Inclusion of RCM while calculating refund for inverted duty structure

[Vineet Agrawal]

As per Rule 89 of CGST Rules,

Maximum Refund Amount = [(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover] - [Tax payable on such inverted rated supply of goods and services x (Net ITC ÷ ITC availed on inputs and input services)]

Should input tax claimed under the head of RCM be included in 'ITC availed on inputs and input services' while calculating the refund amount? [Note: RCM has been paid on inward services received]

[Padmanathan KV]

As there is no specific bar on ITC of RCM paid on inward services/ inputs in R.89, the same can be included in the formula as well.

[Kiran Tahelani]

I agree with Padmanathan Kollengode. you can rightly include ITC of RCM. But to the best of my knowledge refund on ITC on account of service is not available, therefore no point of discussion of inclusion of RCM paid on account of inward services.

Experts can correct me if i am wrong

[Padmanathan KV]

Ld Kiran Ma'am, you are correcf. "Net ITC" in formula will include only ITC of inputs (inc RCM paid on inputs if any) to my understanding .

[Shilpi Jain]

In the ITC availed on inputs and input services include the RCM credit. Net ITC would be ITC of inputs only.

[Vineet Agrawal]

Thank you everyone for your valuable inputs.

AI Summary

Reverse charge credit inclusion in inverted-duty refund: RCM on inputs can be counted in ITC components, service ITC constrained. Whether credit under the reverse charge mechanism on inward supplies is includible in the Rule 89 inverted-duty refund formula turns on the formula's components: RCM-paid ITC on inputs may be included in 'ITC availed on inputs and input services,' and Net ITC should be understood as ITC attributable to inputs (including RCM on inputs). Refundability of ITC attributable to services remains constrained and generally not available under the inverted duty refund framework.