Highlights of Draft Circular of August 2018 -354/290/2018-TRU regarding lapse of credit

1. It was decided in 28th GST Council meeting to simultaneously lapse the accumulated ITC, lying unutilised, for the past period, after the payment of GST for the month of July, 2018 [Para 3 of Circular]

2. ITC on input services and capital goods are not affected by Notification No. 20/2018-Central Tax (Rate) dated 26/07/2018 regarding lapse of credit [Para 6 and 8 of Circular]

3. As regards, the legislative power of providing for lapsing of input tax credit, the same flows inherently from the power to deny refund of accumulated ITC on account of inverted structure. [Para 9 of Circular]

4. Calculation of ITC to lapse shall be done according to formula provided in Rule 89(5) to ensure that ITC relating to capital goods and input services does not lapse.

{(Turnover of inverted rated supply of goods÷ Adjusted Total Turnover) x Net ITC} – tax payable on such inverted rated supply of goods.

The above formula to be applied separately for CGST, SGST,UTGST and IGST.

The formula gives the maximum amount of ITC to lapse. If calculated ITC is Rs. 5 lacs and actual ITC is

a) Rs. 10 lacs, only Rs. 5 lacs shall lapse

b) Rs. 3 lacs, Rs. 3 lacs and not 5 lacs shall lapse

[Para 10 of Circular]

5. ITC relating to stock as on 31-07-2018 shall be excluded while making calculation of ITC to be lapsed.[Para 11]

6. ITC relating to inputs contained in stock to be determined as per Point no. 7 of ITC-01 [Para 11]

Point no. 7 of ITC-01 requires following information to be furnished for allowing ITC on inputs u/s 18(1):

1. GSTIN of Supplier

2. Invoice No. and Date

3. Description of Inputs

4. Unit Quantity Code

5. Quantity

6. Value (As adjusted by credit/debit note)

7. Amount of ITC claimed

7. Formula to be applied to cotton, silk and other natural fibre fabrics also inspite there is no inverted duty rate structure involved. Calculation as per formula shall automatically take care of such situations [Para 12]

8. Formula under Rule 89(5) excludes zero rated supplies and ensures that ensures that accumulated ITC on exports does not lapse.[Para 13]

9. The amount of ITC to lapse shall be reflected in GSTR 3B for August 2018 in column 4B (2) of the return [ITC amount to be reversed for any reason (others)]. [Para 14]

10. Verification of accumulated ITC amount so lapsed may be done at the time of filing of first refund (on account of inverted duty structure on fabrics). A detailed calculation sheet in respect of accumulated ITC lapsed shall be prepared by the taxable person and furnished at the time of filing of first refund claim on account of inverted duty structure.

Author Bio

More Under Goods and Services Tax


  1. Prem Kumar says:

    Where a supplier do export of mentioned fabrics in Notification 5 of Central Tax (Rate), with payment of IGST, than whether aforesaid Exporter can claim refund of GST after considering Notification No. 5 of Central Tax (Rate)

  2. gopikishan kabra says:

    SIR, what a funny game is being played with textile ?
    1.we paid gst on stock held with us as on 30/06/2017 on which excise duty was already paid.
    2.refund of ITC disallowed to us.
    3. now accumulated gst is lapsed (31/07) for which value is paid by us and income tax also we beard on it as on 31/03/2018

    any one please advice that for the accumulated gst we have paid value and income tax on it. Govt have rights to lapse it ? why dont we have rights to utilize the whole gst for which we have paid value?
    is it fair ? Should we go for legal justice ?

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

June 2021