CBIC Clarifies on ITC Refund under Inverted Duty Structure

Central Board of Indirect Taxes and Customs (CBIC) clarified amendments to section 54 of the Central Goods and Services Tax (Central GST) Act, 2017. This section provides the procedure for obtaining the refund of unutilised Input Tax Credit (ITC) accumulated under the inverted duty structure.

Earlier, CBIC issued Central Tax Notification No. 14/2022 dated 05th July 2022, amending CGST Rule 89(5), i.e., the formula for granting refunds in cases of inverted duty structure. Also, it issued Central Tax (Rate) Notification No. 09/2022 on 13th July 2022, restricting certain goods falling under chapters 15 and 27 while claiming the refund of unutilised in case of the inverted duty structure. 

However, the department received representations from the businesses and field formations seeking clarification on implementing the above notifications. Accordingly, CBIC clarified them as below:

1. It is clarified that the amended formula under CGST Rule 89(5) via Central Tax notification no: 14/2022 for the calculation of refund of accumulated ITC under inverted duty structure is applicable for refund applications filed on or after 5th July 2022. Hence, the refund applications filed before 5th July 2022 shall be processed with the earlier formula.
2. The Central Tax (Rate) notification no. 09/2022, dated 13the July 2022, restricting certain goods falling under chapters 15 and 27 while claiming the refund of accumulated ITC comes into force prospectively only with effect from 18th July 2022. Hence, this amendment applies to refund applications filed on or after 18th July 2022 but not those filed before 18th July 2022.

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