Clarification on issue of claiming refund under inverted duty structure

The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification on the issue of claiming a refund under an inverted duty structure where the supplier is supplying goods under some concessional notification.

Earlier Board had issued the circular no 135/05/2020, dated 31.03.2020 which stipulates that refund under the Inverted duty structures in terms of section 54(3)(ii) of the CGST/RGST would not be available where the Input and Output supplies are the same.

In order to clarify the circular no 135/05/2020, dated 31.03.2020, board has issued a clarification in circular no 173/05/2022, dated 06.07.2022, and substituted in para 3.2.

As per the substituted paragraph, it has been clarified that where the input and output goods are same but the output supplies are made under a concessional notification due to which the rate for tax on output supplies is less than the rate of tax on inputs. In such cases, as the rate of tax of output supply is less than the rate of tax on inputs at the same point of time due to supply of goods by the supplier under such concessional notification, the credit accumulated on account of the same is admissible for refund.

However, this shall not apply to the case where the output supply is either NIL rated or fully exempted or where the supply of such goods or services is not notified by the Government for their exclusion from the refund of accumulated ITC.

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