INVERTED DUTY STRUCTURE

[BARUN MUKHERJEE]

Respected sir,

One of my clients manufacturing e-rickshaws where the rate of tax on inputs purchased is more than the rate of tax on outward supplies so the said taxpayer is eligible to get refund under inverted duty structure. And the taxpayer is also engaged to resale of batteries on which tax rate is 28% and also sale the same at the rate of 28%. Now my question is that when we calculate maximum refund amount as per rule 89(5) which figure will be considered as net input tax credit. Is there shown total input as raw materials purchased for manufacturing of e- rickshaws and batteries purchased for trading purpose or only considered raw materials purchased for manufacturing purpose….?

AI Summary

Clarification Sought on Calculating Maximum Refund Under Rule 89(5) for E-Rickshaw Manufacturer Facing Inverted Duty Structure A client manufacturing e-rickshaws faces an inverted duty structure issue, where input tax rates exceed output tax rates, potentially qualifying for a refund. The client also resells batteries taxed at 28%. The query seeks clarity on calculating the maximum refund amount under rule 89(5) and whether to include inputs for both manufacturing and trading. Responses highlight the lack of clear guidance, with one noting that excluding traded goods from calculations could skew results. A court decision suggests refunds shouldn't be denied if input and output tax rates match, emphasizing that certain circulars cannot override statutory provisions. Another participant shares a similar issue with e-bikes and battery installations.