Introduction: The implementation of GST can be considered as biggest yet controversial tax system in India. The government has been changing and introducing new rules almost every fortnight. Among all these rules and regulation lies a prominent aspect that is GST refund. We will today discuss one of many circumstances in which a taxpayer can apply for the credit that is lying in his/her Electronic Credit ledger account.
What is Inverted Tax Structure?
To understand this we will take a real life example of Footwear Industry. Example. X is a manufacturer of Footwear having a retail sale price not exceeding (Rs.500 1000 substituted on 27/07/2018) per pair, provided that such retail sale price is indelibly marked or embossed on the footwear itself the rate of output GST in this situation is 5% and all the items or parts required to make footwear are taxed at 18% GST. Here X has rate of output GST less than the Input GST which ultimately leads to the situation of accumulation of the credit in the credit ledger.
What should be done with such accumulated credit?
It is very much advised to get the refund of such accumulated credit because as per the GST law in case of Inverted Tax Structure scenario the credit gets lapsed after the two years from the relevant date. The relevant date for Inverted Tax Structure is end of the Financial Year in which such input was taken. Example: If X has purchased a Input material from his supplier on 3rd august 2017 then the relevant date shall be 31st march 2018 and the credit shall lapse by 2 years from the relevant date ie 31st march 2020.
How to get GST Refund under Inverted Tax Structure?
Well I’ll describe you this in following 2 steps:
1. Fill the online form GST RFD01A.
2. Submit the following documents to the department.