Question ID : 36974

refund due to inverted tax structure

Deficiency memo received in which asked clarification for ITC on SS utensils which is finished product. We are purchasing SS patta which is coverted into utensils by way of jobwork. SS Patta is charged 18% while selling utensils at 12%. Simultaneously we are also purchasing ss utensils 12% and selling it@ 12%. As all the items i.e. ss utensils purchased and manufactured are sold from common pool (stock), there is very difficult to separate manufactured and purchased utensils. Department is denying the refund for Ss utensils Net ITC which is purchased by way of finished product. Circular No. 79/53/2018-GST dated 31/12/18 issued in which point no 4 (a) mentioned as below. 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 applied for refund of inputs only. But Departmental officer denied that ss utensils purchased is not input under inverted tax structure. As per Rule 89(5) 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. In formula, there is no anywhere mentioned that, Net ITC should not include Input procured at lower or equal rate. circular also clarify the above matter. Therefore, we are eligible for refund by considering the NET ITC of all input availed. If we reduced net I