"INVERTED DUTY STRUCTURE"

ISSUES IN "INVERTED DUTY STRUCTURE" REFUND

Research by: Abhishek Raja Ram; 9810638155

Q1. What are the implications for refund claims under the inverted duty structure when a circular has been struck down as ultra vires by multiple High Courts, particularly about CBIC Circular No. 135/05/2020-GST?

A1. Refund claims under the inverted duty structure were rejected based on circulars struck down as ultra vires, rejection orders were set aside, and the matter was remanded for fresh consideration.

Eveready Spinning Mills Pvt. Ltd. - Madras High Court

(2024) 22 CENTAX 237

Q2. When is the relevant date for refund under Section 54, Clause (2) of the second Explanation of the CGST Act, 2017, in cases where the refundable amount initially set off against demand has been restored to the credit ledger upon appeal?

A2. Where the assessee/petitioner’s refund application for ‘Inverted Duty Structure’ was rejected due to limitation, but refundable amount was set off against demand raised before expiry of limitation period and subsequently restored on appeal, the High Court held that upon appeal, restored amount became refundable as consequence of appellate order, not as ‘Inverted Duty Structure’ refund - Therefore, relevant date for refund is date of communication of appellate order as per Clause (2) of second Explanation to Section 54.

Induvarna LPG Bottling Pvt. Ltd. - Patna High Court

(2024) 19 CENTAX 325

Q3. How should refund applications for unutilised input tax credit under the inverted tax structure be examined, especially when there is a turnover mismatch between GSTR-1, GSTR-3B, and GSTR-2A returns?

A3. Where assessee's application for refund of unutilised ITC due to inverted duty structure was rejected due to turnover mismatch in GSTR returns, since assessee had submitted invoices issued by supplier and invoices raised by it, refund application was to be processed in accordance with Circular No. 135/05/2020-GST, dated 31-3-2020 matter was to be remanded for reconsideration.

Sri Krishna Textile Mills - Madras High Court

(2024) 87 GSTL 397

I hope you will find this useful.

Thanks and Regards

Abhishek Raja?Ram

9810638155