{"id":16892,"date":"2020-09-25T11:48:36","date_gmt":"2020-09-25T06:18:36","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=16892"},"modified":"2021-01-15T11:49:05","modified_gmt":"2021-01-15T06:19:05","slug":"inverted-duty-structure-under-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/","title":{"rendered":"Inverted Duty Structure under GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Inverted Duty Structure is a situation where the tax rate on inputs is higher than tax rate on output supplies. Inverted duty structure under <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and services tax<\/strong><\/a> usually results in increase of excess tax credit and cascading cost, therefore it is the need of hour to optimize the arousal of refunds in the platform.<\/p>\n\n\n\n<p>As\nper Section 54(3) of the Central Goods and Services Tax Act, 2017, any\nregistered person can claim a refund of the unutilized ITC with relation to\nInverted Duty Structure at the end of any taxation period.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Previous_Scenario_%E2%80%93_Inverted_Duty_Structure_under_GST\" >Previous\nScenario &#8211; Inverted Duty Structure under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Refund_for_Inverted_Duty_Structure_under_GST\" >Refund for Inverted\nDuty Structure under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Calculation_of_Maximum_Refund_available\" >Calculation of\nMaximum Refund available<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Procedure_of_Claiming_Refund\" >Procedure of\nClaiming Refund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Documents_required_to_be_uploaded_with_the_Refund_Application\" >Documents required to be uploaded with the Refund\nApplication<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Relevant_Clarifications_Issued_so_far\" >Relevant Clarifications Issued so far<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/inverted-duty-structure-under-gst\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Previous_Scenario_%E2%80%93_Inverted_Duty_Structure_under_GST\"><\/span>Previous\nScenario &#8211; Inverted Duty Structure under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In\nthe pre-GST rule, any situation of Inverted duty structure arises in case where\nimport duty on raw materials used in the manufacturing goods was higher than\nthe import duty on the finished goods.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Refund_for_Inverted_Duty_Structure_under_GST\"><\/span>Refund for Inverted\nDuty Structure under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any\nregistered person can claim a refund of the unutilized ITC with relation to\nInverted Duty Structure at the end of any taxation period where the credit has been assembled on description of tax rate on&nbsp;input\nhigher than the tax rate on output supply.<\/p>\n\n\n\n<p><em><strong>Refund of unutilized ITC should not be allowed in these cases:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>Output supplies as notified by\nthe Government on the recommendations of the Council.<\/li><li>Goods exported are subject to\nexport duty.<\/li><li>Refund of supplies claimed\nunder IGST Act of output tax paid <\/li><li>If the supplier avails refund\nof IGST on supplies.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Calculation_of_Maximum_Refund_available\"><\/span>Calculation of\nMaximum Refund available<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The formula for Maximum refund Amount is:-<\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"679\" height=\"256\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-99.png\" alt=\"Calculation of Maximum Refund available\" class=\"wp-image-16893\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-99.png 679w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-99-300x113.png 300w\" sizes=\"(max-width: 679px) 100vw, 679px\" \/><\/figure><\/div>\n\n\n\n<p>Where,<\/p>\n\n\n\n<ul><li>\u201cAdjusted Total turnover\u201d states that the turnover in a State or a Union territory, as explained in section 2 (122) of CGST Act, excluding the value of exempt supplies other than inverted-rate supplies, during the relevant period.<\/li><li>\u201cNet ITC\u201d means ITC availed on inputs during the relevant period rather than ITC availed for which refund is claimed under sub-rules 4A or 4B.<\/li><li>&nbsp;\u201cTax payable on inverted rate supply of goods and services\u201d means the tax payable on inverted rate supply of goods and services under the same head, i.e. IGST, CGST, and SGST.<\/li><li>\u201cTurnover of inverted rate supply of goods\u201d means the value of the inverted supply of goods made during the relevant period.<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/refund-in-gst-in-india\/\">An Outlook on Refunds in GST<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_of_Claiming_Refund\"><\/span>Procedure of\nClaiming Refund<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The GSTN has issued&nbsp;\u201c<strong><em>Circular No.\n125\/44\/2019 dated 18.11.2019&nbsp;and Circular\nNo. 135\/05\/2020 dated 31.03.2020\u201d. <\/em><\/strong><strong>The circular says the guiding\nprinciples<\/strong> and processing\nof refund which needs to be done electronically.<strong><\/strong><\/p>\n\n\n\n<p>GSTR-1\nand GSTR-3B forms are required to be filed for the taxation period for which a\ntax payer wants to apply for Refund of ITC accumulated.&nbsp;<\/p>\n\n\n\n<p>The refund application should be filed in approved <a href=\"https:\/\/corpbiz.io\/learning\/refund-under-gst-and-overview-of-rfd-01-and-rfd-01a\/\"><em><strong>Form RFD-01A<\/strong><\/em><\/a>.&nbsp; It is a temporary return form introduced in place of RFD-01 for application till time the online facility is enabled for refund claims. RFD-01 is required to be filed within 2 years from the end of financial year in which claim for refund occurs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Steps Involved-<\/h3>\n\n\n\n<ul><li>Fill in the RFD-01A form on GSTN\nportal. Application Reference Number (ARN)\ncode will be generated by the portal.<\/li><li>Take the print of the duly\nfiled application form and ARN code generated from the portal.<\/li><li>Submit the documents with respective\nsupporting credentials to the relevant authority.<\/li><li>Tax officer will process and\nexamine the refund application. After successful process and examination of\napplication refund will be paid out manually.<\/li><li>If jurisdictional authority of\nthe state or central is not fixed yet, the tax payer shall approach the Nodal officer\nof the relevant state.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Documents_required_to_be_uploaded_with_the_Refund_Application\"><\/span>Documents required to be uploaded with the Refund\nApplication<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"628\" height=\"543\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-100.png\" alt=\"Documents required to be uploaded with the Refund Application\" class=\"wp-image-16894\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-100.png 628w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-100-300x259.png 300w\" sizes=\"(max-width: 628px) 100vw, 628px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relevant_Clarifications_Issued_so_far\"><\/span>Relevant Clarifications Issued so far<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The relevant Clarifications regarding Inverted Duty Structure under GST by recent Notification are as follows-<\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">From Circular No. 125\/44\/2019 dated 18th November 2019<\/h3>\n\n\n\n<p><em><strong>The agendas presented by Circular No. 125\/44\/2019 dated 18th November 2019 are given below. Those are as follows:-<\/strong><\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Multiple inputs involving multiple GST rates<\/h4>\n\n\n\n<p>It has been simplified that for the purpose of refund, Input Tax Credit\naccumulated on all the inputs used in making outward supply needs to be\nconsidered. It can be the inputs which are obtained at equal or lower rate of\nGST than the GST rate on outward supply.&nbsp;<em><\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Refund of accumulated Input Tax Credit<\/h4>\n\n\n\n<p><strong>Refund\nof accumulated Input Tax Credit is applicable on supplies made to merchant\nexporters<\/strong><strong> <\/strong><strong>at reduced<\/strong><strong> <\/strong><strong>or<\/strong><strong> <\/strong>concessional rate of 0.05%\nor 0.1%.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Input Tax Credit of invoices<\/h4>\n\n\n\n<p><strong>Input Tax\nCredit of invoices issued in prior period, and \u201cavailed\u201d in succeeding period<\/strong><strong>&nbsp;<\/strong>can\u2019t\nbe barred from the calculation of the refund amount for the succeeding period.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Refund of&nbsp;Input Tax Credit on Inputs<\/h4>\n\n\n\n<p><em>The refund of&nbsp;<\/em><strong><em>Input Tax Credit on inputs includes inward supplies and<\/em><\/strong><em> should be available as long as:<\/em><\/p>\n\n\n\n<ul><li>They are used for the business purpose and for completing taxable supplies, including zero-rated supplies;<\/li><li>Input Tax Credit for such inputs is not restricted under section 17(5) of the <strong><em>CGST act<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/CGST\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Calculation of Refund amount to be claimed <\/h4>\n\n\n\n<p><em>The observation of the circular says that the common portal calculates the refundable amount at the least of the following amount. Those are as follows:-<\/em><\/p>\n\n\n\n<ul><li>Maximum refund amount calculated in accordance with Rule 89(5) (Formula is to applied on combined amount of ITC i.e. CGST+&nbsp;SGST\/UTGST+IGST);<\/li><li>Amount in electronic ledger at the time of filing for refund application;<\/li><li>Amount in electronic credit ledger at the end of taxation period for which refund is being claimed<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">From&nbsp;Circular No. 110\/29\/2019 dated 3rd October 2019<\/h3>\n\n\n\n<p><em><strong>The agendas presented by Circular No. 110\/29\/2019 dated 3<\/strong><\/em><sup><em><strong>rd<\/strong><\/em><\/sup><em><strong> October 2019 are given below. Those are as follows:-<\/strong><\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">When NIL application is filed inadvertently&nbsp;<\/h4>\n\n\n\n<p>It\ndoes not allow re-filing the refund claim for that period under the same\ncategory. Taxpayers can file the refund claim under \u201cAny Other\u201d category and once\nthe application is examined entirety by the proper officer the refund amount claimed\nhas to be separately debited from Electronic Credit Ledger through Form DRC-03.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">From&nbsp;Circular No. 135\/05\/2020 dated 31<sup>st<\/sup> March 2020<\/h3>\n\n\n\n<p><em>The agendas presented by Circular No. 135\/25\/2020 dated 31<\/em><sup><em>st<\/em><\/sup><em> March 2020 are given below. Those are as follows:-<\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Refund of accumulated Input Tax Credit on account of reduction in GST Rate<\/h4>\n\n\n\n<p>It\nhas been explained that the refund of accumulated Input Tax Credit under\ninverted duty structure will not be applicable in case where the inversion\nis due to decrease in the GST rate on the output goods.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Budget 2018-19 has mentioned that specific duties on some medical devices have been reduced to nil from 2.5% to correct inverted duty rate. Moreover, some taxpayers are confused due to issues in various GST laws which require attention and one of them is refund of accrued credit in case of inverted duty structure under GST. Contact <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a> for more information regarding the same.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/elucidation-on-gst-refund-issues\/\">Elucidation on GST Refund Issues \u2013 Recent Updates<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inverted Duty Structure is a situation where the tax rate on inputs is higher than tax rate on output supplies. Inverted duty structure under Goods and services tax usually results in increase of excess tax credit and cascading cost, therefore it is the need of hour to optimize the arousal of refunds in the platform. [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":16895,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1036],"acf":{"service_id":"96"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":6540,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16892"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=16892"}],"version-history":[{"count":10,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16892\/revisions"}],"predecessor-version":[{"id":24209,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16892\/revisions\/24209"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/16895"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=16892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=16892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=16892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}