An inverted tax structure could direct to accumulation of input tax credit on the taxpayer’s GST account. For e.g. input tax credit would give accumulated if a commodity purchases an input that is charged a 12% GST rate and sells the item after processing at a five percent GST rate. In such a scenario, the taxable person enrolled under GST can pertain for a refund of unutilized input tax credit due to an inverted tax structure. In this article, we look at the procedure for applying for an unutilized input tax credit refund under GST.

Unutilized Input Tax Credit Refund Under GST

Requirements For Filing GST Refund Application

Before filing the application for a GST refund, assure that you have filed GSTR 1 and GSTR 3B returns for the relevant tax period for which the refund application is made. Ordinary taxpayers having a turnover of more than Rs.1.5 crores can file for GST reimbursement every month after filing the relevant GSTR 1 and GSTR 3B returns. 

Note: Since GSTR 2 and GSTR 3 returns have been temporarily postponed, there is no requirement for filing such returns to claim a GST refund.

Amount Of Refund Claimed

The maximum percentage count of refund that can be alleged by a taxpayer on account of an inverted tax configuration can be evaluated using the following formula:

Refund Amount = (Turnover of inverted rated supply of goods X Net input tax credit / Adjusted total turnover) – Tax payable on such inverted valued supply of goods

“Refund amount” implies the maximum refund that is adequate.

“Net ITC” implies input tax credit availed on inputs and input employment during the relevant period

“Turnover of overturned rated supply of goods” means the value of inverted supply of goods made during the relevant period without payment of tax under the bond of the undertaking.

“Tax payable on such inverted valued supply of goods,” says the tax payable on such inverted rated supply of goods under the similar head i.e. IGST, CGST, SGST.

“Adjusted Total turnover” means the turnover in a State, as defined under clause (112) of section 2 of the CGST Act, eliminating the value of free supplies other than inverted-rated supplies, during the relevant period

“Relevant period” implies the period for which the lawsuit has been filed.

Step 1: Select Application for Refund

Login to GST account.

Click on Application for Refund.

Step 1 – Unutilised Input Tax Credit Refund

Step 1 – Unutilised Input Tax Credit Refund

Step 2: Select Type for Refund Application

Unutilized Input Tax Credit Refund Under GST

On the refund application page, choose the Refund on account of ITC accumulated due to the Inverted Tax Structure radio button. You can also choose and apply for other kinds of GST refunds from this page.

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

Click the create button.

Step 2 – Unutilised Input Tax Credit Refund

Step 3: Refund Computation

This is a vastly significant step in making the GST refund application. In the table analysis for refund, the following information must be given 

In column-1 (Turnover of inverted rated supply of goods), enter the turnover of inverted rated supply of goods by pertaining to column-3.1(a) of the Form GSTR-3B.

In column-2 (Tax payable on such inverted rated supply of goods), enter the tax payable on such inverted rated supply of goods under the 4 major heads – IGST, CGST, SGST / UTGST, and CESS.

In column-3 (Adjusted estimate turnover), join the adjusted whole turnover.

In column-4 (Net input tax credit), enter the Net Input Tax value pictures for the main heads – IGST, CGST, SGST / UTGST, and CESS individually. 

Step 3 – After filling in the appropriate figures, the refund amounts will get auto-populated for all the four major heads, in the “Amount Eligible for Refund” Table. The individual can verify the refund quantity as provided by the Government in the Refund Claimed table.

Step 4: Select Bank Account and Submit Application

The applicant shall earn the refund amount to one of the enrolled bank accounts in the GST Portal and linked with the taxpayer’s GST account. At the time of filling-out form RFD-01A, you will be expected to, select a bank account from the list of your linked/registered accounts in the GST Portal. In case the taxpayer compels receipt of refund in a various bank account, he/she may add that bank account in GST registration details by way of non-core amendment.

Step 5 – Unutilised Input Tax Credit Refund

The individual should save the refund application before filing. Hence, keep the refund application by clicking on the Save. Once, the procedure displays a confirmation message upon saving the application, the continue button will be generated.

Now agree by selecting the checkbox and click the PROCEED key to start the e-signing process.

Step 4A – Unutilised Input Tax Credit Refund

Step 4A – Unutilised Input Tax Credit Refund

Step 5: Sign the Refund Application

On clicking the proceed button, the steps for digitally signing the GST refund will start. You can now sign with a digital signature or EVC to complete and submit the application.