TaxTMI 
TaxTMI 
Clarification regarding removal of restriction of refund of accumulated ITC on fabrics.
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....dit accumulated on account of inverted duty structure on fabrics for the period upto the 31st July, 2018. 2. The said notification No. 38/1/2017-Fin(R&C)(5/2017-Rate) was issued in exercise of powers vested under section 54 of the Goa Goods and Services Tax Act, 2017 (Goa GST Act, 2017). It notifies the items on which refund of accumulated input tax credit on account of inverted duty structure is not allowed. Some of the items notified under this notification are fabrics. A total 10 categories of fabrics covered in the notification are as follows: S.No. Tariff item, heading, sub-heading or Chapter Description of Goods (1) (2) (3) 1. 5007 Woven fabrics of silk or of silk waste 2. 5111 to 5113 Woven fabrics of wool or of animal ....
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....o. 38/1/2017-Fin(R&C)(5/2017-Rate). "Provided that,- (i) nothing contained in this notification shall apply to the input tax credit accumulated on supplies received on or after the 1st day of August, 2018, in respect of goods mentioned at serial numbe₹ 1, 2, 3, 4, 5, 6, 6A, 6B,6C and 7 of the Table below; and (ii) in respect of said goods, the accumulated input tax credit lying unutilised in balance, after payment of tax for and upto the month of July, 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse.". 5. The doubts raised, with reference to changes made vide notification No. 38/1/2017-Fin(R&C)(20/2018-Rate), are as follows: (1) Whether this notification seeks to lapse all the input tax cred....
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.... the subject matter of principal notification, i.e. accumulated credit on account of inverted duty structure in respect of stated fabrics. The net effect of clause (ii) in the said proviso is that it provides for lapsing of input tax credit that would have been refundable in terms of section 54 of the Act, for the period prior to the 31st July, 201 8, but for the restriction imposed vide said notification No. 38/1/2017-Fin(R&C)(5/2017-Rate) and that too to the extent of accumulated ITC lying unutilised after making payment of GST upto the month of July, 2018. In other words, in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases m....
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.... (1) A manufacturer who produces only manmade fibre fabrics, had a turnover of ₹ 5 crore for the period from July, 2017 to July 2018 [or for the relevant period for fabrics on which refund was blocked subsequently by inserting entries in notification No. 38/1/2017-Fin(R&C)(5/2017-Rate)]. Tax payable thereon is ₹ 25 lakh (@ 5%). Assuming the net ITC availed on inputs, during this period, was ₹ 30 lakh. Applying the formula prescribed in rule 89 (5), the accumulated ITC on account of inverted duty structure comes to ₹ 5 lakh. In other words, this manufacturer has accumulated ₹ 5 lakh on inputs on account of inverted duty structure during the said period. If ITC balance lying unutilized with him is more than this ....
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....at ITC relating to capital goods and input services does not lapse. 11. However, a manufacturer may have closing stock of finished goods and inputs as on 31.7.2018. A doubt has been raised as to whether input tax relating thereto shall also lapse and concern has been expressed that this would amount to double taxation. It is clarified that the proposed amendment seeks to lapse only such credit that has been accumulated on inputs on account of inverted duty structure. Therefore, in case a manufacturer, whose accumulated ITC is liable to lapse in terms of said notification, has certain stock lying in balance as on 31.7.2018, the input tax credit involved in inputs contained in such stock (including inputs lying as such) may be excluded for d....