GST Refund as Inverted Duty Structure

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Quick Summary

Businesses facing an inverted duty structure, where GST on raw materials exceeds GST on sales, can claim a refund. This is calculated using a specific formula, which was updated on 5 July 2022 to include input services. Claims must be filed within two years of the financial year's end using Form RFD-01(A) on the GST portal.

Kadiwal and Associate

Kadiwal and Associate (Querist)
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01 February 2024 One of my client engaged in aluminum utensil manufacturing.

His raw material purchase is in 18% and sales goes in 12%.

Refund applicable as Inverted duty structure.

For how much old period we can apply for refund under inverted duty structure. If we applying quarterly then now for which period we can make an application for refund?

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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02 February 2024 Refund of any month can be claimed within 2 years from due date of filing of return of that month

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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17 August 2025 Here are some important nuances to enhance your understanding:
1. Who’s Eligible?
Refund is available when GST on inputs exceeds GST on outputs, leading to ITC accumulation—except where outputs are fully exempt or supplier has claimed duty drawback/IGST refund.
MYGSTRefund
KMG CO LLP
2. How Is Refund Calculated?
Under Rule 89(5), it’s:
Refund = (Inverted Turnover × Net ITC ÷ Adjusted Turnover) – (Tax on inverted supply × Net ITC ÷ ITC on inputs + services)
The formula was updated on 5 July 2022 to include input services.
GSTHero
CBIC GST
KMG CO LLP
3. Applicability Timeline
The new formula applies only to claims filed on or after 05.07.2022. Claims prior must use the old method. Also, refunds are disallowed for certain goods under Chapters 15 & 27 from 18.07.2022.
CBIC GST
4. Filing Procedure & Timeline
File your refund in Form RFD-01(A) on GST portal, after filing required GSTR-1 and GSTR-3B. Must be within 2 years of the financial year’s end.
GST Council
TaxTMI
Razorpay
KMG CO LLP
5. Refund Status Tracking
Use the ARN to track your claim: provisional refund within 7 days and final processing within 60 days—subject to compliance.
TaxTMI
Conclusion:
A refund under IDS is a helpful relief for businesses, but it requires precise calculation, timely filing, and awareness of circulars and goods-based restrictions. Hope this helps close the thread with practical clarity!

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