GST Refund of Accumulated Input Tax Credit on account of Inverted Structure: Tamil Nadu Dept Clarifies [Read Circular]

The Tamil Nadu State GST department has clarified that the refund of the accumulated input tax credit on account of inverted structure as per clause (ii) of sub-section (3) of section 54 of the TNGST Act, 2017 would be allowed in cases where an accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for the lower rate of tax for some specified supplies subject to fulfillment of other conditions.

The department stated that the intent of para 3.2 of Circular No. 9/2020- TNGST (PP6/35622/2019) dated 20.06.2020 was not to cover those cases where the supplier is making the supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification.

“Therefore, it is clarified that in such cases, refund of the accumulated input tax credit on account of inverted structure as per clause (ii) of sub-section (3) of section 54 of the TNGST Act, 2017 would be allowed in cases where the accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for a lower rate of tax for some specified supplies subject to fulfillment of other conditions,” the circular issued on 2^nd September said.

Accordingly, para 3.2 of Circular No. 9/2020- TNGST (PP6/35622/2019) dated 20.06.2020 stands substituted as under:

“It may be noted that refund of accumulated ITC in terms of clause (ii) of the first proviso to sub-section (3) of section 54 of the TNGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the TNGST Act, 2017.”

“There may, however, be cases where though inputs and output goods are same but the output supplies are made under a concessional notification due to which the rate of tax on output supplies is less than the rate of tax on inputs. In such cases, as the rate of tax of output supply is less than the rate of tax on inputs at the same point of time due to the supply of goods by the supplier under the such concessional notification, the credit accumulated on account of the same is admissible for refund under the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the TNGST Act other than the cases where output supply is either Nil rated or fully exempted, and also provided that supply of such goods or services are not notified by the Government for their exclusion from the refund of accumulated ITC under the said clause,” the circular amended.

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