- Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on Output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.
- Much water flown with respect to the word “inputs” whether includes input services or not. Gujarat High Court in the case of VKC Footsteps India Pvt Ltd vs UOI 2020 (43) G.S.T.L. 336 (Guj.) held that in terms of Section 54(3) of GST Act, assessee is eligible for GST involved on input services as these are also used for same business.
- Contrary to the above decision of the Hon’ble Gujarat High Court, the Hon’ble Madras High Court passed an order in favour of revenue in the case of Transtonnelstroy Afcons Joint Venture v. UOI-  119 taxmann.com 324 (Madras). It was held that the benefit of refund can be availed only to the extent of unutilized ITC that accumulates on ‘goods’, thereby exclusion of unutilized ITC accumulated on ‘services’ in case of inverted rate structure is valid.
- Through this article, the author wishes to stress on the word ‘output supplies’. The word output supplies is not defined in the CGST Act. However, the Outward supply defined under section 2 (83) CGST Act reads as “means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business.”
- From this one can understand that “supplier of services” is also eligible for refund under inverted duty structure.
List of services not eligible for inverted duty refund
- In exercise of the powers conferred Section 54 (3), the government has issued Notification no. 15/2017-Central Tax (Rate) dated 28th June 2017 wherein it has been notified that no refund of unutilised input tax credit shall be allowed under sub-section (3) of section 54 of the said Central Goods and Services Tax Act, in case of supply of services specified in sub-item (b) of item 5 of Schedule II of the Central Goods and Services Tax Act.
- The supplies specified under item 5(b) of Schedule II reads as “construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier”.
- In short one can say residential or commercial apartment construction services not eligible for inverted duty refund.
Sample list of services eligible for refund
Though there are many suppliers/businessmen engaged in the above business somehow due to lack of knowledge, confusion, divergent practices in the GST department people are not applying for these refunds. Very few people are applying for these refunds. Due to disruption of Covid -19 many businesspeople are suffering from cash crunch & working capital pressure. It is high time for the businesspeople who are in the above business to apply for the refunds from the GST department so that it will give some working Capital Cushion.