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Refund due to inverted tax structure

ABHAY KUMAR (Senior Accountant) (53 Points)

30 January 2018

Dear Expert,

Please explain about "INVERTED DUTY STRUCTURE" for the purpose of Refund under sub-section (3) of section 54 of CGST Act and Rule 89(2)(h). can we take refund of unutilized input tax credit now from July to December 2017.

Pls explain below table also.

Turnover of inverted rated supply of goods	Tax payable on such inverted rated supply of goods	Adjusted total turnover	Net input tax credit	Maximum refund amount to be claimed [(1×4÷3)-2]
1	2	3	4	5

Thanks

Abhay

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Bhargav Suraparaju (27 Points)
Replied 30 January 2018

Inverted tax structure means tax rates rates on your purchases are more than the tax rates on your outward supplies. Eg: If your purchase is taxable @ 18% and your supply is taxable @ 12%.
Because of this type of tax structure you will not be able to use your ITC fully. That's why the law provides for refund of unutilised ITC.
Explanation for table:
1. Turnover of inverted rated supply means the turnover of supplies which attracts lower rate than that of your purchases.
2. Tax paid on such inverted rated supplies means how much of ITC you have adjusted against the tax liability arising from inverted rated turnover supplies.
3.Adjusted turnover includes all your supplies except exempt supplies.
4. Net input tax credit means ITC available after reversal ITC on purchases used for exempt supplies, if any.