I HAVE APPLIED REFUND UNDER INVERTED TAX STRUCTURE. THE NODDLE OFFICER TOLD ME I HAVE TO GIVE HIM BIFURCATION REGARDING THE INPUT TAX CREDIT IN INPUT, INPUT SERVICES AND CAPITAL GOODS. HE ALSO TOLD THAT REFUND CANNOT BE ALLOWED REGARDING THE INPUT SERVICES AND CAPITAL GOODS. ONLY REFUND RELATING TO INPUTS WILL BE ALLOWED. PLS GUIDE AND SEND ME NOTIFICATION REGARDING THE SAME IF POSSIBLE. CAN HE DENY REFUND RELATING TO INPUT SERVICES OR CAPITAL GOODS.

Reply— 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 capital goods is not covered under Inverted duty structure. 

As per Notification No 21/2018 - Central Tax (Rate) dated April 18, 2018 and Notification No. 26/2018-Central Tax dated 13.06.2018 21 do not allow refund of ITC availed on Input services in respect of provisions of Section 54 (3) of the CGST Act, 2017. You can refer Advance Ruling pronounced by AAR Maharashtra in matter of Daewoo-TPL JV dated 24.04.2019.