GST REFUND DUE TO INVERTED DUTY STRUCTURE
This query is : Resolved
29 September 2025
Can we claim refund of job work charges like stiching and all in garments manufacturing company as it is the main expenses incurred by them while filing claim for refund on account of inverted duty structure
29 September 2025
The inverted duty structure refund under Section 54(3) of the CGST Act allows refunds only when the GST rate on inputs (goods) is higher than the output tax rate.
ITC on input services (such as stitching, embroidery, fabric processing, etc.) and capital goods is specifically excluded from refund eligibility under Rule 89(5) of the CGST Rules (as amended), as confirmed by the Supreme Court in the case of VKC Footsteps.
Although accumulated ITC from input services can be used to offset output tax liability, any unutilized portion relating to services is not refundable due to the inverted duty structure.
ITC on input services (such as stitching, embroidery, fabric processing, etc.) and capital goods is specifically excluded from refund eligibility under Rule 89(5) of the CGST Rules (as amended), as confirmed by the Supreme Court in the case of VKC Footsteps.
Although accumulated ITC from input services can be used to offset output tax liability, any unutilized portion relating to services is not refundable due to the inverted duty structure.
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29 September 2025
Job work charges such as stitching—considered input services—cannot be claimed for a refund under the inverted duty structure when filing for GST refunds for a garments manufacturing company. Under the current GST law, the refund of unutilized Input Tax Credit (ITC) due to an inverted duty structure is strictly limited to ITC on input goods and does not extend to input services or capital goods.
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29 September 2025
Section 54(3) of the Act and Rule 89(5) clearly outline these restrictions.
Recent amendments and Supreme Court judgments reinforce that this is a legislative choice and only ITC on goods is to be considered.
In short, stitching and similar job work charges are not eligible for refund under the inverted duty structure claim in the context of a garment manufacturing company.
Recent amendments and Supreme Court judgments reinforce that this is a legislative choice and only ITC on goods is to be considered.
In short, stitching and similar job work charges are not eligible for refund under the inverted duty structure claim in the context of a garment manufacturing company.
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29 September 2025
Good luck..
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