Refund Application of Accumulated ITC on Account of Sales Made to Exporter@ 0.10%

[NILESH PITALE]

Dear Expert

We are in Dealing of Goods Having GST Rate @18% and The same Goods we are selling to the Exporter @ 0.10%, Therefore There is Huge ITC Accumulated in our credit ledger,

Our Question : Can we apply for refund as per circular No Circular No. 125/44/2019 - GST dated 18.11.2019, Please Guide

[Sadanand Bulbule]

In terms of following Para No.59 of the CBIC Circular No.125/44/2019, you are entitled for refund of accumulated ITC:

Clarifications on other issues

59. Notification No. 40/2017 - Central Tax (Rate) and notification No. 41/2017 - Integrated Tax (Rate) both dated 23.10.2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications. It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and / or the recipient and the goods may be procured at the normal applicable tax rate. It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of Integrated tax.

Reply

[KASTURI SETHI]

Dear Querist,

Refund is allowed. What created doubt in your mind ?

[YAGAY andSUN]

Yes, in the given facts, refund of accumulated Input Tax Credit (ITC) is admissible, subject to statutory conditions.

You are procuring goods on payment of GST at 18% and supplying the same at a concessional rate of 0.1% to exporters under Notification No. 40/2017-Central Tax (Rate). This results in accumulation of ITC due to a higher rate of tax on inputs as compared to output supplies.

As per Section 54(3) of the CGST Act, 2017, refund of unutilized ITC is permissible in cases of inverted duty structure, i.e., where the rate of tax on inputs exceeds the rate on output supplies. Your case squarely falls within this category.

Further, Circular No. 125/44/2019-GST prescribes the procedural framework for filing refund applications, including documentation, timelines, and the manner of filing Form GST RFD-01. The said circular supports the processing of such refund claims but does not independently determine eligibility, which is governed by the Act and relevant notifications.

It is pertinent to ensure that the goods in question are not covered under the restriction specified in Notification No. 5/2017-Central Tax (Rate), as refund of ITC is not allowed in respect of notified goods under the inverted duty structure.

Subject to the above condition and proper compliance with Rule 89(5) of the CGST Rules regarding computation, your claim for refund of accumulated ITC is legally tenable.

[Pinnacle Tax Advisor]

Yes, Refund is allowed on account of inverted duty rate structure u/s 54(3)(ii)- refer to Circular 125/44/2019-GST

[Shilpi Jain]

This is a case of inverted duty structure i.e. GST on inputs is higher than GST on output. You can claim refund.

 

AI Summary

Inverted duty structure allows refund of accumulated ITC on concessional supplies made to exporters. Refund of accumulated input tax credit is available where goods are purchased at 18% GST and supplied to exporters at the concessional rate of 0.1%, creating an inverted duty structure. Such refund claims may be made under section 54(3) of the CGST Act, subject to Rule 89(5), the procedural framework in CBIC Circular No. 125/44/2019-GST, and the restriction that goods notified under the relevant rate notification are excluded.