TMI BlogClarification regarding removal of restriction of refund of accumulated ITC on fabrics - reg.X X X X Extracts X X X X X X X X Extracts X X X X ..... e) dated 28.07.2018 and 5/2017-State Tax (Rate) dated 29.06.2017 to the Notification No. 20/2018-Central Tax (Rate) dated 26.07.2018 and Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017 respectively. In exercise of powers conferred by section 168 of the Tripura State Goods and Services Tax Act, 2017 (Tripura Act No. 9 of 2017) for the purpose of uniformity in the implementation of the Act it is instructed to follow the clarifications issued vide Circular No. 56/30/2018 GST dated 24th August, 2018 by the Department of Revenue, Tax Research Unit. Enclo. :1. Circular No. 56/30/2018 GST. (Nagesh Kumar B, IAS) Chief Commissioner of State Tax Government of Tripura Circular No. 56/30/2018-GST F. No. 354/290/2018-TRU Government of India Ministry of Finance Department of Revenue Tax Research Unit North Block, New Delhi 24th August, 2018 To, The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All) Madam/Sir, Subject: Clarification regarding removal of restriction of refund of accu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting, it was decided to remove the restriction of not allowing refund of ITC accumulated on account of inverted duty structure on fabrics with prospective effect on the input supplies received after the date of issue of notification. It was also decided to simultaneously lapse the accumulated ITC, lying unutilised, for the past period, after the payment of GST for the month of July, 2018. Accordingly, to give effect to this decision, the notification No. 20/2018-Central Tax (Rate) has been issued amending notification No. 5/2017-Central Tax(Rate) . To keep the accounting simple, it was decided to make these changes effective from the 1st day of August, 2018. 4. Vide the said notification No. 20/2018-Central Tax (Rate) , the following proviso has been inserted in notification No. 5/2017-Central Tax (Rate) . Provided that,- (i) nothing contained in this notification shall apply to the input tax credit accumulated on supplies received on or after the 1 st day of August, 2018, in respect of goods mentioned at serial numbers 1, 2, 3, 4, 5, 6, 6A, 6B, 6C and 7 of the Table below; and (ii) in respect of said goods, the accumulated input tax credit lying unut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the month of July, 2018. In other words, in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases made on or before the 31 st July, 2018) shall lapse. 8 As the notification No. 5/2017-Central Tax (Rate) does not put any restriction in respect of ITC on input services and capital goods, therefore the proviso now inserted in the said notification No. 5/2017-Central Tax (Rate) vide notification No. 20/2018 does not affect the ITC availed on input services and capital goods. 9. As regards, the legislative power of providing for lapsing of input tax credit, the same flows inherently from the power to deny refund of accumulated ITC on account of inverted structure. 10. Doubts have also been raised as regards the manner of calculating the ITC amount accumulated on account of inverted duty structure on the inputs of said fabrics that would lapse on account of above stated change. It is clarified that for determination of such amount, the formula as prescribed in rule 89 (5) of the CGST rules shall mutatis mutandis apply as it applies for determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apse. However, assuming that in this case the ITC availed on input is ₹ 42 lakh, the accumulated ITC on accounted on inverted duty structure is ₹ 5 lakh (5/7*42-25) The manner of calculation as provided in rule 89(5) would mutatis mutandis apply. 10.1 As illustrated, the application of formula prescribed in rule 89(5) ensures that ITC relating to capital goods and input services does not lapse. 11. However, a manufacturer may have closing stock of finished goods and inputs as on 31.7.2018. A doubt has been raised as to whether input tax relating thereto shall also lapse and concern has been expressed that this would amount to double taxation. It is clarified that the proposed amendment seeks to lapse only such credit that has been accumulated on inputs on account of inverted duty structure. Therefore, in case a manufacturer, whose accumulated ITC is liable to lapse in terms of said notification, has certain stock lying in balance as on 31.7.2018, the input tax credit involved in inputs contained in such stock ( including inputs lying as such) may be excluded for determination of Net ITC for the purposes of applying the said formula. For this purpose, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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