Inverted Duty Structure on Tractors Assembly

[Rajendra Prasad]

Dear Sir,

I am a tractor manufacturer. I purchase various parts and engine by paying itc at 18%. But tractor is taxable at 12%.

Can I accumulate and carry forward excess itc in my Electronic Credit Ledger.

Can I cliam excess itc under inverted duty structure as my out put tax is always less than itc.

[Kashish Gupta]

Dear Rajendra Prasad Ji,

Yes, you can claim refund of unutilised balance lying in electronic credit ledger at the end of any tax period if such balance has been accumulated for the reason that rate of tax on inputs if higher than the rate of tax on output supplies. For this, you can refer the provisions of section 54(3) of CGST Act, 2017 read with rule 89(5) of CGST Rules, 2017 [corresponding provisions are similar under State GST Acts].

Kindly note that there is an ongoing dispute regarding eligibility to claim refund in respect of input services under inverted duty structure. We are of the view that as per law, said refund should be allowed because there is no restriction under the Act and the same has been imposed by way of inserting formula in rules. If you have such balance, it is recommended to included portion of input services as well so that if matter is resolved by higher judiciary in future, you claim does not get barred by time. Hon'ble High Court of Gujarat and Rajasthan has already admitted certain writ petitions praying for eligibility of refund of input services under this model - [2018 (9) TMI 1475; 2019 (1) TMI 1608; 2018 (9) TMI 1766 and 2018 (8) TMI 587]

Further, refund of transitional credit cannot be claimed under inverted duty structure. This has already been clarified by the CBIC [Refer para 50 of Circular Number 125/44/2019-GST dated 18.11.2019].

[Rachit Agarwal]

1. There is no restriction in carry forward of the ITC

2. Refund can be claimed under the Inverted Duty Structure on the ITC accumulated on Inputs. Refund not allowed on accumulated ITC on Services and Capital Goods.

[PAWAN KUMAR]

As per my view you may claim refund as per section 54(3)CGST ACT.

[Ganeshan Kalyani]

Sec. 54 (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilised input tax credit shall be allowed in cases other than––

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

[KASTURI SETHI]

A perusal of profile of Sh.Rajendra Prasad CA, his experience and replies posted in Discussion Forum reveals that he is an expert par excellence. His replies have enriched my knowledge.

AI Summary

Tractor Manufacturer Eligible for Refund of Unutilized ITC Under Section 54(3) CGST Act; Input Services Dispute Ongoing A tractor manufacturer inquires about claiming excess Input Tax Credit (ITC) under the inverted duty structure, where inputs are taxed at 18% and tractors at 12%. Respondents confirm that a refund of unutilized ITC is possible under section 54(3) of the CGST Act, 2017, but note ongoing disputes regarding eligibility for input services refunds. They advise including input services in claims to avoid future time-bar issues if judicial resolutions allow such refunds. It is clarified that refunds are not available for transitional credit under this structure, as per CBIC guidelines.