QRT Manufacturing Ltd, a registered supplier of Karnataka, is engaged in manufacturing and supply of taxable goods. Given below are the details of the turnover and applicable GST rates of the final products manufactured

CS Professional · Advanced Tax Laws · PYQS · June 2025
QRT Manufacturing Ltd, a registered supplier of Karnataka, is engaged in manufacturing and supply of taxable goods. Given below are the details of the turnover and applicable GST rates of the final products manufactured by QRT manufacturing Ltd. as also the input tax credit (ITC) availed on inputs used in manufacture of each of the final products and GST rates applicable on the same, during a tax period : Products Turnover (Excluding GST (₹) Output GST Rates ITC availed on input exclusively used (₹) Input GST Rates P 14,00,000 5% 1,10,000 12% Q 13,00,000 5% 1,08,000 18% R 9,00,000 12% 94,000 12% Additional Information: (i) GST paid ₹ 42,000. (@ 12% on ₹ 3,50,000) for Capital Goods 'A' exclusive used for product P. (ii) GST Paid ₹ 54,000 (@ 18% on ₹ 3,00,000) on Input Services exclusive used for product P. Determine the maximum amount of refund of the unutilised input tax credit that QRT manufacturing Ltd. is eligible to claim under section 54(3) (ii) of the CGST Act, 2017 (i.e., due to inverted duty structure) read with rule 89(5) of CGST Rules, 2017. Note: (1) Product Q is notified as a product, in respect of which no refund of unutilised input tax credit shall be allowed under said section. (2) No refund claimed under rule 89 (4A) or 89 (4B) of CGST Rules, 2017. (3) All the amount of ITC reflecting in GSTR 2A of company.

Answer & Explanation:

In the given case, the rates of tax on inputs used in Products P and Q (12% and 18% are higher than rates of tax on output supplies of Products P and Q (5% each). However, Product Q is notified as a product so it is not eligible for refund. Rule 89 (5) of the CGST Rules, 2017 stipulates that in the case of refund on account of inverted duty structure, refund of ITC is granted as per the following formula: Maximum Refund Amount = (Turnover of inverted rated supply of goods and services × Net ITC / Adjusted Total Turnover) - Tax payable on such inverted rated supply of goods and services Tax payable on inverted rated supply of Product P = ₹ 14,00,000 × 5% = ₹ 70,000 Net ITC = ₹ 3,12,000 (₹ 1,10,000 + ₹ 1,08,000 + ₹ 94,000) [Net ITC availed during the relevant period needs to be considered irrespective of whether the ITC pertains to inputs eligible for refund of inverted rated supply of goods or not, but ITC on capital goods and Input service is not eligible] Adjusted Total Turnover = ₹ 36,00,000 (₹ 14,00,000 + ₹ 13,00,000 + ₹ 9,00,000) Turnover of inverted rated supply of Product P = ₹ 14,00,000 Maximum refund amount is as follows: = [(₹ 14,00,000 × ₹ 3,12,000) / ₹ 36,00,000] - ₹ 70,000 = ₹ 51,333 (rounded off)

Topics: GST

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