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siva andhavarapu (ca final)     16 August 2021

Refund of Excess ITC (Circulars cannot override ACT)

Mr.X had purchased goods at a GST rate of 18%/12% and supplied Goods to IIT Research Wing at the rate of 5% GST.(Eligible as per notification no. 45/2017)

" CIRCULAR cannot override ACT ",There are many supporting case laws for this line also. 

As per   Circular No. 135/05/2020 – GST dated 31st March, 2020,Point no.'s 3.1,3.2 (https://www.cbic.gov.in/resources//htdocs-cbec/gst/Circular_Refund_135_5_2020.pdf)

" It may be noted that refund of accumulated ITC in terms clause (ii) of sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of sub-section (3) of section 54 of the CGST Act. It is hereby clarified that refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same."

As per  Section 54(3) of the CGST Act, 2017(https://www.cbic.gov.in/resources//htdocs-cbec/gst/Refund%20of%20unutilised%20ITC%20in%20%20GST_Web.pdf;jsessionid=996ED277E2D4A5672221262A0520FDAA)

" Inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council. In such cases also, refund can be applied under Section 54 of the CGST Act, 2017 read with Rule 89 of the CGST Rules, 2017. It should be noted that no refund of unutilised input tax credit is allowed in cases where the goods exported out of India are subjected to export duty. Further, no refund of input tax credit is allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies."

My question is as follows

The circular issued by department on refund is overriding the wordings in the act. So whether  Mr.X can claim refund of such excess ITC due to rate variation based on the ACT?



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