1. What is Inverted Tax Structure in the GST regime?

The term ‘Inverted Tax Structure’ refers to a situation where the rate of tax on input received (i.e. Input tax credit received) is more than the rate of tax (i.e. the tax paid) on output supplies. As a result, the higher tax paid on input supplies gets accumulated in the Electronic Credit Ledger of the receiver Taxpayer. The Taxpayer can claim the refund of ITC accumulated on account of Inverted Tax structure by filing the refund application form RFD-01A. (Refer Section 54(3) (ii) of the CGST Act 2017)

2. What is needed to file for refund of accumulated ITC of IGST / CGST / SGST, export of goods?

You can file for refund of IGST / CGST / SGST on account of ITC accumulated due to Inverted Tax Structure, if you have filed GSTR1 and GSTR-3B of the relevant tax period, for which refund is to be claimed.

However, in case registered persons having aggregate turnover of up to Rs1.5 crores in the preceding financial year or the current financial year are opting to file FORM GSTR-1 quarterly (notification No. 57/2017-Central Tax dated 15.11.2017 refers), such persons shall apply for refund on a quarterly basis. Please note that such refund on account of inverted tax structure is not available in case of exempted or nil rated supplies.

3. How can I file for refund on account of ITC accumulated due to Inverted Tax structure, and how will the disbursement be made?

  1. Ensure that you have filed GSTR 1 and GSTR-3B of the relevant tax period for which you want to file for refund of the accumulated ITC on the basis of balance available in the Electronic Credit Ledger.
  2. Once the eligibility to file for refund is established, fill-out the form RFD-01A and file it in GST Portal.
  3. Upon filing the form RFD-01A, GST Portal will generate an ARN.
  4. After ARN generation, Taxpayer needs to take prints of the filed application and the Refund ARN Receipt generated on the portal, and submit the same along with supporting documents to the jurisdictional authority.
  5. After Refund Application is processed by tax official, refund will be disbursed manually.
  6. In case of the taxpayer where the jurisdictional authority of state/ center yet not allotted then the taxpayer has to contact to the Nodal officer of the corresponding state/ center.

4. Is it mandatory to file GSTR-1, GSTR-2 and GSTR-3 in order to file for refund?

If the Taxpayer has filed GSTR1 and GSTR-3B, then he / she need not file GSTR-2 and GSTR-3 for filing refund form RFD-01A. Presently GSTR-2 and GSTR- 3 are deferred, hence for the reason taxpayer has to give manual undertaking to the jurisdictional authority (Refer circular no 24/24/2017-GST dated 21/12/2017 for details)

5. Is there any time limit to file for refund of ITC accumulated due to Inverted Tax Structure?

Yes, as per Explanation 2 (e) of subsection 14 of Section-54, the refund application in form RFD-01A needs to be filed within 2 years from the end of financial year in which such claim for refund arises

6. In which bank account will the refund amount be credited? Is it one of the accounts that I registered in GST Portal?

Yes, the refund amount will be credited to one of the bank accounts that you registered in the GST Portal and linked it with your GST profile. At the time of filling-out form RFD-01A, you will be required to select a bank account from the list of your linked / registered accounts in the GST Portal. In case the applicant requires receipt of refund in a different bank account, he may add that bank account in GST registration details by way of non-core amendment.

7. What is Net ITC?

Net ITC is the input tax credit availed on inputs and input services during the relevant period.

8. What is Turnover of inverted rated supply of goods?

The value of inverted supply of goods made during the relevant period without payment of tax under bond or letter of undertaking

9. What is Tax payable on such inverted rated supply of goods?

The tax amount payable on such inverted rated supply of goods under the same head i.e. IGST, CGST, SGST.

10. What is Adjusted Total Turnover?

Adjusted total turnover is the turnover in a State or a Union territory, as defined under clause (112) of section 2 of CGST Act, excluding the value of exempt supplies other than inverted-rated supplies, during the relevant period

11. What is the ‘SAVE’ feature in refund application?

The refund application must be saved before filing.

  • The system will flash a confirmation message when saving the application for the first time.
  • The system displays a confirmation message upon saving the application.
  • Application can be saved at any stage and can be retrieved using the My Saved / Submitted Applications option under Refunds.
  • Saved applications are stored in the system for 15 days, after which they get automatically deleted.
  • Saving the application activates the Declaration checkbox.

12. Where can I track my filed refund application?

  • Filed applications (ARNs) can be downloaded as PDF documents using the My Saved / Submitted Applications option under Refunds.
  • Filed applications can be tracked using the Track Application Status option under Refunds.

13. I am not able to make any changes in the refund application? What could be the issue?

After clicking on Proceed button no changes can be made in the refund application.

14. When is debit entry of refund amount claimed is made in ledger, while filing refund due to inverted duty structure?

A debit entry shall be made in the Electronic Credit Ledger for the amount claimed as Refund after ARN is generated on submission of the refund application.

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2 responses to “FAQs on Refund of ITC accumulated due to Inverted Tax Structure (RFD-01A)”

  1. V Shankar says:

    Whether EGM No. and date is must for the refund.
    Statement- 3A [rule 89(4)]
    Refund Type: Export without payment of tax (accumulated ITC) – calculation of refund
    amount.
    Please do confirm

  2. GHANSHYAM VAISHNAV says:

    I think refund in such cases can be made only after the end of financial year.

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