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Our client is a processor of textile fabrics owned by its customers. They are covered by the Inverted Duty Structure.

During the GST era, it has purchased plant and machinery which is used for the purpose of processing of textile fabrics. Our query is that whether refund will be admissible on such capital goods?


As per section 54(3) of CGST Act, 2017, A registered person can claim a refund of unutilized ITC on account of Inverted Duty Structure at the end of any tax period where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.

Section 2(59) of CGST Act clearly define that “input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

Therefore, in our opinion refund in respect of capital goods is not allowed.

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