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CMA Final · Indirect Tax Laws and Practice · GST Refunds - Inverted Duty Structure and Zero Rated Supplies

A trader in goods has inverted rated supplies. For the relevant period: turnover of inverted rated supply Rs 50,00,000; adjusted total turnover Rs 80,00,000; net ITC on inputs Rs 6,00,000; ITC availed on inputs and input services Rs 7,50,000; tax payable on the inverted rated supply Rs 1,50,000. What is the maximum refund under the inverted duty formula in the rule?

The maximum refund is Rs 2,55,000. The first term is Rs 3,75,000 and the tax payable is scaled by net ITC over total ITC availed (0.8), giving Rs 1,20,000 to subtract. Subtracting the full Rs 1,50,000 ignores that scaling.

  1. ARs 2,25,000Correct
  2. BRs 3,75,000
  3. CRs 2,55,000
  4. DRs 1,05,000

Explanation

First term = 50,00,000 x 6,00,000 / 80,00,000 = Rs 3,75,000. Second term = 1,50,000 x (6,00,000 / 7,50,000) = 1,50,000 x 0.8 = Rs 1,20,000. Refund = 3,75,000 - 1,20,000 = Rs 2,55,000. So the correct figure is Rs 2,55,000, as subtracting the full tax payable (Rs 1,50,000) gives Rs 2,25,000, which is wrong.

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