstood and litigated refund categories under GST. Many industries such aschemicals, pharma, plastic, etc face a situation where input GST rates are higher than output GST rates leading to accumulated ITC.
Here is a simple, practical guide to understand eligibility, documentation and timelines pertaining to Inverted Duty Structure or "IDS" refund.
What Is an Inverted Duty Structure?
An Inverted Duty Structure situation arises when a business pays higher GST on inputs (goods/services) than the GST charged on its output supply. This is also referred to as "IDS" situation.
This excess ITC accumulates in the electronic credit ledger. This becomes eligible for refund under Section 54(3) of the CGST Act, subject to specific conditions.
Eligibility Criteria
Refund under IDS can be claimed when:
- GST rate on inputs (goods or services) is higher than the GST rate on output supplies.
- Output is taxable (not nil-rated/exempt).
- Output supplies are not covered under notifications that bar IDS refunds.
Not eligible for refund:
- ITC on capital goods
- Blocked credits under Section 17(5)
Refund Calculation (Updated Rule 89(5))
MaximumRefund Amount={(Turnover of Inverted Rated Supply of Goods and Services) × Net ITC ÷ Adjusted Total Turnover} - {[Tax Payable on such Inverted rated supply of goods and services x (Net ITC ÷ ITC availed on inputs and input services)}
How to claim refund of unutilised ITC
A refund application has to be filed online on GST portal in Form RFD-01. The following documents to be filed along with the refund application:-
- GSTR-1 & GSTR-3B for the relevant period
- Purchase register + ITC ledger
- Working sheet under Rule 89(5)
- Declaration of non-duplication
- CA certificate (if refund >₹2 lakh)
Recent Amendment
- As per recent CGST Instruction 6/2025- dt 3rd October, 2025, issued pursuant to the 56th GST Council meeting, grant of 90% provisional refund of accumulated ITC in case of inverted duty structure is effective from 01.10.25 for refund applications after the said date. Balance 10% to be refunded after officer verification. The amendment in the Act to incorporate the same is yet to be done.
Time period for claiming refund
- 2 years from the end of "relevant period" where relevant period refers to due date of furnishing the return under Sec 39 for the period for which refund is claimed
Conclusion
Refunds under Inverted Duty Structure remain compliance-heavy, but a clear understanding of eligibility, documentation, and timelines can significantly reduce delays and disputes. With the introduction of 90% provisional refunds from October 2025, businesses can expect faster liquidity support-provided filings are accurate and well-documented.
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