Clarifications on Inverted Duty Structure Refunds

[Prabhakar Jebakumar]

Respected experts, the goods dealt by me comes under IDS category and I have make exports of Goods without payment of tax. I have to claim refund of unutilized ITC on inverted duty structure and also on account of zero rated exports. I have following doubts.

1. While claiming refunds, whether I need to claim for input invoices belonging to the particular relevant tax period or prior periods also but reflected in GSTR-2B of relevant tax period. Eg. Suppose I file IDS refund for March 2025. Some suppliers filed GSTR-1 for Feb 2025 belatedly so the invoices get reflected in March 2025 2B. Can I include the ITC in Net ITC calculation.

2. Whether I need to reduce turnover related to Zero rated supplies from IDS turnover as I have claimed refunds under zero rated category also. Including zero rated turnover in IDS refund calculation makes double benefit/refund

3. If I make exports with payment of tax and got refunds from custom department based on Shipping bills, whether I am eligible to refunds under zero rated and IDS category

4. IGST paid while importing inputs are also eligible to be included in Net ITC

5. Kindly clarify my doubts. will be grateful.

[Sadanand Bulbule]

1. ITC can be claimed as per GSTR-2B of the refund period; even if supplier files GSTR-1 late, once it reflects in 2B you may include it in Net ITC.

2. Zero-rated turnover (exports) must be excluded from IDS refund working, since refund for exports is available separately.

3. If exports are made with payment of IGST, refund of such IGST bars IDS refund for that portion.

4. IGST on imports is eligible and can be included in Net ITC.

5. No double benefit is allowed – claim under either IDS or zero-rated, not both.

[Prabhakar Jebakumar]

Thank you sir for your clarification. regarding point no 5, kindly clarify. Eg. I have inputs ITC of Rs. 10000/- and I have zero rated sales for Rs. 25000 and inverted for 15000. Can I claim refunds proportionate ITC on two modes or not sir. 

I have ITC on inputs, input services and capital goods. Can I make exports with payment of tax so as to get refund of capital goods ITC. and also can I claim refund under zero rated and IDS for the same tax period.

[Sadanand Bulbule]

In terms of refund provisions under Section 54(3) of the CGST Act read with Rule 89, refund of ITC can be claimed either on account of zero-rated supplies made without payment of tax or on account of inverted duty structure. The same set of ITC cannot be used simultaneously for both purposes in the same tax period, and proportionate splitting of ITC into two refund modes is not permissible.

Further, refund of ITC on capital goods is specifically excluded under the law. In case of exports with payment of IGST, the refund available is that of the IGST paid on exports and not refund of ITC on capital goods.

For exports without payment of tax under LUT/Bond, refund of unutilized ITC can be claimed, but only in respect of inputs and input services, excluding capital goods.

Accordingly, you may choose the appropriate route depending upon your transactions. Refund under zero-rated supplies or inverted duty can be claimed, but not both for the same ITC in the same tax period.

[Shilpi Jain]

Pls refer the below decision which has held that - Claiming refund under zero rated supply will not disentitle from claiming refund under inverted duty structure

VSM Weavess India (P.) Ltd. v. Assistant Commissioner [2024 (1) TMI 924 - MADRAS HIGH COURT]

AI Summary

Refund of unutilized ITC: GSTR-2B inclusion allowed, zero-rated turnover excluded from IDS refunds. ITC reflected in GSTR-2B for the refund period may be included in Net ITC; zero-rated turnover must be excluded from IDS refund working; IGST on imports is includible in Net ITC. Exports with IGST permit refund of IGST only and do not allow parallel IDS refund for the same portion. Capital goods ITC is excluded from unutilized ITC refunds for zero-rated supplies, and the same ITC cannot be claimed simultaneously under zero-rated and IDS routes in the same tax period.