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

[KASTURI SETHI]

Yes. There is no restriction on utilisation in the situation explained. Even now refund is admissible but too many strings are attached.

[Ganeshan Kalyani]

law says if purchases / expense incurred in course or furtherance of business then input tax credit is eligible. both the products are taxable so credit cannot be denied. though it seems that excess credit of normal product can be used to set off liability of footwear, but chances are there for the litigation. this is because the business vertical is different. though the gstin is same.

[koushal sharma]

If both the businesses are covered under same GSTIN and all inputs are for business purpose, then you can use the same for tax liability of other goods.

To know more detailed faqs under GST, Just visit at GST Forum India and know more about

[KASTURI SETHI]

Sh.Sharma Ji,

Thanks for throwing more light.

[Ganeshan Kalyani]

going by the definition the credit can be taken if gstin is single .

AI Summary

Input tax credit can be used across products under the same GSTIN, subject to conditions and dispute risk. Input tax credit is available where purchases or expenses are incurred in the course or furtherance of business and supplies are taxable. Excess input tax on one product may be used to discharge output tax on another product if both activities fall under the same GSTIN and inputs are for business purposes. Refunds for inverted duty structures are available but subject to procedural conditions. Use across different business verticals may attract dispute, so maintain documentation to support set off or refund claims.