INVERTED DUTY REFUND FOR SERVICE PROVIDERS-AMENDMENT IN RULE 89(5)

GST Update pertaining to refund of accumulated credit on account of inverted duty structure to the service providers

GST regime introduced refund of accumulated credit on account of rate of tax on inputs being higher than rate of tax on output supplies as per section 54(3)(ii) of the CGST Act, 2017.
Since the term output supplies included both supply of goods and services, it was interpreted that the supplier of goods or supplier of services where rate of tax on inputs is higher than rate of tax on output supplies would be eligible to claim the refund of inverted duty structure as per section 54(3)(ii) of the CGST Act, 2017. Moreover, it was also mentioned in the said provision that the government may notify the supplies of goods or services on which the refund of inverted duty structure would not be admissible which also strengthened the interpretation that the refund of inverted duty structure was available to service providers.

However, the mechanism for claiming refund under Rule 89(5) of the CGST Rules, 2017 did not support this interpretation because the formula mentioned therein only specified the “Turnover of inverted rated supply of goods”. In the absence of words “and services” after this phrase and the phrase “Tax payable on such inverted rated supply of goods”, refund claims on account of inverted duty structure filed by service providers were being rejected on the grounds that the formula prescribed in Rule 89(5) does not mention ‘services’ and so refund is not admissible. The cries of the service providers appear to have been heard by the government and amendment has been made in Rule 89(5) of the CGST Rules, 2017 vide Notification No. 21/2018-Central Tax dated 18.04.2018 wherein the words “and services” have been included in the formula given for computing the maximum amount of refund claim on account of inverted duty structure.

This amendment has brought a great sigh of relief to the service providers eligible for claiming refund of accumulated credit on account of inverted duty structure. However, it is pertinent to mention that the amendment in formula has been made applicable w.e.f. 18.04.2018 thereby meaning that the revenue authorities have got a strong ground to deny the refund claim to service providers for the period from 01.07.2017 to 17.04.2018 as the amendment has prospective effect. Therefore, it is requested that the government realises the difficulty faced by the service providers in claiming the refund of accumulated credit on account of inverted duty structure due to lacunae in the formula prior to 18.04.2018 and give retrospective effect to the rectification made vide the notification no. 21/2018-Central Tax dated 18.04.2018.

Comments

GST Update pertaining to refund of accumulated credit on account of inverted duty structure to the service providers

Post a Comment

Query