Inverted Duty Structure

 What is Inverted Duty Structure?

Inverted tax structure simply refers to a condition where the tax rate on inputs used is higher than the tax rate on the outputs for sale.

Whether we get Refund of unutilized excess ITC?
A registered person may claim a refund of unutilized Input Tax Credit (ITC) at the end of any tax period where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies.

When the Refund of excess credit cannot be claimed?
a) Output supplies are nil-rated or fully exempt supplies except for supplies of goods or services or both as may be notified by the Government on the recommendations of the GST Council.
b) If the goods exported out of India are subject to export duty.
c) If the supplier claims a refund of output tax paid under the IGST Act.
d) If the supplier avails duty drawback or refund of IGST on such supplies.
e) No refund can be claimed for ITC on Input Services, Capital Goods, and Compensation Cess.

What is the time limit for filing for Refund?
Within 2 years from the end of the FY in which such a claim for refund arises by filing form RFD-01.

What is maximum amount of Refund that can be claimed?
CBIC issued Central Tax Notification No. 14/2022 dated 05th July 2022, amending CGST Rule 89(5), i.e., the formula for granting refunds in cases of inverted duty structure as below:
{(Turnover of inverted rated supply of goods and services) * Net ITC ÷ Adjusted Total Turnover} – {tax payable on the such inverted rated supply of goods and services * (Net ITC ÷ ITC availed on inputs and input services)}