Latest Query & Reply

Followings are the points for which we need your advice:

1) ITC on fixed assets (vat period) which is consider for transition1, is Covered under inverted duty structure?

( input vat on fixed asset was 13.5% & 18% and now GST rate is 5% (for sale)

2) Can we claim excess credit of vat under revised return for TRAN1? Or only original return credit can be claim?

3) Now for current period are GST rate is 5% (sales) and purchase rate is 12% &18 % so what is the formula for inverted duty structure applicable for us.

Reply

1) 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, ITC of fixed asset is not covered under inverted duty structure.

2) TRAN-1 once filed, cannot be revised, therefore original return credit can be claimed.

3) Refund in case where rate of tax on inputs is greater than rate of tax on output (inverted duty structure) shall be granted as per the following formula:

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,