Inverted Tax Utilization

[DEEPAK SHARMA]

Sir,

One is manufacturing normal products, where rate of tax on inputs and output is almost same, simultanously they manufacturing footwear where input tax rate is higher i.e. 18% and output tax rate is 6% it means its under inverted tax rate structure.

Is it possible to the taxpayer they can use spare tax accumulated on raw material of footwear to liability arised on normal products.

Thanks

AI Summary

Taxpayer Seeks to Offset Excess Input Tax Credit from Footwear; Faces Litigation Risks Due to Business Vertical Differences. A taxpayer inquired about utilizing excess input tax credit from manufacturing footwear, which has an inverted tax rate structure (input tax at 18% and output tax at 6%), to offset liabilities from other products with similar input and output tax rates. Responses indicated that while there is no restriction on such utilization if both businesses fall under the same GSTIN and are for business purposes, there could be litigation risks due to different business verticals. Refunds are possible but come with conditions. The consensus was that input tax credit is generally eligible if incurred in the course of business.