How to calculate GST with different raw materials

[Asked by Guest]

My product contains raw materials which attracts 5%, and 18% GST. My Final product GST % is 5 only.

Sized cotton/viscose warp - 18%

Cotton weft yarn - 5%

Final Product Saree with 85% cotton and other materiasl (HSN code 5208) is taxed at 5%.

So finally ended up n making loss, any other way to overcome this problem?

[DR.MARIAPPAN GOVINDARAJAN]

You may consult with the consultant in this regards.

[MADAN RAHEJA]

You can claim refund of accumulated credit arising on account of inverse tax structure under Section 54(3) of CGST Act.

[PAWAN KUMAR]

Correct reply by Sh.Madan.

You may apply for refund of ITC on account of input rate higher than output and for accumulation of ITC.

[Rajagopalan Ranganathan]

Sir,

According to sub-rule (5) of Rule 89 of CGST Rules, 2017 "in the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula -

Maximum Refund Amount = {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} - tax

payable on such inverted rated supply of goods

Explanation.- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4).

According to sub-rule (4) (B) of rule 89 of CGST Rules, 2017 ""Net ITC" means input tax credit availed on inputs and input services during the relevant period."

According to the same rule (89 (4) (E)) "Adjusted Total turnover" means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

[Ganeshan Kalyani]

Yes refund is allowed in case of inverted tax rate structure.

AI Summary

Inverted duty structure: refund of accumulated input tax credit available under CGST rules using prescribed refund formula.
Inputs taxed at higher GST rates than the final product create an inverted duty structure, permitting refund of accumulated input tax credit under the CGST refund mechanism. The refundable amount is calculated by a formula linking turnover of inverted-rated supplies, Net ITC and Adjusted Total Turnover, less tax payable on such supplies. "Net ITC" means input tax credit availed on inputs and input services during the relevant period; "Adjusted Total Turnover" excludes exempt supplies other than zero-rated supplies for the relevant period.