TMI BlogClarification regarding removal of restriction of refund of accumulated ITC on fabrics.X X X X Extracts X X X X X X X X Extracts X X X X ..... apsing of input tax credit accumulated on account of inverted duty structure on fabrics for the period upto the 31 st July, 2018, 2. The said rates notification No. 5 (FTX.56/2017/56 dated 29 th June, 2017) was issued in exercise of powers vested under section 54 of the Assam Goods and Services Tax Act, 2017 (hereinafter referred to as the Assam GST Act ). It notifies the items on which refund of accumulated input tax credit on account of inverted duty structure is not allowed, Some of the items notified under this notification are fabrics. A total 10 categories of fabrics covered in the notification are as follows: Sl.No. Tariff item, heading, sub-heading or Chapter Description o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verted duty structure on fabrics with prospective effect on the input supplies received after the date of issue of 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 rate notification No. 20/2018 (FTX-56/2017/Pt-III/144 dated 24th September, 2018) has been issued amending rate notification No. 5 (FTX.56/2017/56 dated 29th June, 2017), To keep the accounting simple, it was decided to make these changes effective from the 1st day of August, 2018. 4. Vide the said rate notification No. 20/2018 (FTX.56/2017/Pt.III/144 dated 24th September, 2018), the following proviso has been inserted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods, the refund of such accumulated input tax credit shall not be allowed. Rate Notification No, 5 (FTX.56/2017/56 dated 29th June, 2017) has been issued in terms of this provision and it interalia prescribes that refund of accumulated ITC on account of inverted duty Structure shall not be allowed in respect of fabrics as mentioned in para 2. Therefore, the restriction of refund of accumulated ITC under rate notification No. 5 (FTX.56/2017/56 dated 29th June, 2017) is applicable only in respect of refund of accumulated ITC on inputs. This notification does not put any restriction in relation to the ITC on input services and capital goods. 7. The proviso has to be read with the principal part of the notification, A comprehensive read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated 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 Assam GST Rules, 2017 shall mutatis mutandis apply as it applies for determination or refundable amount for inverted duty structure. Such amount shall be determined for the months from July, 2017 to July 2018 [or for the relevant period for such fabrics on which refund was blocked subsequently by inserting entries in rate notification No. 5 (FTX.56/2017/56 dated 29th June, 2017), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/56 dated 29 th June, 2017), Tax payable thereon is ₹ 25 Iakh on MMF fabrics and ₹ 10 lakh on cotton fabrics. MMF fabric has inverted duty Structure while cotton fabric does not have inverted duty structure. Assuming the net ITC availed on inputs, during this period, was ₹ 35 lakh, i.e., = {(Turnover of inverted rated supply of goods + Adjusted Total Turnover) x Net ITC} - tax payable on, such inverted rated supply of goods The accumulated TTC on account of inverted duty structure shall be equal to nil (5/7*35-25)- Thus no amount shall lapse. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. As regards accumulated ITC in relation to exports, the refund of such ITC on exports is separately determined under rule 89 Application of formula. as prescribed in rule 89(5), ensures that accumulated ITC on exports does not lapse as this formula excludes zero rated supplies. Further, rate notification No. 5 (FTX.56/2017/56 dated 29th June, 2017) does not impose any restriction of refunds on zero rated supplies as was also clarified vide CGST circular no. 18/2011-Central Tax dated 16th November, 2011 Hence the proviso has no applicability to the input tax credit relating to zero rated supplies, Accordingly, accumulated ITC on zero rated supplies shall not lapse. This is ensured by application of formula. 14. The procedure to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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