| Question And Answer | |
|---|---|
| Subject: | REFUND OF ITC ON ACCOUNT OF INVERTED DUTY STRUCTURE |
| Category: | GST |
| Querist: | CA KARAN SHAH |
| Answered by: | Advocate C.B.Thakar |
| Tags: | Extracting minerals, GST, Refund |
| Date: | September 21, 2021 |
IN CASE OF MINING INDUSTRIES (QUARRY BUSINESS), GST IS PAID ON RCM BASIS ON ROYALTY PAID TO GOVERNMENT FOR EXTRACTING MINERALS AT 18% AND AFTER PAYMENT ITC IS ALSO AVAILED IN GST RETURN. WHEREAS ALL SALES IS AT 5% LEADING TO ACCUMULATION OF ITC.
Q1 – HOW TO CLAIM REFUND OF SUCH ACCUMULATED ITC MAINLY DUE TO RCM PAYMENT OF ROYALTY
Q2 – WILL SUCH ITC AVAILED ON ROYALTY CLASSIFIED AS ITC ON INPUT SERVICE
Q3 – THE SUPREME COURT HAS RECENTLY DISMISSED THE GUJARAT HC JUDGEMENT IN CASE OF VKC FOOTSTEPS INDIA – WHAT IS THE POSITION NOW.
Q4 – ARE THERE ANY CHANCES THAT THE GST COUNCIL MAY AMEND THE RULE AND ALLOW GST REFUND ON ITC OF INPUT SERVICE ALSO IN CASE OF INVERTED DUTY STRUCTURE
The royalty falls in service category and therefore ITC on same will be ITC on input service. Though there are four queries, the sum and substance is that whether refund is possible on input services under inverted duty structure? As mentioned in the query, the Hon. Supreme Court in case of Union of India vs. VKC Footsteps India P. Ltd. (Civil Appeal no.4810 of 2021 dt.13.9.2021) has held that when the Rule does not permit refund on input services in inverted duty structure, the same cannot be eligible. Therefore, you are not eligible to claim refund on your inward service of royalty. Hon. Supreme Court has suggested to GST Council to relook into the matter, being a policy matter. In the last meeting of the GST Council held on 17.9.2021, the GST Council has discussed about rationalization of rates to avoid inverted duty structure in relation to certain activities. However, there is no indication about allowing refund on input service. Therefore, it can be said that at present there is no any proposal to allow the refund on input service.
The royalty falls in service category and therefore ITC on same will be ITC on input service. Though there are four queries, the sum and substance is that whether refund is possible on input services under inverted duty structure? As mentioned in the query, the Hon. Supreme Court in case of Union of India vs. VKC Footsteps India P. Ltd. (Civil Appeal no.4810 of 2021 dt.13.9.2021) has held that when the Rule does not permit refund on input services in inverted duty structure, the same cannot be eligible. Therefore, you are not eligible to claim refund on your inward service of royalty. Hon. Supreme Court has suggested to GST Council to relook into the matter, being a policy matter. In the last meeting of the GST Council held on 17.9.2021, the GST Council has discussed about rationalization of rates to avoid inverted duty structure in relation to certain activities. However, there is no indication about allowing refund on input service. Therefore, it can be said that at present there is no any proposal to allow the refund on input service.