Inverted Rate structure .

As a manufacturer of FMCG goods in INdia, you can claim a refund of input Tax Credit on input services under the inverted duty structure. 

According to SEction 54 of the CGST Act, 2017, and Rule 89 of the CGST Act,2017, you can claim a refund if the tax rate on inputs is higher than the tax rate on outward supplies (inverted rate structure). 

Regarding notifications by CBIC on refund of Input Tax Credit in case of an inverted duty structure for FMCG gooods manufactuers:

Notification No:41/2020_Central Tax dt:20-5-2020, and other relevant rules might apply. 

You should check the latest notifications and circulars in GST official portal

Input services are excluded from inverted-duty refunds:

• Sec 54(3)(ii) allows a refund of unutilised ITC where it accumulates because the rate on inputs is higher than on outputs. Rule 89(5) defines "Net ITC" as ITC on inputs (goods) only, excluding input services and capital goods.

• The SC in VKC Footsteps (2021) upheld this restriction. Refund of ITC on input services under the inverted duty structure is not available.

• The GST Council has discussed it, and some sectors (e.g. textiles, specific notifications) have special rules. But there's no general notification allowing input-service refunds. Check sector-specific restrictions too: some goods are notified under Sec 54(3) proviso as ineligible for inverted refund.

• Practical: input-service ITC can only be used against output tax. If it accumulates, review pricing and procurement (e.g. registering suppliers under RCM where appropriate).

• Use the post-July 2022 Rule 89(5) formula: (Turnover of inverted rated supply × Net ITC / Adjusted total turnover) − (tax payable on such supply × Net ITC / ITC availed on inputs and input services).

Yes. For an inverted duty structure refund under section 54(3) of the CGST Act, eligible input services can be included in Net ITC. The earlier restriction to input goods was removed retrospectively from 1 July 2017 by the Finance Act, 2022. The refund remains subject to the statutory formula and other conditions; it is not a refund of input-service tax as a separate standalone claim.

CBIC issued Notification No. 14/2022–Central Tax, dated 5 July 2022, to amend the relevant rules and give effect to this change. This is the key notification for input-service ITC in inverted-duty refunds; check the applicable version of the rules and the current portal procedure before filing, as procedural requirements may change.

For an FMCG manufacturer, this means reviewing eligible input-service credits alongside input-goods credits when preparing the inverted-duty refund computation. Manual reconciliation across purchase records, GST returns and refund workings is difficult; automation can reduce repetitive work while keeping eligibility decisions and review under professional judgment. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. WhatsApp us to explore a workflow for your team: https://wa.me/message/3HVOZ7HIY4ESC1