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One of my clients is in business of trading in fabrics. He purchase finished fabrics and sale finished fabrics attracting gst rate @5%. so my query is he is purchasing packing material for packing of goods witch attract gst@18% So is it cover under inverted duty structure can he claim refund of ITC accumulated due to higher rate on packing material?? If Yes the how to calculate refund?? Please provide answer with example.

Reply

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services.

“Net ITC” shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) of Rule 89 of CGST Rules, 2017 or both; and

"Adjusted Total turnover" means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding—

 a)  the value of exempt supplies other than zero-rated supplies and

b)  the turnover of supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both, if any,

Example— suppose supply of Fabric is 10,000/- + 5% GST (GST 500/-)
                   value of inward supply is 6000/- + 18% GST (GST 1080)

                 maximum refund amount = {(10000 x 1080)/ 10000} - 500
                                                          = 580/- 

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