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 ..... x credit accumulated on account of inverted duty structure on fabrics for the period upto the 31st July, 2018. 2. The said notification No. 1129-F.T. [5/2017-State Tax (Rate)] was issued in exercise of powers vested under section 54 of the West Bengal Goods and Services Tax Act, 2017(WBGST Act, 2017). 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. Following 10 categories of fabrics are covered in the said notification: S.No. Tariff item, heading, sub-heading or Chapter Description of Goods (1) (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 1036-F.T.[20/2018-State Tax (Rate)] has been issued amending notification No. 1129-F.T. [5/2017-State 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. 1036-F.T.[20/2018-State Tax (Rate)], the following proviso has been inserted in notification No. 1129-F.T. [5/2017-State Tax (Rate)]. Provided that, - (i) nothing contained in this n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision and it inter alia 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 notification No. 1129-F.T. [5/2017-State Tax (Rate)] dated 28.06.2017 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 reading of amended notification makes it clear that the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 WBGST rules shall mutatis mutandis apply as it applies for determination of 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 notification No. 1129-F.T. [5/2017-State Tax (Rate)]]. The accumulated input tax credit determined by each supplier using the prescribed formula lying unutilised in balance after making the payment of GST for the month of July, 2018 shall lapse. Illustrations : (1) A manufacture who produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 ITC 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) 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5), ensures that accumulated ITC on exports does not lapse as this formula excludes zero rated supplies. Further notification No. 1129-F.T. [5/2017-State Tax (Rate)] does not impose any restriction of refunds on zero rated supplies as was also clarified vide WBGST circular no. 19/2018[18/18/2017-GST] w. e. f. 16th November, 2017. 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 followed for lapsing of accumulated input tax credit: A taxable person, whose input tax credit is liable to be lapsed in terms of said notification, shall calculate the amount of su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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