The basis and crux of the so called Good & Simple Tax (GST) is to provide set off of the input tax (i.e. the tax on purchases made) from the output tax liability (i.e. the tax on the sales incurred) and finally to remove cascading effect of tax.
INVERTED DUTY STRUCTURE: – In general parlance as the name suggests “inverted”, where the rate of tax on output is lower than the rate of tax on input, which gives rise to a situation of accumulation of input tax under electronic credit ledger of GST.
Is the refund available from electronic credit ledger of GST?
Yes, the refund is available from the electronic credit ledger of GST of unutilized accumulated amount of input tax credit (ITC) on account of inverted duty structure.
Time Limit to file Refund application ?
As per Section 54 of the CGST Act,2017 the time limit to file refund application is 2 years from the relevant date.
In this case, the relevant date is due date of GSTR-3B for the period for which the claim for refund arises.
For e.g. For the F/Y 2020-2021, the last date to file GTSR-3B for the month of march 2021 is 20/04/21 or 22/04/21 or as applicable to other states and 2 years shall be counted from the due date .Hence, the refund application should be filled before 20/04/23 or 22/04/23 or as applicable to other state.
Period of claiming refund ?
Refund application can be applied for multiple months in a single application.
For. e.g. For the F/Y 2020-2021- one can apply for refund for the entire months of 20-21 and till the running months of the year 21-22.
Refund Application Procedure
1. An application in form GST RFD-01A is to be filled on GST common portal along with annexure giving the details of the sales and the purchases made.
2. A copy of Acknowledgement is generated for the refund application filled in form RFD-02 within 15 days of submission of the application.
3. The amount claimed as refund is debited form electronic credit ledger, which is the alarming point in the entire refund procedure as the amount is blocked and cannot be utilized for payment towards the output tax liability.
4. A Statement-1 and Statement -1A in tabular form is filled calculating the amount of refund.
5. Maximum amount of refund = {[Turnover of inverted rated supply of goods] X Net ITC / Adjusted Total Turnover} – Tax payable on such inverted rated supply of goods.
6. The application RFD-01A is transferred to the jurisdictional officer for further processing. In case any deficiency is noticed then a deficiency memo in form RFD-03 is issued within 15 days of the submission, requiring the tax payer to file fresh application after rectification of deficiency.
7. The jurisdictional Officer, upon being fully satisfied about the eligibility of the refund and is of the opinion that no further scrutiny is required, directly issue a refund order in Form RFD-06.
And if he/she is not satisfied rejects the refund application and issues rejection order in Form RFD-06.
8. The jurisdictional Officer, along with issuing the refund order, issues the payment order in form RFD-05 for the amount sanctioned and the same shall be credited to the applicant’s bank account.
KEYNOTE: –
Under CGST Act, 2017, refund under Inverted Duty Structure is available only for tax on inputs used for output finished goods
and is not available for the tax on input services and capital goods.
Conclusion:
The calculation of refund under inverted duty structure is cumbersome and time bound. Thus, requiring an expertise in and due adherence for timely filling of refund application.
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Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.
The writer is a direct and indirect tax expert and can be reached on jainakansha1809@gmail.com.
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