Change in formula for claiming refund of ITC in case of Inverted Duty Structure- Simplified
CBIC vide Notification No. 14/2022-Central Tax dated 05-07-2022 has made an amendment in the formula under Rule 89(5) of CGST Rules, 2017 which now reads as under-
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net ITC ÷ ITC availed on inputs and input services)}
Now understand with the help of example-
| Turnover of Inverted rated supply of goods and services (5%) | Other Turnover (12%) | Total Adjusted Total Turnover |
| Rs 550000 | Rs 50000 | Rs 600000 |
–
| ITC on Inputs | Rs 50000 |
| ITC on Input Services | Rs 15000 |
| ITC on Capital Goods | Rs 5000 |
| Total ITC | Rs 70000 |
Refund formula before amendment:
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods and services.
= 550000*50000/600000 – (550000*5/100)
Eligible refund = 45833 – 27500
= 18333
Now refund formula after amendment-
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net ITC ÷ ITC availed on inputs and input services)}
=550000*50000/600000- (27500*50000/65000)
= 45833 -21154
= Rs 24679
So refund increased after amendment in formula – (24679 – 18333) – Rs 6346
Reason for amendment in formula –
Reduction of output tax on inverted rated supplies is to be done in the same ratio in which ITC has been availed on input and input services during the relevant period.
Now, many disputes have been solved but still it will be great if ITC on Capital Goods will also be considered by GST COUNCIL.
Any doubts /queries related to above mailed at [email protected]
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