Mintu Engineering Works, a registered supplier in Haryana, is engaged in supply of taxable goods within the State. Given below are the details of…

(a) Section 54 (3) (ii) of the CGST Act, 2017 allows refund of unutilized input tax credit (ITC) at the end of any tax period to a registered person where the credit has accumulated on account of inverted duty structure i.e. rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council. In the given case, the rates of tax on inputs used in Products A and B (18% each) are higher than rates of tax on output supplies of Products A and B (5% each). However, Product B is notified as a product, in respect of which no refund of unutilised ITC shall be allowed under section 54 (3) (ii) . Further rate of tax on input used in the product C is carrying same rate of tax on output supplies hence it is not the case of inverted duty structure. Therefore, no refund on the Product C. Therefore, only Product A is eligible for refund under section 54 (3) (ii) . Further, rule 89 (5) stipulates that in the case of refund on account of inverted duty structure, refund of ITC 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 x ITC availed on inputs and input services) where,- A. "Net ITC" means input tax credit availed on inputs during the relevant period; B. Adjusted Total Turnover means the sum total of the value of- (a) the turnover in a State or a Union territory, as defined under section 2 (112) , excluding the turnover of services; and (b) the turnover of zero-rated supply of services determined in specified manner and non-zero-rated supply of services, excluding- (c) the value of exempt supplies other than zero-rated supplies during the relevant period. C. Relevant period means the period for which the claim has been filed. In accordance with the aforesaid provisions, the maximum refund amount which Mintu Engineering Works is eligible to claim shall be computed as follows: Tax payable on inverted rated supply of Product A = 5,00,000 × 5% = 25,000 Net ITC = 108000 (₹ 54,000 +54,000) [Net ITC availed during the relevant period needs to be considered irrespective of whether the ITC pertains to inputs eligible for refund of inverted rated supply of goods or not - Circular No. 79/53/2018-GST dated 31.12.2018] Adjusted Total Turnover = 9,50,000 (₹ 5,00,000 +3,50,000 +1,00,000) Turnover of inverted rated supply of Product A = 5,00,000 Maximum refund amount for Mintu Engineering Works is as follows: = [(₹ 5,00,000 × ₹ 108000)/9,50,000] – (₹ 25,000 x 108,000/118,000) = 33,961 (rounded off)