Refund under Inverted Tax Structure in case of multiple business

[Sumeet Tholle]

Dear Sir,

We are having 2 business(activities) under one GSTIN.

In one trading activity input & output rate are same but in other manufacturing activity, input rate is 28% (mollasses) & output rate is 5% and hence there is accumulation of ITC.

Now, we filed refund under Inverted Tax Structure and we considered 'Net ITC' as ITC of inputs only of both activities. But the officer asked to remove ITC of inputs of trading activity but considering 'Adjusted Total Turnover' as Turnover of both activity i.e. trading as well as manufacturing.

As per formula, refund=(Turnover of inverted rated supply of goods & services/Adjusted Total Turnover )*Net ITC-Tax payable on inverted rated supply of goods & Services

Here the Net ITC means ITC availed on inputs i.e ITC of inputs of that GSTIN.

As per formula, our claim is correct.

Request for expert guidance.

Thanks.

[KASTURI SETHI]

Have you filed refund claim in the office of CGST or SGST ?

[Sumeet Tholle]

Sir,

SGST, Maharashtra

[KASTURI SETHI]

Where rate of input and rate of output (the finished goods) are the same, the turnover of that unit has no correlation with the refund claim.

Hence I agree with your view.

[Sumeet Tholle]

Thanks Sir.

[Sumeet Tholle]

Thanks Sir.

Sir, but then this will be against that formula.

Net ITC & Agg. Turnover will not be as per formula.

[KASTURI SETHI]

Dear Sh.Sumot Tholle,

"As per formula, our claim is correct." What is the basis of this expression mentioned in your query by you ?

Pl. let me know.

[KASTURI SETHI]

It is a technical issue. Relief is possible only through litigation.

[Shilpi Jain]

The claim of the officer is illogical. If the ITC of that business is not considered then the turnover should also not be regarded.

Also rule 89(5) does not restrict taking the ITC of the trading activity for the inverted duty refund. In such case the turnover should also be considered in the denominator

AI Summary

Refund under inverted tax structure: whether trading-activity input credits must be included when computing proportional refund. Dispute concerns whether, for an inverted-rate refund under a single GSTIN with trading and manufacturing activities, Net ITC should include input tax credits of the trading activity while Adjusted Total Turnover captures turnover of both activities. The officer excluded trading ITC but retained its turnover; commentators argue Rule 89(5) does not prohibit using trading inputs in the refund calculation and recommend litigation to resolve the technical interpretation.