CA in Practice
1340 Points
Joined September 2013
I understand from the facts that you have following questions:
1. Whether the accumulated credit can be claimed as refund in case where the inputs rate is higher than the outward supply?
Answer: Accumulated Input tax credit is allowed as refund only in two scenarios as per Section 54(3) of CGST Act viz..(i) on account of zero rated supplies without payment of IGST, (ii) inverted duty structure (inputs rate being higher than output rate), unless the government notify that the specific supplies are not eligible for refudn under this category (chapter 86, tobaco, civil construction etc are notified). Assuming that your supplies are not covered under the exception category of supplies.
In your case, the inputs are taxable at 18%, finished goods are taxable at 3%. Ttarget='_blank' rel='nofollow' hrefore, refund is allowed as per the formula prescibed under Rule 89(5) of CGST Rules.
2. Whether the refund is allowed on transitional credit under GST?
Answer: Net ITC defined under Rule 89(5) does not include the transitional credit. In other words, ITC availed during the period alone shall be considered for the purpose of calculation of eligible refund.
To compute maxium eligible refund we need to check the closing balance in elecronic credit ledger (to debit the amouunt of refund) which may include the transitioanl credit.
3. What is the liability on the taxable person at the time of cancellation of registration (voluntory-not liable to register under GST/closure of business)?
Answer: Final return to be filed containing the details of held in stock (Section 45 of CGST Act read with Rule 81 of CGST Rules). The closing balance of credit in electronic credit ledger after claiming refund on account of inverted duty structure would expire.
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