Govinda Exports, a partnership firm, is registered under GST in the State of Gujarat. The firm exports goods without payment of tax under letter of undertaking in accordance with the provisions of section 16(3) (a) of th

Determination of maximum amount of refund admissible to Govinda Exports Particulars Amount (₹) Domestic supplies of taxable product 'P' during the period [Note 2] 1,45,385 Export of product 'Q' to Austria [Note 1] Nil Total refund claim admissible to supplier 1,45,385 Notes: Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act, 2017. Further, the supplier exports goods without payment of tax under letter of undertaking in accordance with the provisions of section 16(3)(a) of the IGST Act, 2017. Therefore, as per clause (i) of first proviso to section 54(3) of the CGST Act, 2017, a registered person may claim refund, of any unutilized ITC in the case of zero rated supply at the end of any tax period. However as per 1st proviso to section 54(3) of the CGST Act, 2017 no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty. Refund of unutilised ITC is allowed in case of inverted duty structure, i.e. 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 GST Council [Clause (ii) of the first proviso to section 54(3) of the CGST Act, 2017] 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) Less (A) Where "Net ITC" means ITC availed on inputs during the relevant period other than the ITC availed for which refund is claimed under sub-rules (4A) or (4B) or both. "Adjusted total turnover" means the sum total of the value of: (i) the turnover in a State / Union territory, as defined under Section 2(112), excluding turnover of services; & (ii) the turnover of zero-rated supply of services determined in terms of specified manner and non-zero-rated supply of services, excluding: (a) value of exempt supplies other than zero-rated supplies; and (b) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period. Tax payable on inverted rated supply of goods = 14,00,000 x 5% = ₹70,000 Here, Net ITC = ₹4,00,000 (4,60,000 - 60,000 for exempt supplies) Adjusted Total Turnover = 26,00,000 [14,00,000 + 12,00,000] Turnover of inverted rated supply of goods = 14,00,000 Thus, maximum refund amount under rule 89(5) = [(14,00,000 x 4,00,000) / 26,00,000] - 70,000 = ₹1,45,385