Rules

Rule 89(5) of CGST Rules:

Maximum Refund Amount =

 {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover}

- tax payable on such inverted rated supply of goods

Explanation:-

For the purposes of this sub rule, the expressions ?

Net ITC and ?

Adjusted Total turnover

shall have the same meanings as assigned to them in sub-rule (4)

Net ITC (As per Rule 89(4):-

Net ITC means Input Tax Credit Availed on Inputs and Input Services during the relevant period.

Adjusted Total Turnover :-

Means turnover in a state or a union territory, as defined under section 2(112),

excluding the value of exempt supplies

other than zero rated supplies, during the relevant period

{(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover}

(15,00,000*210000)/1500000 -75000 = 135000

Amendment has been made via Notification No 21/2018 Central Tax dated 18th April 2018 

For Notification, Click Below:

1. in rule 89, for sub-rule (5), the following shall be substituted, namely:-

“(5). In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:-

Maximum Refund Amount =

{(Turnover of inverted rated supply of goods and services)

x Net ITC

÷ Adjusted Total Turnover}

- tax payable on such inverted rated supply of goods and services.

Explanation:- For the purposes of this sub-rule, the expressions –

 (a) “Net ITC” shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

(b) “Adjusted Total turnover” shall have the same meaning as assigned to it in sub-rule (4).”

Refund Amount = 1500000*120000/1500000-75000

                       = 45,000 Rs.

Further Amendment has been made via Notification No 26/2018 Central Tax

With effect from 01st July, 2017,

For Notification, Click Below:

in rule 89, for sub-rule (5), the following shall be substituted, namely: -

“(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:-

Maximum Refund Amount =

{(Turnover of inverted rated supply of goods and services)

x Net ITC ÷ Adjusted Total Turnover}

 - tax payable on such inverted rated supply of goods and services.

Explanation:- For the purposes of this sub-rule, the expressions

(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

(b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4)

Further Amendment has been made via Notification No 39/2018 Central Tax in which they changed the meaning of Adjusted Total Turnover which was mentioned in Sub rule 4

In the said rules, in rule 89, in sub-rule (4), for clause (E), the following clause shall be substituted, namely:-

 (E) “Adjusted Total Turnover” means the sum total of the value of-

1. the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and 

1. the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

excluding

1. the value of exempt supplies other than zero-rated supplies; and
2. the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period.’.

Further Amendment has been made via Notification No 74/2018 dated 31st Dec 2018.

For Notification, Click Below:

In the said rules, in explanation (b) to sub-rule (5) of rule 89, the following clause shall be substituted, namely: -

Adjusted Total turnover and relevant period shall have the same meaning as assigned to them in sub-rule (4)

As per Sub Rule 4:- Relevant Period means the period for which the claim has been filed.

Also A Circular has also been issued

Circular No 79/53/2018

For Circular, Click below:

Gujrat High Court

VKC FOOTSTEPS INDIA PVT. LTD Versus Union of India Gujrat High Court Allowed Inverted Refund on Services as well.

For High Court Judgement, Click Below:

Supreme Court Judgement

VKC FOOTSTEPS INDIA PVT. LTD Versus Union of India 

For Supreme Court Judgement, Click Below:

Latest Amendment

Notification No 14/2022 Central Tax 

For Notification, Click Below:

In Rule 89

in sub-rule (5), for the words

tax payable on such inverted rated supply of goods and services, the brackets, words and letters

tax payable on such inverted rated supply of goods and services

x (Net ITC / ITC availed on inputs and input services)

 shall be substituted;

(15,00,000*120000/15,00,000)- (75000*120000/210000) 

= Rs 120000-42857

= Rs 77143/-