GST Input Tax Credit & Statutory Refunds
GST Inverted Duty Structure Refund Calculator (Rule 89(5))
Compute your maximum sanctionable GST refund on accumulated input tax credit where the tax rate on inputs is higher than on output supplies, as per amended CGST Rule 89(5) and CBIC Circular 173/05/2022-GST.
1. Outward Turnover & Output Tax Details
Enter inverted rated supply turnover and total state turnover for the tax period
Value of taxable outward supplies where input GST rate > output GST rate
Total IGST + CGST + SGST payable on the inverted rated supplies (Effective Output Rate: 5.00%)
Total state turnover (excl. exempt supplies) during the refund period
2. Input Tax Credit (ITC) Availed in GSTR-3B
Segregate ITC availed during the period between inputs, input services, and capital goods
ITC availed on raw materials/components (excl. services, capital goods & Rule 89(4A/4B)) (Effective Input Rate: ~14.40%)
ITC on factory rent, job-work charges, freight, professional & audit fees
Plant, machinery & office equipment ITC (ineligible for inverted refund)
3. Electronic Credit Ledger Balance Verification
Verify ledger balances to ensure sanction under Form GST RFD-01 tri-limits
Balance in Electronic Credit Ledger on the last date of the refund period
Current balance in Electronic Credit Ledger available before RFD-01 debit
Sanctionable Refund Amount (RFD-01)
- Rule 89(5) Maximum Formula Refund
- ₹4,95,000.00
- Term 1: Allocated Input ITC
- ₹7,20,000.00
- Term 2: Adjusted Output Tax Apportionment
- - ₹2,25,000.00
- Input Tax Apportionment Ratio
- 90.00%
- Un-Refundable Input Service ITC
- ₹55,000.00
Amended Rule 89(5) Formula Computation
Form GST RFD-01 Tri-Limit Check
Frequently asked questions
What is an Inverted Duty Structure under Section 54(3)(ii)?
An Inverted Duty Structure occurs when the GST rate on raw material inputs purchased is higher than the GST rate charged on finished outward goods or services. For instance, buying fabric/chemicals at 18% and selling finished garments or footwear under ₹1,000 at 5% or 12%. This leads to continuous accumulation of unutilized input credit in the electronic credit ledger.
How did Notification No. 14/2022-Central Tax change the Rule 89(5) formula?
Previously, the entire output tax payable on inverted supplies was deducted from the allocated input ITC. This was inequitable because taxpayers also utilize ITC from input services to pay output tax. The amended formula multiplies output tax by the ratio of Net ITC on inputs to total ITC on inputs and input services, effectively reducing Term 2 and maximizing the eligible refund claim.
Can I claim refund on ITC of Capital Goods or Input Services?
No. The Supreme Court in the VKC Footsteps case upheld that Section 54(3)(ii) allows refund only on 'inputs' (goods). Capital goods and input services ITC are strictly excluded from the Net ITC numerator. However, input services are included in the denominator of the Term 2 apportionment ratio to benefit the taxpayer.
What is the 'Lowest of Three' (Tri-limit) rule for Form GST RFD-01?
Per CBIC Circular No. 125/44/2019-GST and Circular No. 135/05/2020-GST, the GST officer sanctions the lowest of: (1) The refund calculated via the Rule 89(5) formula, (2) The closing balance in the electronic credit ledger at the end of the refund period, or (3) The electronic credit ledger balance on the date of submitting Form GST RFD-01.
What is Adjusted Total Turnover?
Adjusted Total Turnover means the turnover in a State or Union Territory during the period, excluding exempt supplies (other than zero-rated supplies). It includes domestic taxable supplies, zero-rated exports, and inverted rated supplies.
What is the limitation period for filing an Inverted Duty Refund application?
Under Section 54(1), Form GST RFD-01 must be filed within two years from the 'relevant date'. In the case of inverted duty structure, the relevant date is the due date for furnishing of return under Section 39 (GSTR-3B) for the period in which such claim for refund arises.