GST Refund of input services under Inverted Duty Structure

ITC on input services remains available and usable, but refund of accumulated ITC relating to input services is not permissible under the inverted duty structure. Refund is presently restricted to the eligible ITC attributable to inputs (goods) only.

nverted duty structure refund is available under Section 54(3)(ii) of the CGST Act where the rate of tax on inputs exceeds the rate of tax on outward supplies.

Eligibility check:

1. The output supply must be taxable (not exempt , exempt supplies are excluded from this refund).
2. ITC accumulation must be on account of inverted tax structure specifically. ITC carried forward due to higher exports or blocked credits does not qualify.
3. Refund formula: Maximum Refund = (Turnover of inverted rated supply / Adjusted Total Turnover) x Net ITC , Tax payable on inverted rated supply

Key exclusions: No refund on ITC from capital goods, services, or any supply where the rate is equal to or lower than the output rate.

Application process: File RFD-01 on GST portal within 2 years from the relevant date (date of payment of tax for the period). ARN generated, processed within 60 days. Amount first credited to ECL.

For assistance with RFD-01 filing, refund computation under the formula, and handling queries from the proper officer, Tax Garden CAs handle GST refund applications end to end.

The short answer is: ITC on input services can be availed and used to offset your GST liability, but it cannot be claimed as a cash refund under the inverted duty structure.

Here is why this matters:
- Section 54(3) of the CGST Act allows refund of accumulated ITC only when the input tax rate is higher than the output tax rate. But the proviso to Section 54(3) specifically excludes ITC attributable to input services from this refund.
- The Supreme Court confirmed this in Union of India v. VKC Footsteps India Pvt Ltd (2021): input services are excluded from the inverted duty refund formula.
- For your job work, printing, and tooling dies: the GST you pay on these flows into your ITC credit ledger and reduces your monthly GST outflow, but you cannot get a cash refund of that accumulated credit under the inverted duty route.

What you can do instead:
- Claim the ITC and set it off against your output GST liability on corrugated boxes.
- If you consistently have large ITC build-up from capital goods (plant, machinery), those can sometimes be factored into efficiency improvements.

For the full GST on manufacturing and commission agent services rules, see this [GST on commission agents guide](https://taxgarden.in/blog/gst-on-commission-agent-agency-services-india-2026) which also covers SAC codes and RCM applicability for job work.