Refund of ITC accumulated due to Inverted Tax Structure (RFD-01A)

1. What is Inverted Tax Structure in the GST regime?

The term ‘Inverted Tax Structure’ refers to a situation where the rate of tax on input received (i.e. Input tax credit received) is more than the rate of tax (i.e. the tax paid) on output supplies. As a result, the higher tax paid on input supplies gets accumulated in the Electronic Credit Ledger of the receiver Taxpayer. The Taxpayer can claim the refund of ITC accumulated on account of Inverted Tax structure by filing the refund application form RFD-01A. (Refer Section 54(3) (ii) of the CGST Act 2017)

2. What is needed to file for refund of accumulated ITC of IGST / CGST / SGST, export of goods?

You can file for refund of IGST / CGST / SGST on account of ITC accumulated due to Inverted Tax Structure, if you have filed GSTR1 and GSTR-3B of the relevant tax period, for which refund is to be claimed.

However, in case registered persons having aggregate turnover of up to Rs 1.5 crores in the preceding financial year or the current financial year are opting to file FORM GSTR-1 quarterly (notification No. 57/2017-Central Tax dated 15.11.2017 refers), such persons shall apply for refund on a quarterly basis. (As of now, monthly refund filing functionality is available. Multiple tax period functionality for filing refund application will be available soon). Please note that such refund on account of inverted tax structure is not available in case of exempted or nil rated supplies.

3. How can I file for refund on account of ITC accumulated due to Inverted Tax structure, and how will the disbursement be made?

1. Ensure that you have filed GSTR 1 and GSTR-3B of the relevant tax period for which you want to file for refund of the accumulated ITC on the basis of balance available in the Electronic Credit Ledger.
2. Once the eligibility to file for refund is established, fill-out the form RFD-01A and file it in GST Portal.
3. Upon filing the form RFD-01A, GST Portal will generate an ARN.
4. After ARN generation, Taxpayer needs to take prints of the filed application and the Refund ARN Receipt generated on the portal, and submit the same along with supporting documents to the jurisdictional authority.
5. After Refund Application is processed by tax official, refund will be disbursed manually.
6. In case of the taxpayer where the jurisdictional authority of state/ center yet not allotted then the taxpayer has to contact to the Nodal officer of the corresponding state/ center.

4. Is it mandatory to file GSTR-1, GSTR-2 and GSTR-3 in order to file for refund?

If the Taxpayer has filed GSTR1 and GSTR-3B, then he / she need not file GSTR-2 and GSTR-3 for filing refund form RFD-01A. Presently GSTR-2 and GSTR- 3 are deferred, hence for the reason taxpayer has to give manual undertaking to the jurisdictional authority (Refer circular no 24/24/2017-GST dated 21/12/2017 for details)

5. Is there any time limit to file for refund of ITC accumulated due to Inverted Tax Structure?

Yes, as per Explanation 2 (e) of subsection 14 of Section-54, the refund application in form RFD-01A needs to be filed within 2 years from the end of financial year in which such claim for refund arises

6. In which bank account will the refund amount be credited? Is it one of the accounts that I registered in GST Portal?

Yes, the refund amount will be credited to one of the bank accounts that you have added while filing your registration application on the GST Portal. At the time of filling out form RFD-01A, you will be required to select a bank account from the list of your linked / registered accounts in the GST Portal for crediting refund to that account. In case you want refund in another preferred bank account which is not appearing in the drop down list, you will have to add that bank account by filing amendment of registered (non-core) form. The bank account added by amendment form will get added to the drop-down list.

7. What is Net ITC?

Net ITC means 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:

(4A) In the case of supplies received on which the supplier has availed the refund of input tax credit, in respect of other inputs or input services used in making zero-rated supply of goods or services or both.

(4B) In the case of supplies received on which the supplier has availed input tax credit in respect of inputs received for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods.

8. What is Turnover of inverted rated supply of goods?

The value of inverted supply of goods made during the relevant period without payment of tax under bond or letter of undertaking.

9. What is Tax payable on such inverted rated supply of goods?

The tax amount payable on such inverted rated supply of goods under the same head i.e. IGST, CGST, SGST. Cess amount to be provided separately by the taxpayer.

10. What is Adjusted Total Turnover?

Adjusted total turnover is the turnover in a State or a Union territory, as defined under clause (112) of section 2 of CGST Act, excluding the value of exempt supplies other than zero-rated supplies and the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both, if any, during the relevant period.

11. What is the ‘SAVE’ feature in refund application?

The refund application must be saved before filing.

• The system will flash a confirmation message when saving the application for the first time.
• The system displays a confirmation message upon saving the application.
• Application can be saved at any stage and can be retrieved using the My Saved / Submitted Applications option under Refunds
• Saving the application activates the Declaration checkbox.
• Saved applications are stored in the system for 15 days from the date of creation of refund application form, after which they will get automatically deleted. Taxpayer can edit and file saved refund application by navigating to “My Saved/Submitted Applications” under Refunds within 15 days of the creation date of refund application form.

12. Where can I track my filed refund application?

• Filed applications (ARNs) can be downloaded as PDF documents using “My Saved / Submitted Applications” option under Refunds.
• Filed applications can be tracked using the Track Application Status option under Refunds also by using ARN.

13. I am not able to make any changes in the refund application? What could be the issue?

Refund applications can be saved for 15 days from the date of creation of refund application form. Within 15 days, refund application form can be edited and deleted. On click of “Proceed” button in refund application form, there would be two options “Back” and “File”. If tax payer wants to make changes, he can click on “Back” button and make changes in the refund application form. On click of “File” button in refund application form, no changes can be done in refund application and no application can be deleted after filing.

14. When is debit entry of refund amount claimed is made in ledger, while filing refund due to inverted duty structure?

A debit entry shall be made in the Electronic Credit Ledger for the amount claimed as Refund on filing of refund application form by clicking on “File” button. On click of File, ARN is generated on submission of the refund application.

User Manual

What are the steps to file for refund of ITC accumulated due to Inverted Tax Structure, on the GST Portal?

To file for refund of ITC accumulated on account of Inverted Tax Structure, perform the following steps on the GST Portal:

1. Access the GST Portal. The GST Home page is displayed.

2. Navigate to the Services > Refunds > Application for Refund option. The Select the refund type page is displayed.

3. Select the Refund on account of ITC accumulated due to Inverted Tax Structure radio button.

4. Select the tax period (year and month) for which the refund application needs to be filed.

5. Click the CREATE button corresponding to your selected refund type.

6. In the Table Computation of refund to be Claimed (Statement 1), perform the following steps:

a.    In column-1 (Turnover of inverted rated supply of goods), enter the turnover of inverted rated supply of goods by referring to column-3.1(a) of the Form GSTR-3B. The figure in column-1 is not pre-populated.

b.    In column-2 (Tax payable on such inverted rated supply of goods), enter the tax payable on such inverted rated supply of goods. Taxpayer shall enter the sum of Integrated Tax, Central Tax and State/UT Tax in merged tax column and enter cess amount separately.

c.    In column-3 (Adjusted total turnover), enter the adjusted total turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period.

d.    In column-4 (Net input tax credit), The figures of Net Input Tax Credit (ITC) in column-4 may be taken from column-4(C) of the Form GSTR-3B respectively. Net Input Tax Credit shall be auto-populated from the Electronic Credit Ledger of the taxpayer and taxpayer can edit the Net ITC, if required to exclude, the ITC availed on input services and the ITC of refund claimed under Rule 89 (4A) and/ or (4B). Sum of Integrated Tax ITC, Central Tax ITC and State/UT Tax ITC would be populated on aggregation basis. And Cess ITC amount would be auto-populated separately.

Notes:

Maximum refund amount will be determined by using the formula given in rule 89(4) of the CGST rules.

The formula for calculating refund on account of ITC accumulated due to Inverted Tax Structure is:
Refund Amount = (Turnover of inverted rated supply of goods X Net input tax credit / Adjusted total turnover) – Tax payable on such inverted rated supply of goods

In this formula:

(A) “Refund amount” means the maximum refund that is admissible.

(B) “Net ITC” means 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

(C) “Turnover of inverted rated supply of goods” means the value of inverted supply of goods made during the relevant period without payment of tax under bond or letter of undertaking.

(D) “Tax payable on such inverted rated supply of goods” means tax payable on such inverted rated supply of goods under the same head i.e. IGST, CGST, SGST.

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2 of CGST Act, excluding the value of exempt supplies other than zero-rated supplies and the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both, if any, during the relevant period.

(F) “Relevant period” means the period for which the claim has been filed.

The maximum Refund Amount will be auto-calculated based on the above formula.

7. After filling the appropriate figures in table for Computation of Refund to be claimed (Statement 1), tax payer shall enter the amount of refund to be claimed in the “Amount Eligible for Refund” Table.

Notes:

• The values as computed in the Amount eligible for Refund table are:
  • Balance in Electronic Credit ledger at the end of tax period (balance amount remaining after the return for the said period is filed) for which refund is claimed is auto populated : Balance available in the Electronic Credit Ledger immediately after filing GSTR-3B for the respective tax period is displayed
  • Balance in Electronic Credit ledger at the time of filing of refund application is auto populated
  • Refund to be Claimed has to be entered by taxpayer under each head which should be less than the unutilized ITC balance available in its ITC ledger for each head auto populated in 1^st and 2^nd Column.
• “Eligible Refund Amount to be claimed” will be the lowest of all of the following:
  • Total ‘Refund to be Claimed’ shall be less than or equal to Maximum refund allowable as per the specified formula and indicated in the last column of the first table (Column denoted as (5) in Table named “Maximum refund amount to be claimed)
  • Total Refund to be Claimed entered in the heads of CGST/IGST/SGST, when taken on aggregated for all heads (excluding Cess) shall be less than or equal to total of CGST/IGST/SGST under Maximum refund allowable in first table (Column denoted as (5) in Table named “Maximum refund amount to be claimed)
  • Total Refund to be Claimed entered in Cess shall be less than or equal to Cess under Maximum refund allowable in first table (Column denoted as (5) in Table named “Maximum refund amount to be claimed)

8. Click SAVE to upload your entered refund details to the GST Portal.

Notes:

• The refund application must be saved. Before click on Proceed, taxpayer shall save the refund application.
• The system will flash a confirmation message when saving the application for the first time.
• The system displays a confirmation message upon saving the application.
• Application can be saved at any stage and can be retrieved using the My Saved / Submitted Applications option under Refunds.
• Saved applications are stored in the system for 15 days, after which they get deleted automatically. Within 15 days from the date of creation, saved application can be edited and filed.
• Saving the application activates the Proceed button.

9. Select the Bank Account Number from the drop-down list.

Notes:

• The bank accounts displayed in the drop-down are those accounts that were provided during GST registration.
• The taxpayer must select a bank account from the drop-down list in order to receive refund. In case you want refund in another preferred bank account which is not appearing in the drop-down list, please add that bank account by filing amendment of registered (non-core) form.

10. Click PREVIEW button to preview the details in PDF format.

11. Select the declaration checkbox.

12. Click the PROCEED button.

13 Select the Verificationcheckbox.

14 In the Name of Authorized Signatorydrop-down list, select the name of authorized signatory.

Note: If you want to edit the refund application form, click on “Back” button and make changes.

15. Click either FILE WITH DSC or FILE WITH EVC option.

Notes:

In Case of DSC:

• Click the PROCEED button.
• Select the certificate and click the SIGN button.

In Case of EVC:

o    Enter the OTP sent to email and mobile phone number of the authorized signatory registered in the GST Portal, and click the VERIFY button.

16. A success message is displayed, and the status is changed to Submitted. The Application Reference Number (ARN) receipt is downloaded.

17. Open the Refund ARN Receipt downloaded as a PDF document.

18. The Refund ARN Receipt is displayed.

Once Application Reference Number (ARN) is generated, take a print of Application and submit to the Jurisdictional Authority manually along with other relied upon documents as required under RFD-01.

Taxpayer will get SMS and email on the registered mobile number and email id on filing of refund application form.

Note: A debit entry shall be made in the Electronic Credit Ledger for the amount claimed as Refund in the Refund Claim Matrix.

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