TaxTMI 
TaxTMI 
Clarification regarding removal of restriction of refund of accumulated ITC on fabrics.
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....ur, Hamirpur, Mandi. Kullu, Chamba, Kangra, Revenue Distt Nurpur and Una, H.P 4. The Asstt. Commissioner of State Taxes and Excise, Incharge Distt. Kinnour, H.P Dated Shimla-9 13th March, 2019. Madam/Sir, Subject: Clarification regarding removal of restriction of refund of accumulated ITC on fabrics. Certain doubts have been raised regarding the applicability and intent of notification No. 20/2018-State Tax (Rate) dated 27th July, 2018 (which seeks to amend notification No. 5/2017-State (Rate) dated 30.06.2017) relating to the provision for lapsing of input tax credit accumulated on account of inverted duty structure on fabrics for the period upto the 31% July, 2018. 2. The said notification No. 5/2017-State Tax (Rat....
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....rics with prospective effect on the input supplies received after the date of issue of notification. It was also decided to simultaneously lapse the accumulated ITC, lying unutilised, for the past period, after the payment of GST for the month of July, 2018. Accordingly, to give effect to this decision, the notification No. 20/2018-State Tax (Rate) has been issued amending notification No. 5/2017-State Tax(Rate). To keep the accounting simple, it was decided to make these changes effective from the 1 day of August, 2018. 4. Vide the said notification No. 20/2018-State Tax (Rate), the following proviso has been inserted in notification No. 5/2017-State Tax (Rate). "Provided that,- (i) nothing contained in this notificati....
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....t inter-alia prescribes that refund of accumulated ITC on account of inverted duty structure shall not be allowed in respect of fabrics as mentioned in para 2. Therefore, the restriction of refund of accumulated ITC under notification No. 5/2017-State Tax (rate) dated 30.06.2017 is applicable only in respect of refund of accumulated ITC on inputs. This notification does not put any restriction in relation to the ITC on input services and capital goods. 7. The proviso has to be read with the principal part of the notification. A comprehensive reading of amended notification makes it clear that the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulated credit on account of ....
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...., the formula as prescribed in rule 89 (5) of the HPGST rules shall mutatis mutandis apply as it applies for determination of refundable amount for inverted duty structure. Such amount shall be determined for the months from July, 2017 to July 2018 [or for the relevant period for such fabrics on which refund was blocked subsequently by inserting entries in notification No. 5/2017- State Tax (Rate)]. The accumulated input tax credit determined by each supplier using the prescribed formula lying unutilised in balance after making the payment of GST for the month of July, 2018 shall lapse. Illustrations: (1) A manufacture who produces only manmade fibre fabrics, had a turnover of Rs. 5 crore for the period from July, 2017 to ....
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....of goods+ Adjusted Total Turnover)x Net ITC} - tax payable on such inverted rated supply of goods The accumulated ITC on account of inverted duty structure shall be equal to nil (5/735-25). Thus no amount shall lapse. However, assuming that in this case the ITC availed on input is Rs. 42 lakh, the accumulated ITC on accounted on inverted duty structure is Rs. 5 lakh (5/742-25) The manner of calculation as provided in rule 89(5) would mutatis mutandis apply. 10.1 As illustrated, the application of formula prescribed in rule 89(5) ensures that 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 raise....
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....iction of refunds on zero rated supplies as was also clarified vide HPGST circular no. 18/2017. Hence the proviso has no applicability to the input tax credit relating to zero rated supplies. Accordingly, accumulated ITC on zero rated supplies shall not lapse. This is ensured by application of formula. 14. The procedure to be followed for lapsing of accumulated input tax credit: A taxable person, whose input tax credit is liable to be lapsed in terms of said notification, shall calculate the amount of such accumulated ITC, in the manner as clarified above. This amount shall, upon self-assessment, be furnished by such person in his GSTR 3B return for the month of August, 2018. The amount shall be furnished in column 4B (2) of the return [....