Question ID :
refund due to inverted tax structure
We had received deficiency memo in which Department had asked the clarification for Input credit on SS utensils which is finished product.
We are selling the ss utensils. We are purchasing SS patta which is coverted into utensils by way of jobwork. SS Patta is charged @ 18% while we are selling utensils at 12%.. However, simuntanouly we are also purchasing ss utensils @ 12% and selling the same @ 12%.
As all the items i.e. ss utensils purchased and manufactured are under common pool (stock), there is very difficult to separate manufactured and purchased utensils.
Department is denying the refund for Ss utensils under Net ITC formula for calculation.
As per t Circular No. 79/53/2018-GST dated 31/12/18 issued by government in which point no 4 (a) on page no 3 & 4 specifically mentioned as below.
“Representations have been received stating that while processing the refund of unutilized ITC on account of inverted tax structure, the departmental officers are denying the refund of ITC of GST paid on those inputs which are procured at equal or lower rate of GST than the rate of GST on outward supply, by not including the amount of such ITC while calculating the maximum refund amount as specified in rule 89(5) of the CGST Rules. The matter has been examined and the following issues are clarified:
a) Refund of unutilized ITC in case of inverted tax structure, as provided in section 54(3) of the CGST Act, is available where ITC remains unutilized even after setting off of available ITC for the payment of output tax liability. Where there are multiple inputs attracting different rates of tax, in the formula provided in rule 89(5) of the CGST Rules, the term „Net ITC? covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax.
Section 2(59) says input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. We herby applied for refund of inputs only .i.e. goods.
Feb 11, 2019