The term "Inverted tax structure" describes a circumstance in which the input GST rate—that is, the GST paid on inputs received—is higher than the output GST rate—that is, the GST paid on supplies made to customers.
Simply expressed, when comparing purchases tax to sales tax, the taxpayer pays more tax overall. Because of the reverse tax system, a taxpayer is entitled to a return of the input tax credit (ITC).
Anyone who is registered can apply for a refund of any unused input tax credits (ITC). Because the input tax rate is higher than the output tax rate, ITC resulting from the reverse tax structure may be claimed at the conclusion of each tax period where the credit has accrued.
The time frame for which the return must be filed is known as the tax period. Section 54 (3) (ii) of the CGST Act, 2017 read with Rule 89 (5) of the CGST Rules, 2017,provides for a refund of accumulated input tax credit on account of the inverted duty structure.
Supply of information technology products by an IT Company to Government Departments, PSUs, and to other Research and Educational Institutes. In these instances, 18% GST is levied at the time of procurement from the Distributors and/or Original Equipment Manufacturers.
When such goods are supplied to specified institutions (mentioned above) 5% GST is levied. However, the same goods, when supplied to other users attract 18% GST. In this case, to the extent of supplies to specified end users for which a concessional rate has been prescribed, there is accumulation of input tax credit on account of an inverted duty structure.
A person claiming a refund must apply in Form GST RFD-01. GSTR-1 and GSTR-3B have to be filed for the relevant tax period for which you want to file a refund application for the accumulated ITC.
RFD-01 has to be filed within two years from the end of the financial year in which such a claim for refund arises.
The GST paid on the goods or services provided is accumulated in the e-cash ledger of your registered GST account. Pre-paid taxes or GST paid reflects on your GST portal account. In case of uncertainty in determining the value of tax or tax rate, sometimes the supplier pays the tax provisionally and later claims the excess tax refund in the final assessment. Any excess payment or GST paid by mistake can be claimed from the portal by submitting relevant documents.
All the balance of GST will be shown in the Electronic cash ledger from where you can claim the refund. Refund of excess balance in the electronic cash ledger can be filed, while the GSTR 3B is used for filing the yearly return.
Apart from the reasons mentioned earlier, if the taxpayer does not fall in any category and still has a refund, he can claim on the grounds of "any other".
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