Earlier, CBIC for the benefit of Industry under Inverted Duty Structure changed the formula of Refund given under Rule 89(5) vide Notification No. 14/2022-Central Tax dated 05.07.2022. To bring clarity regarding its applicability, CBIC vide Circular 181/13/2022-GST dated 10th November, 2022 has clarified that the benefit of change in formula will be given prospectively i.e. for the Refund applications filed on or after 05.07.2022.
For the benefit of readers, further we would like to discuss the changes made in the formula and how exactly it will benefit the industry.
Case-1
Total Turnover | 500000 |
Turnover of Inverted | 500000 |
ITC on Inputs: | 72000 |
ITC on Services: | 18000 |
Tax on Inverted (12%) | 60000 |
Refund Old Formula (500000*72000/500000)-60000 | 12000 |
Refund New Formula (500000*72000/500000)-(60000*72000/90000) | 24000 |
Case-2
Total Turnover | 5,00,000 |
Turnover of Inverted | 4,00,000 |
ITC on Inputs: | 72000 |
ITC on Services: | 18000 |
Tax on Inverted (12%) | 48000 |
Refund Old Formula (400000*72000/500000)-48000 | 9600 |
Refund New Formula (400000*72000/500000)-(48000*72000/90000) | 19200 |
Old Formula:
Refund Amount= (Turnover of Inverted rated Supply of Goods and Services (X) NET ITC/ Adjusted Total Turnover) – Tax Payable on such inverted Rated Supply of Goods and Services
New Formula:
Refund Amount: (Turnover of Inverted rated Supply of Goods and Services (X) NET ITC/ Adjusted Total Turnover) – (Tax Payable on such inverted Rated Supply of Goods and Services (X) NET ITC/ITC Availed on Inputs and Inputs Services)
Legal Language of Change:
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8. In the said rules, in rule 89, –
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(d) in sub-rule (5), for the words ― “tax payable on such inverted rated supply of goods and services”, the brackets, words and letters ― “{tax payable on such inverted rated supply of goods and services x (Net ITC’ ITC availed on inputs and input services)} .” shall be substituted;