Circular No. 181/13/2022-GST [C10-66X]

Attention is invited to sub-section (3) of section 54 of CGST Act, 2017, which provides for the refund of unutilized input tax credit in cases where credit is accumulated on account of rate of tax of inputs being higher than the rate of tax on output supplies i.e. on account of inverted duty structure. Sub-rule (5) of rule 89 of CGST Rules, 2017 prescribes the formula for grant of refund in cases of inverted duty structure. Vide Notification No. 14/2022-Central Tax dated 05.07.2022, amendment has been made in the formula prescribed under sub-rule (5) of rule 89 of the CGST Rules, 2017. Further, vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022, which has been made effective from 18.07.2022, the restriction has been placed on refund of unutilised input tax credit on account of inverted duty structure in case of supply of certain goods falling under chapter 15 and 27.

2. Representations have been received from the trade and the field formations seeking clarification on various issues pertaining to the implementation of the above notifications. In order to clarify the issues and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues as under:

S. No. Issue Clarification

1. Whether the formula prescribed Vide Notification No. 14/2022-Central Tax under sub-rule (5) of rule 89 of the dated 05.07.2022, amendment has been CGST Rules, 2017 for calculation of made in sub-rule (5) of rule 89 of CGST refund of unutilised input tax credit Rules, 2017, modifying the formula on account of inverted duty structure, prescribed therein. The said amendment is as amended vide Notification No. not clarificatory in nature and is applicable 14/2022-Central Tax dated prospectively with effect from 05.07.2022. 05.07.2022, will apply only to the Accordingly, it is clarified that the said refund applications filed on or after amended formula under sub-rule (5) of rule

Circular No. 181/13/2022-GST

05.07.2022, or whether the same will 89 of the CGST Rules, 2017 for calculation also apply in respect of the refund of refund of input tax credit on account of applications filed before 05.07.2022 inverted duty structure would be applicable and pending with the proper officer in respect of refund applications filed on or as on 05.07.2022? after 05.07.2022. The refund applications filed before 05.07.2022 will be dealt as per the formula as it existed before the amendment made vide Notification No. 14/2022-Central Tax dated 05.07.2022.

2. Whether the restriction placed on Vide Notification No. 09/2022-Central Tax refund of unutilised input tax credit (Rate) dated 13.07.2022, under the powers on account of inverted duty structure conferred by clause (ii) of the first proviso in case of certain goods falling under to sub-section (3) of section 54 of the chapter 15 and 27 vide Notification CGST Act, 2017, certain goods falling No. 09/2022-Central Tax (Rate) under chapter 15 and 27 have been specified dated 13.07.2022, which has been in respect of which no refund of made effective from 18.07.2022, unutilised input tax credit shall be allowed, would apply to the refund where the credit has accumulated on applications pending as on account of rate of tax on inputs being higher 18.07.2022 also or whether the same than the rate of tax on the output supplies of will apply only to the refund such specified goods (other than nil rated or applications filed on or after fully exempt supplies). The said notification 18.07.2022 or whether the same will has come into force with effect from be applicable only to refunds 18.07.2022. pertaining to prospective tax periods? The restriction imposed vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022 on refund of unutilised input tax credit on account of inverted duty structure in case of specified goods falling under chapter 15 and 27 would apply prospectively only. Accordingly, it is clarified that the restriction imposed by the said notification would be applicable in respect of all refund applications filed on or after 18.07.2022, and would not apply to the refund applications filed before 18.07.2022.

3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

4. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.