Whether refund of IGST paid on Export of goods &refund of Inverted tax for same tax period by taxpayer is allowed? Cir. N.125 dt.18.11.19-Declaration in Anx-A Sr. No.5 restricts refund simultaneously

[Niketan Dhumal]

Brief and Query:

Brief as under:

• Exporter has inputs taxed at 18%, output export at 12% IGST(Paid)
• Exported has claimed IGST Refund of 12% and same has been received
• Exporter has ITC accumulated due to inputs at 18% and output at 12% (inverted tax)
• Now, exporter claimed the refund under Inverted tax ((under section 54(3)(ii))
• Dept. rejected refund on ground of declaration under Cir. No.125 dt 18.11.2019.
• Circular Mandates declaration to be filed for refund claimed under section 54(3)(ii)
• declaration content as under: Second Proviso to section 54(3) - I hereby declare that the goods exported are not subject to export duty, I also declares that I have not availed any drawback of Cen excise duty/service tax/ Central tax on goods of both and that I have not claimed refund of the IGST paid on supplies in respect of which refund is claimed.

Questions :

1. Request to provide expert view on above query with relevant provisions, Case Law, Advance ruling if any
2. Whether declaration as specified under Sr. No.5 of Annexure-A of Circular 125 dt 18.11.2019 is mandatory for refund claim filed under clause ii) of section 54(3) ( Inverted tax ) ??
3. Third proviso to section 54(3) ' Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the IGST paid on such supplies' - whether this is applicable to section 54(3)(ii) also (section 54(3(ii) - is for refund claim of inverted tax ) ??
4. Our View - If the Accumulated ITC from input tax on inputs (e.g. 18& inputs), and the IGST Claim of 12% is only related to output tax(12%) exports, then we can still be eligible for inverted tax refund under clause ii) of section 54(3) for the unutilised ITC of 6%, as long as there is no double claim on same ITC portion. Whether our argument is proper according to relevant provision of law ??

[YAGAY and SUN]

The rejection of refund under Section 54(3)(ii) of the CGST Act, 2017 on the ground of non-submission of the declaration as prescribed under Circular No. 125/44/2019-GST dated 18.11.2019 is not sustainable in law, where the refund of unutilized input tax credit arises due to an inverted duty structure and there is no double benefit claimed. It is respectfully submitted that the restriction under the third proviso to Section 54(3) applies only in cases where refund of input tax credit is claimed on supplies in respect of which drawback of central tax has been availed or refund of IGST paid has already been claimed on the same supplies. In the present case, the refund of IGST paid on export of goods pertains exclusively to output tax liability at the rate of 12%, whereas the claim under Section 54(3)(ii) pertains to the accumulated unutilized input tax credit arising on procurement of inputs taxed at 18%. There is no overlap or duplication in the refund claims, and the declaration required under the said circular is procedural in nature and cannot override the statutory entitlement conferred under the CGST Act. It is a settled legal position, as upheld in Amit Cotton Industries v. Principal Commissioner, 2019 (7) TMI 472 - GUJARAT HIGH COURT, that refund of accumulated ITC under inverted duty structure is allowable even where IGST refund on exports is claimed, so long as there is no double benefit. Accordingly, the refund under Section 54(3)(ii) is legally admissible and the rejection solely on procedural grounds is without merit and liable to be set aside.

[Niketan Dhumal]

Dear Sir,

Thanks for your reply.

However, we need further clarification and relevant provisions about the declaration requirement under Cir 125 at Sr. No.5  for inverted tax refund ? because the said declaration is contrary if the Exporters claimed IGST refund and intent to avail Inverted tax refund ??

Please clarify on third Proviso applicability to clause ii of section 54(3) ??

The case law of Amit cotton pertains to cir dated 2018 compliance requirement. 

Request further clarifications and any case law or AAR in the contest of the matter

Thanks

[YAGAY and SUN]

In response to the rejection of refund claimed under Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017, it is respectfully submitted that the said rejection solely on the ground of non-submission of the declaration prescribed under Circular No. 125/44/2019-GST dated 18.11.2019 is neither tenable in law nor sustainable on facts. The petitioner is an exporter who has paid IGST at the rate of 12% on export supplies and has duly received the refund thereof. Simultaneously, the petitioner is burdened with an accumulation of unutilized input tax credit on account of procurement of inputs taxed at the rate of 18%, resulting in an inverted duty structure. The refund claim under Section 54(3)(ii) pertains strictly to the unutilized input tax credit attributable to input supplies taxed at a higher rate, and there is no overlap with the refund of IGST claimed and granted on the export of output supplies.

The third proviso to Section 54(3) prohibits refund of input tax credit only in cases where the applicant has availed drawback of central tax or has claimed refund of IGST paid on the same supplies. In the present case, the refund of IGST pertains to output tax liability on exports, whereas the refund under the inverted duty structure is limited to credit accumulated on inputs, which have not been included in the IGST refund. There is thus no double benefit or contravention of the statutory bar. The declaration mandated under Serial No. 5 of Annexure-A to the said Circular is procedural in nature and cannot curtail or override the substantive right to refund under the CGST Act. The Hon’ble Gujarat High Court in Amit Cotton Industries v. Principal Commissioner, 2019 (7) TMI 472 - GUJARAT HIGH COURThas categorically held that a refund of accumulated input tax credit under the inverted duty structure cannot be denied merely because the assessee has also claimed refund of IGST on exports, provided that there is no duplication in the claim.

The impugned rejection fails to appreciate that the Circular cannot operate to impose additional substantive conditions beyond those envisaged in the parent statute. In the absence of any revenue loss or double claim, denial of refund solely for want of a declaration is ex facie contrary to law. Accordingly, it is submitted that the refund under Section 54(3)(ii) is legally admissible, and the rejection thereof is liable to be set aside.

[Niketan Dhumal]

Thanks for your reply,

Small clarification required sir on third Proviso applicability to clause ii of section 54(3).

Case law of Amit Cotton Industries v. Principal Commissioner, 2019 (7) TMI 472 - GUJARAT HIGH COURT referred is not relevant in contest of query, the case law referred is on claiming higher drawback and igst refund and subject our query is of claiming inverted tax refund and IGST refund simultenously ?  

[Shilpi Jain]

This is a hardship where, in case of exports with payment of tax, claiming refund of ITC is restricted in line with the below proviso

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

[Meet Desai]

Yes, A supplier can claim refund under both the categories as long as the conditions specified for each category satisfied. The same was confirmed by the Madras High Court in the case of VSM Weavess India (P.) Ltd. 2025 (10) TMI 167 - MADRAS HIGH COURT, The Hon'ble High Court after considering the submissions made and facts of the case, found that it is evident that the refund claimed and received earlier pertained to zero rated supplies and not unutilized ITC. Under Section 54 of the GST Act, refund may be claimed either for unutilized ITC on account of an inverted duty structure or in respect of zero-rated exports. Therefore, the refund claim for zero rated exports does not disentitle the petitioner from claiming a refund for unutilized ITC. Hence, the first reason for rejection is untenable.

[Ghanshyam Suthar]

Here's a polished and professional version in question format suitable for posting in a GST/Finance/Pharma professional group:

In the Pharma Industry, we are procuring raw materials at 18% GST and also availing certain input services taxed at 18%. However, the final product is sold at 5% GST. We have both domestic sales and export sales.

Due to inverted duty structure (IDS) and exports, a substantial amount of ITC has accumulated and remains blocked.

We seek expert views on the following:

Option 1:

To maximize refund eligibility, can we simultaneously file:

1. Refund application under Inverted Duty Structure (IDS), and

2. Refund of unutilized ITC on exports made without payment of IGST (LUT route)

for the same tax period?

Or is there any restriction under GST law on claiming both types of refunds for the same period?

Option 2:

Can we make exports with payment of IGST @ 5% and simultaneously file refund under IDS by considering such export turnover (with payment of IGST) also as part of inverted duty structure turnover?

Are both of the above options legally permissible under GST provisions? Also, which option would be more advisable from a litigation-risk perspective while ensuring maximum legitimate refund?

This is a genuine case involving a significant amount of blocked ITC. Requesting guidance from professionals who have handled similar situations.

[Nikunj Kishorbhai Tosar]

There is so much confusion by the word "such supplies" in the third proviso to the section 54(3).

In my view, the meaning of it is that if the taxpayer has claimed IGST refund on export supplies, then, he cannot file ITC Refund of Unutilised ITC under IDS and EXPWOP/SEZWOP of those supplies.

A Taxpayer cannot take double benefit via IGST route as well as ITC route.

so, even though, the IDS arises due to Domestic as well as Export supplies both at lower rate than input then either

1. claim IGST Refund on Export supplies under IGST Route and on domestic supplies claim ITC Refund under IDS

or

2. claim ITC Refund under LUT as export without payment of tax and on domestic supplies claim ITC Refund under IDS

Further, many experts/ department officers take view that in case of multiple refund claimed under different categories for the same period, then the NET ITC should be reduced by the refund received earlier. But I am not in agreement with it.

E.g., IGST Refund claimed and received on EXPWP. then after Refund claimed under IDS. Then Net ITC calculated for IDS Refund need not to be reduced by IGST refund as in the ATTO the turnover of EXPWP is already included.

AI Summary

Refund of IGST and inverted duty ITC may coexist if the claims do not overlap on the same supplies. The discussion concerns whether refund of IGST paid on export supplies and refund of unutilised input tax credit under the inverted duty structure may both be claimed for the same tax period. One view is that the third proviso to section 54(3) bars refund only where the same supplies are used for both claims, and that the declaration in Circular No. 125/44/2019-GST is procedural and cannot override the statute. If there is no double benefit or overlap, the refund claims are described as capable of coexisting.