In cases of inverted duty structure, where the GST rate on input goods or services is higher than the GST rate on the output supplies, a refund of the unutilized input tax credit (ITC) can be claimed. The formula for grant of GST refund in cases of inverted duty structure is as follows:
Maximum Refund Amount = (Turnover of inverted rated supply of goods and services) x (Net ITC ÷ Adjusted Total Turnover)
Here, the terms used in the formula are defined as follows:
1. "Turnover of inverted rated supply of goods and services" means the aggregate value of the inverted rated supply of goods and services made during the relevant period.
2. "Net ITC" means the input tax credit availed on inputs during the relevant period.
3. "Adjusted Total Turnover" means the turnover in a State or Union territory, as defined under the GST law, excluding the value of exempt supplies, zero-rated supplies, and supplies on which tax is paid by the recipient on reverse charge basis.
The maximum refund amount that can be claimed is subject to a maximum cap of the unutilized ITC available in the relevant period. In addition, certain conditions and restrictions apply to the claim of refund, and it is necessary to follow the procedure prescribed under the GST law to claim the refund.
The turnover of inverted rated supply of goods and services means the value of all supplies made, including exports and inter-state supplies, but excludes inward supplies of goods and services that attract a higher rate of tax than the outward supplies. In other words, it is the value of all supplies made by the taxpayer that are subject to a lower rate of tax than the inputs used to produce those supplies. This value is used in the formula for calculating the maximum refund amount that a taxpayer can claim in cases of inverted duty structure under the GST regime.
Inverted duty structure is a situation where the rate of tax on inputs used in the production of goods or services is higher than the rate of tax on the finished product or output. This results in a scenario where the input tax credit accumulated by the taxpayer is higher than the output tax liability, leading to a refund claim by the taxpayer.
Under the GST regime, taxpayers can claim a refund of the input tax credit accumulated on account of inverted duty structure. In such cases, the taxpayer can claim a refund of the unutilized input tax credit subject to certain conditions and limits. However, the refund claim is subject to a formula that limits the maximum amount of refund that can be claimed by the taxpayer. The formula takes into account the turnover of the inverted rated supply of goods and services and the tax paid on such supply to determine the maximum amount of refund that can be claimed.
1. The refund amount is calculated on a monthly basis.
2. The "turnover of inverted rated supply of goods and services" includes the value of all supplies made, including exports and inter-state supplies, but excludes inward supplies of goods and services that attract a higher rate of tax than the outward supplies.
3. The "net ITC" means the total input tax credit availed on all inputs (other than capital goods) during the relevant period, reduced by the ITC claimed on input services and inputs used for exempt supplies.
4. The "adjusted total turnover" means the turnover in a State or Union territory, as defined under the GST law, excluding the value of exempt supplies, zero-rated supplies, and supplies on which tax is paid by the recipient on reverse charge basis.
5. The formula calculates the maximum refund amount that can be claimed. The actual refund amount may be less than the maximum amount depending on the actual amount of unutilized ITC available with the taxpayer in the relevant period.
6. The claim of refund is subject to certain conditions and restrictions, such as the requirement to file a refund application within the prescribed time limit and the requirement to provide all the necessary supporting documents along with the application.
7. The procedure for claiming refund may differ for different categories of taxpayers, such as exporters and manufacturers, and it is important to follow the relevant procedure prescribed under the GST law.
Here are some FAQs on the formula for grant of GST refund in cases of inverted duty structure:
A: Inverted duty structure means a situation where the rate of tax on inputs is higher than the rate of tax on output supplies.
A: The formula for grant of GST refund in cases of inverted duty structure is as follows: Maximum Refund Amount = (Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover.
A: The turnover of inverted rated supply of goods and services means the value of all supplies made, including exports and inter-state supplies, but excludes inward supplies of goods and services that attract a higher rate of tax than the outward supplies.
A: Net ITC means the total input tax credit availed on all inputs (other than capital goods) during the relevant period, reduced by the ITC claimed on input services and inputs used for exempt supplies.
A: Adjusted total turnover means the turnover in a State or Union territory, as defined under the GST law, excluding the value of exempt supplies, zero-rated supplies, and supplies on which tax is paid by the recipient on reverse charge basis.
A: Yes, the refund amount is calculated on a monthly basis.
A: The claim of refund is subject to certain conditions and restrictions, such as the requirement to file a refund application within the prescribed time limit and the requirement to provide all the necessary supporting documents along with the application.
A: Yes, the refund amount is subject to a maximum limit, which is calculated using the formula mentioned above.
A: No, the procedure for claiming refund may differ for different categories of taxpayers, such as exporters and manufacturers, and it is important to follow the relevant procedure prescribed under the GST law.
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