Refund of tax on inverted structure

Sir, Kindly clarify.
It is to mention one taxpayer is filed two refund claims for the same month on the following types :
1. Refund of ITC unutilised on account of accumulation due to inverted tax structure
2. Refund of unutilised ITC on account of exports without payment of tax

The formula for calculating Refund for inverted tax structure the taxpayer has provided
Turnover of Inverted Tax Structure / Total Turnover * Net ITC (without Services/Capital) – Tax payable on Inverted = Total Refund Claim

The formula for calculating Refund for Exports without payment of Tax the taxpayer has provided
Turnover of Inverted Tax Structure / Total Turnover * Net ITC (without only Capital) = = Total Refund Claim

The taxpayer also taking the Drawback on some of the Shipping Bills

CGST office had already given the Refund on Inverted duty Structure

It is requested to clarify on the issue whether CGST office can refund of unutilised ITC on account of exports without payment of tax also.

Regards

Hi Sudhakar,

Your query relates to claiming refund of unutilised ITC under two different scenarios:

Refund of ITC accumulated due to inverted tax structure
Refund of unutilised ITC on account of exports without payment of tax

Key points to clarify:

1. Refund of ITC on Inverted Tax Structure

Allowed under Section 54(3)(ii) of CGST Act.
Formula used is correct:
$supplies\text{Turnover of inverted tax structure} / \text{Total turnover} \times \text{Net ITC (excluding services/capital)} - \text{Tax payable on inverted supplies}$
Refund is granted for ITC accumulated due to inverted tax rates on inputs vs outputs.

2. Refund of unutilised ITC on Exports without Payment of Tax

As per Section 54(3)(iii) CGST Act, ITC refund is allowed for unutilised ITC on exports of goods or services without payment of IGST.
However, if the exporter has claimed drawback, refund of IGST/ITC is not allowed for those goods covered under drawback claims.

Regarding your case:

Since drawback is being claimed on some shipping bills, the taxpayer cannot claim refund of unutilised ITC on exports without payment of tax for those shipping bills.
Refund on inverted duty structure can be claimed separately and already granted by the CGST office.

Summary:

Refund Type	Refund Allowed?	Condition
ITC refund due to inverted tax structure	Yes	As per formula and if ITC is accumulated due to inversion
ITC refund on exports without payment of tax	No (if drawback claimed on those exports)	If drawback claimed, refund on those exports is disallowed

Suggestion:

The taxpayer should not claim refund for unutilised ITC on exports where drawback has been availed.
Separate refund claims for inverted tax structure and exports without payment of tax can be filed only if exports are not subject to drawback.