Assessment under GST: The assessment is the computation of the taxpayer’s tax due under GST law. It is the method of figuring how much tax a person should essentially pay each month.

• What are the different varieties of assessments?
• What is Self Assessment?
• What is Provisional Assessment?
• What is Scrutiny Assessment?
• What is the Best Judgment Assessment?
• What is Summary Assessment?

What are the Different Varieties of Assessments?

• Self Assessment – Assessed under Section 59
• Provisional Assessment – Applies to Section 60
• Scrutiny Assessment – Comes under Section 61
• Best Judgment Assessment – Carried out by tax authorities
• Assessment of non-filers of Returns – Applies to Section 62
• Assessment of Unregistered Persons – Falls under Section 63
• Summary Assessment – Comes under Section 64

Note: The taxpayer performs only self-assessment. Tax administrators levy all other assessments.

What is Self Assessment?

Every registered taxable individual must carefully evaluate his or her taxes and submit a return for each taxable period. This implies that GST, like Excise, VAT, and Service Tax under the existing taxation framework, will support and encourage self-assessment.

Following self-assessment, the individual is obligated to pay tax according to this assessment as stipulated in section 39.

What is Provisional Assessment?

A taxpayer may be subject to provisional assessment if he or she is barely able to correctly deduce the value of goods or services, or both, or the corresponding tax rate. This also specifies the two primary parameters under which this assessment is carried out:

• If the taxpayer can barely evaluate value attributable to complications in computing transaction value or ambiguity about whether particular items should be incorporated or otherwise.
• If the taxpayer cannot establish the amount of tax owing to complexities in sorting goods and services or ascertaining whether or not any notification is appropriate.

What are the Steps in the Provisional Assessment Process?

• The taxpayer must submit a formal request to the GST officer for provisional assessments.
• After reviewing the application, the officer will issue an order within 90 days after obtaining such a formal request. This order effectively permits him to pay tax on a provisional basis or at a GST rate or value that he establishes.
• The taxpayer who makes a provisional payment must simply issue a special bond with security committing to pay the difference between the provisionally assessed tax and the final assessed tax.
• The GST officer will release the final assessment within six months from the provisional payment order.
• Final assessments will immediately supplement provisional assessments.

What is Scrutiny Assessment?

The appropriate official can closely scrutinize the return to help confirm its factual accuracy. It is a purely voluntary pre-adjudication process.

In other simple words, the officer is not required to scrutinize the return. Returns scrutiny is not a legally enforceable or judicial procedure; thus, no order may be imposed.

The officer will request reasonable explanations for any inconsistencies and contradictions identified.

The person must provide an immediate statement within 15 days after receiving the warning.

The registered person may accept the discrepancies as clearly indicated in the notification and pay the taxes, interest, and any additional amount owed and notify the appropriate authorities.

What is the Best Judgment Assessment?

Under this assessment, the Assessing Officer is expected to carefully consider a taxpayer’s total income or less to the best of his judgment in the following situations.

Assessment of non-filers of Returns

If a taxpayer fails to file returns despite obtaining a warning notification under section 46, a GST officer is legally permitted to assess section 62.

In this particular scenario, the GST officer assesses the taxpayer’s tax burden to the best of his judgment, bearing all necessary information.

Assessment of Unregistered Persons

If a taxpayer fails to acquire the necessary GST registration or whose registration has been cancelled at the last minute under section 29(2), even if he is legally obligated to be registered and pay tax, the GST officer may process his or her tax due to the best of his or her judgment under section 63.

This must be done for the corresponding period in which the tax is paid.

What is Summary Assessment?

Summary GST assessment typically demonstrates a high priority assessment. When there is likely cause to suspect that there will be a potential loss of tax income, it is generally performed on an immediate basis.

The officer may also give an assessment order if he has proven that the delay in assessment is adversely affecting the revenue’s interest.

GST on Government Related Activities: Transactions or activities initiated by the Local Authority or Union Territory or Central Government or State Government in which they are contracted as a public authority, i.e. services by means of any activity concerning a purpose entrusted to a Municipality under Article 243W of Constitution or to a Panchayat under Article 243G of the Indian Constitution are neither considered supply of goods nor supply of services – Notification No. 11/2017-IT (Rate) and No. 14/2017-CT (Rate) both dated 28-6-2017.

• Introduction to GST
• The Twelve Schedule Under the Article 243W
• Services By Government to Business-Entities
• Services By One Government to Another Government
• Services Up to Rs. 5,000 Supplied by Government
• Other Exempt Services
• Related Circulars

Introduction to GST

Suppose the government is considered a “person” under the GST act. Consequently, every supply of goods or services by or to the government is subject to GST (unless exempted).

A government company is not termed to be “Government Department” or “Government”. Even if the government owns 100% of its shares, the company cannot be recognised as a government department. A corporation, even though formed under an Act, is also not Government.

Functions consigned to a municipality have been listed in Para 7.3.2 of CBE&C’s ‘Taxation of Services under Article 243W of the Constitution of India: An Education Guide’ announced on 20-6-2012. These cover services like roads and bridges, water supply, public health, fire services, slum improvement, public amenities, functions entrusted to them by the Government, urban planning, regulation of land use etc. The detailed list is as follows:

The Twelve Schedule Under the Article 243W

• Bridges and roads.
• Water supply for industrial, domestic, and commercial purposes.
• Sanitation conservancy, public health, solid waste management and fire services.
• Promotion of ecological aspects, urban forestry, and protection of the environment.
• Safeguarding the concerns of weaker sections of society, including the mentally retarded and handicapped
• Promotion of cultural, aesthetic and educational aspects.
• Electric crematoriums, cremations and cremation grounds, and burials and burial grounds.
• Slum up-gradation and improvement.
• Alleviation of urban poverty.
• Provision of urban facilities and amenities such as playgrounds, parks, gardens.
• Prevention of cruelty to animals and cattle pounds.
• Registration of births and deaths and other essential statistics of the citizen.
• Public amenities including street lighting, bus stops, public conveniences and parking lots.
• Regulation of tanneries and slaughterhouses.
• Town planning and other essential urban planning.
• Construction of buildings and regulation of land use.
• Planning for social and economic development.

Functions mentioned under Article 243G relate to

• preparation of plans made for the development of the economy and
• implementation of schemes for the development of the economy and the entrusted to social justice for them, including those concerning matters listed in the Eleventh Schedule.

The items that are covered by the eleventh schedule are as follows:

1. Implementation of land reforms, land consolidation, soil conservation and land improvement.
2. Extension made for agriculture, including all-over agricultural.
3. Water management, watershed development and minor irrigation.
4. Farm forestry and social forestry.
5. Animal husbandry, dairying and poultry.
6. The minor forest produces.
7. Industries of small scale, including food processing industries.
8. The village, khadi, and cottage industries.
9. The Scheduled Tribes and other Castes.
10. The system of public distribution.
11. Community assets maintenance.
12. Housing in Rural places.
13. Drinking water.
14. Fodder and fuel.
15. Bridges, roads, culverts, ferries, waterways and other modes of communication.
16. The progress of the weaker sections, and in particular, of the Scheduled Caste
17. Cultural activities.
18. Fairs and markets.
19. Primary health centres including hospitals, health and sanitation, and dispensaries.
20. Electrification in Rural areas, including distribution of electricity.
21. Sources of Energy which are Non-conventional.
22. Programme for Poverty alleviation.
23. Education, including schooling at primary and secondary levels.
24. Vocational education and technical training.
25. Non-formal education for Adults.
26. The welfare of the Family.
27. Child and Women Development.
28. Social welfare, including the welfare of the mentally retarded and handicapped.

Services by the local authority or Union territory, State Government, Central Government excluding the following services are excluded from GST:

• services by the Post Department by way of life insurance, speed post, agency services and express parcel post provided to a person other than the State Government, Central Government, Union territory
• services in relation to a vessel or an aircraft, inside or outside the precincts of an airport or a port.
• transport of passengers or goods
• any service other than services provided to business entities covered under entries (a) to (c) earlier.

Services By Government To Business-Entities

Services provided by the local authority or Union territory, Central Government, State Government to a business entity with a collective turnover of up to twenty lakh rupees (in case of a special category state: its ten lakh rupees) in the previous financial year are excluded from GST.

This exemption does not apply to services supplied by railways, renting of immovable property, post and in relation to the vessel or aircraft. In the case of these services, the local authority or the Government providing these services is responsible for paying GST under the forwarding charge.

In the circumstance where annual turnover exceeds the specified limits, the Business Entity is accountable to pay GST under reverse charge. (in cases other than covered in points- i, ii, iii above)

Services By One Government To Another Government

Services granted by Union territory or a local authority, Central Government, State Government, where the consideration for such services does not surpass five thousand rupees are excluded from GST.

This exemption does not apply to services supplied by renting of immovable property, post, railways and in relation to the vessel or aircraft. In the matter of these services, the local authority or government providing these services is accountable to pay GST under the forwarding charge.

Services Up To Rs. 5,000 Supplied By Government

Services granted by Union territory or a local authority, Central Government, State Government, where the consideration for such services does not surpass five thousand rupees are excluded from GST – Sr No. 9 of Notification No. 9/2017-IT (Rate) and No. 12/2017-CT (Rate) both dated 28-6-2017.

In such circumstances, business entities receiving these services will not be applicable for reverse charge.

This exemption does not apply to services supplied by renting of immovable property, post, railways and in relation to the vessel or aircraft.

In the matter of these services, the local authority or government providing these services is accountable to pay GST under the forwarding charge.

If it is a perpetual supply service and the amount does not exceed Rs. 5,000 in a year, then the exemption does not apply.

Other Exempt Services

Services granted by Union territory or a local authority, Central Government, State Government by way of issuance of visa, passport, driving licence, death certificate or birth certificate are exempt from GST – Sr No. 61 of Notification No. 9/2017-IT (Rate) and No. 12/2017-CT (Rate) both dated 28-6-2017.

Services provided by way of registration claimed under any law. testing, safety check or certification relating to the safety or protection of workers, the public at large or consumers, including fire license, are exempt from GST.

Penalty and fine are imposed for breaking the law, and since it is not a consideration for an activity, so it is not considered the supply of service.

Water supply through tankers is exempted.

Plots are given on lease for the construction of public amenities by Govt. entity to Municipal Corporation, are exempt from GST.

Service of maintenance of park which is provided to Government is exempt from GST.

Services by an old-age home operated by State Government, Central Government, or entity under section 12AA of India’s Income-tax Act to its residents or citizens (aged 60 years or more) excluded from consideration when the amount is up to Rs. 25,000 per month (inclusive of charges all the charges for lodging, boarding and maintenance) are excluded from GST

Pure services (excluding composite supplies involving supply of any goods or other works contract service) provided by the local authority or Union territory, State Government, Central Government or a Governmental entity or governmental authority, by means of any activity in relation to any purpose entrusted to a Municipality under article 243W of the Constitution or in relation to any purpose authorised to a Panchayat under article 243G of the Constitution are exempt from GST.

Solid waste management\Conservancy service to Conservancy Department of Municipal Corporation of the government is a purpose designated under Sl. No. 6 from the Twelfth Schedule, i.e., sanitation, conservancy, solid waste management and public health, are exempt from the mortgage of GST.

Services provided by the local authority or Union territory, State Government, Central Government by way of assignment of the right to use resources from nature to an individual farmer for the rearing of all life forms of animals and cultivation of plants, except the rearing of horses, for fuel, raw material, food, fibre or other related products are exempt from GST.

Related Circulars

Circular No. 34/8/2018-GST

The service provided by State Government/Central Government to any business entity including PSUs by way of securing the loans taken by them from financial businesses against compensation in any form, including the Guarantee Commission, is taxable under the law.

Related Case Laws

[Authority for Advance Ruling, New Delhi: On NBCC (India) Ltd.][05-10-2018]

MoHUA-Ministry of Housing and Urban Affairs, Government of India, has appointed NBCC Ltd. as an agent for redeveloping certain colonies in Delhi. NBCC Ltd. has to reconstruct dwelling units, supporting infrastructure, commercial spaces and has done maintenance. The appellant sought a ruling on whether the applicant is accountable to pay GST.

It is ruled that the Ministry of Housing and Urban Affairs, Government of India, is not exempted from reimbursement of GST on sale of built-up commercial space, as it does not associate to any role entrusted to a municipality under Article 243W of the Constitution. Hence, the exemption made under Serial No. 4 of Notification No. 12/2017 – Central Tax (Rate) and parallel notifications under IGST and SGST are not admissible.

[Authority for Advance Ruling, Maharashtra: On Reliance Infrastructure Ltd.][21-03-2018]

The organisation is engaged in the business of production, importation and distribution of electricity. The company is obligated to boring trenches on roads and pay reinstatement charges to municipality authorities for reconstructing patches. A ruling is queried whether these charges are accountable to GST or not. The applicant demanded that such recovery of expenses amounts to service activity under article 243W of Constitution, in relation to a sovereign function entrusted to Municipality and hence, exempt from GST. It is commanded that restoration work be equated neither to maintenance work nor to construction work as suo motu undertaken by Municipal Authorities. Thus on such charges, GST is payable at the rate of 18%.

Depreciation: In accounting, depreciation is the loss of a tangible asset’s monetary value over time due to use, wear and tear, or obsolescence. It’s an accounting method for allocating a portion of an asset’s cost to the profit and loss statement for a financial year over the asset’s useful life.

Simultaneously, the asset’s holding cost in the balance sheet is decreased to the same extent. Depreciation is a non-cash expense because it affects a company’s profitability without requiring a cash outflow. In this article, let’s understand what is depreciation, the formula and how it’s calculated in detail.

• Depreciation Definition
• Understanding Depreciation
• Depreciation Calculation
• Common Methods of Depreciation & Its Calculation
• Straight-line Method
• Straight Line Method Depreciation Formula
• Written Down Value Method (WDV)
• Formula To Calculate The WDV Depreciation
• Sum-of-years Digits Method
• Depreciation Annuity Method
• Why is Depreciation so Important?
• FAQ’s on Depreciation

Depreciation Definition

The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.

Understanding Depreciation

Depreciation is otherwise a loss in the value of an asset, that can be caused by n number of reasons such as bad market conditions Assets such as machinery, equipment, and currency are examples of assets that are expected to depreciate over time. Thus the depreciation is the opposite of appreciation, which is the growth in the value of an asset over time.

Usually, in accounting, we can calculate the depreciation of the assets based on information of asset life. Calculation or estimating the asses value is more important for the purpose of paying income taxes such as property taxes. Usually, the depreciation depends on the market or economic conditions.

Depreciation Calculation

There are multiple methods that are used to calculate depreciation. However, to calculate depreciation, one must first compute the depreciable basis. The depreciable base is the initial value to which the depreciation percentage is applied.

Depreciable base = (Cost of the Asset) – (Salvage or Residual Value at the End of its Useful Life)

Common Methods of Depreciation & Its Calculation

The types of Depreciation are explained in more detail below:

Straight-line Method

This is a straightforward technique of calculating depreciation in which a fixed percentage is applied to the depreciable base and the depreciation amount remains constant throughout the asset’s life until it is reduced to its salvage value. The percentage is calculated by dividing the asset’s depreciable base by its useful life in years.

Depreciation Straight Line Method Calculation Example:

If an asset costs one lakh and has a ten-year useful life with a salvage value of Rs. 10,000, depreciation is charged at Rs. 9,000 for each of the ten years.

which is:

$\frac{\left(100000–10000\right)}{10}$

Straight Line Method Depreciation Formula

$\mathrm{Calculation} \mathrm{of} \mathrm{Depreciation} \mathrm{Rate} = \frac{\left(100 – \% \mathrm{of}the \mathrm{resale} \mathrm{value} \mathrm{of} \mathrm{purchase}price\; useful\right)}{ \mathrm{Life} \mathrm{in} \mathrm{Years}}$ $\mathrm{Depreciation} =\mathrm{Purchase }\mathrm{Price} \times \mathrm{Depreciation} \mathrm{Rate} \mathrm{or} \frac{\left(\mathrm{Purchase} \mathrm{Price} – \mathrm{Salvage} \mathrm{Value}\right)}{\mathrm{Useful} \mathrm{Life}}$

Written Down Value Method (WDV)

The written down method is otherwise known as the reducing balance or diminishing balance method. A fixed rate of depreciation is applied to the reducing or diminishing value of the asset maintained in the books of accounts at the beginning of the financial period, rather than to the asset’s cost, under this method. The carrying value of the asset, as well as the annual depreciation, will be higher in the early years of this technique and will decrease as time goes on.

Depreciation Write Down Method Calculation Example

For example, If an asset is purchased for 1 Lakh and the depreciation rate is 10%, the first-year depreciation will be Rs. 10,000 which is 10% of Rs. 1,00,000, the second-year depreciation will be Rs. 9,000 which is 10% of Rs. 90,000, and the third year depreciation will be Rs. 8,100 which is 10% of Rs. 81,000.

Formula To Calculate The WDV Depreciation

$\mathrm{WDV} \mathrm{Depreciation} \mathrm{Rate} = \left(1 –{\left(\frac{\mathrm{s}}{\mathrm{c}}\right)}^{\frac{1}{\mathrm{n}}}\right)\times 100$

where,

n = Remaining useful life of the asset (in years)
s = Scrap value at the end of the useful life of the asset
c= Cost of the asset/Written down value of the asset

Sum-of-years Digits Method

To calculate the depreciation rate, this method uses accelerated depreciation, which adds the years of the asset’s useful life. For example, f an asset has a five-year useful life, the total of the digits is 1+2+3+4+5=15. The depreciation for a given period will then be calculated using the asset’s remaining useful life years. As a result, the first year’s depreciation rate will be 5/15, the second year’s rate will be 4/15, and so on.

Depreciation Annuity Method

This method is not time-based, and it does not assess the useful life in years, but rather in terms of output capacity. The depreciation cost per unit for a production machine is calculated by dividing the entire cost of the machine by the total units manufactured by the machine over its lifetime. To calculate the total depreciation for the year, multiply this cost by the number of units manufactured during that time period.

Why is Depreciation so Important?

The depreciation is important because it provides various advantages which are listed below:

• Depreciation is a tax-deductible expense, so it’s crucial to think about it if you want to save money on taxes.
• According to the Companies Act of 2013, depreciation must be charged in the profit and loss account.
• If it isn’t taken into account, fixed-asset expenditures aren’t taken into account, and profit can appear to be quite high, especially in businesses that require a lot of plant and machinery. This may also result in a high distribution of earnings to shareholders, resulting in a lack of finances when the company needs to replace an asset.

FAQ’s on Depreciation

Question 1.
What are the 3 methods of depreciation?

Answer:
The 3 methods of depreciation are the Straight Line Method, Write Down Method and Sum of Years Digit Method.

Question 2.
What is the simplest depreciation method?

Answer:
The straight-line method is the simplest depreciation method.

Question 3.
On which assets depreciation is charged?

Answer:
 The depreciation is charged only on fixed assets.

Inverted Duty Structure under GST: The Inverted Duty Structure does not find definition under the GST Act but is meant to classify a situation wherein an entity is liable to pay a higher rate of GST or import duties on the products procured as inputs to the manufacturing process than on the final output that results from the said process.

• Introducing The Concept Of ‘Inverted Duty Structure Under GST
• How Does a GST refund work in the case of an inverted duty structure?
• For Which Inputs Are Refunds Allowed?
• How Is The Maximum Refund Available Calculated?
• How Can A Refund Be Claimed?
• When Is A Refund Application Filed?

Introducing The Concept Of ‘Inverted Duty Structure Under GST

The use of the term ‘Inverted Tax Structure’ is made to signify a situation wherein the tax rate levied on inputs purchased or the rate of GST paid on received inputs stands to be more than the tax rate imposed on the rate of GST payable on outward supplies.

Say, for example, a company XY that operates as an inverter manufacturing company purchases input raw materials at 18%, and the GST paid on which is Rs. 1,00,000. The GST rate applicable on the final product, i.e. the inverter, is 12%, concluding to the GST payable as Rs. 65,000. In this scenario, XY has to pay more GST on the inputs used in the manufacturing process of the inverter than on the final output product.

In the case of an inverted duty structure, a refund is allowed but stands subject to certain specific conditions. The person registered as a taxpayer must apply for the refund he wishes to claim, the procedure for which shall be explained later in the article.

How Does a GST Refund Work in the case of an Inverted Duty Structure?

At the end of a tax period, i.e. a period that requires furnishing of a return, any registered person is allowed the claim of unutilized ITC (input tax credit). This stands based on Inverted Duty Structure, wherein the tax rate on inputs is higher than the tax rate on Outputs & Output services, in compliance with Section 54(3) of the CGST Act, 2017.

Unutilized input tax credit refund is not allowed when:

1. Fully exempt supplies or nil-rated output supplies.
2. Goods exported from India that are subject to export duty.
3. When suppliers of goods or services or both claim refunds of IGST or avail of drawback following central tax.
4. In the instance of supply of construction services, unutilized input tax credit refund stands unallowed under sub-section (3) of section 54 of Central Goods and Services Tax Act, as via Vide notification No. 15/2017.
5. Following vide notification no. 5/2017-Central Tax (Rate) [the tariff item, heading, subheading or chapter is mentioned in the parenthesis succeeding the description of goods]:
   1. Silk or silk waste woven fabrics. (5007)
   2. Wool or animal hair woven fabrics. (5111 to 5113)
   3. Cotton woven fabrics. (5208 to 5212)
   4. Other vegetable textile fibers, paper yarn woven fabrics. (5309 to 5311)
   5. Man-Made textile materials woven fabrics. (5407,508)
   6. Man-made staple fibers woven fabrics. (5512 to 5516)
   7. Knitted or crocheted fabrics [All goods]. (60)
   8. Any rail locomotives powered by electric accumulators or external sources of electricity. (8601)
   9. Other rail locomotives and locomotive tenders. For example- Diesel-electric locomotives, Steam locomotives and tenders thereof. (8602)
   10. Any self-propelled railway or tramway coaches, vans and trucks, excluding those of heading 8604 (8603)
   11. Railway or tramway maintenance or service vehicles, self-propelled or otherwise. These may include workshops, cranes, ballast tampers, trackliners, testing coaches and track inspection vehicles. (8604)
   12. Non-self- propelling railway or tramway passenger coaches, luggage vans, post office coaches and other particular purpose railway or tramway coaches, excluding those of heading 8604 (8605)
   13. Non-self-propelling railway or tramway goods vans and wagons. (8606)
   14. Railway or tramway locomotives or rolling-stock parts; comprising bogies, Bissel-bogies, axles and wheels, and parts thereof. (8607)
   15. Fixtures and fittings of railway or tramway tracks; mechanical (including electro-mechanical) signalling, railways, tramways, roads, inland waterways safety and traffic control equipment, parking facilities, port installations or airfields; parts of the preceding. (8608)

Claiming unutilized input tax credit refund is allowed from 1st August 2018 on the accumulated input tax credit due to inverted duty structure. This is only for supplies of goods mentioned in (a.), (b.), (c.), (d.), (e.), (f.), and (g.).

The unutilized input tax credit that has been accumulated on inward supplies regarding the goods mentioned above till 31st July 2018 shall lapse. This initiative by the government is an undertaking to allow for the claiming of input tax credit returns accumulated due to an inverted duty structure to the textile industry.

For Which Inputs Are Refunds Allowed?

In accordance with notification no. 26/2018, retrospective effects come into play from 1st July 2017 due to Rule 89(5) changes to allow refund only for goods inputs. Such inputs, for the stated purpose, are non-inclusive of capital goods and input services.

Net ITC comprises all inputs directly or indirectly consumed in the manufacturing process stated by circular no. 79/53/2018- GST. As long as a registered individual intends to use the inputs for the intentions of his/her business, the input tax credit of the GST that is paid on the stated inputs shall remain available.

Section 17(5) of the CGST Act levies no restrictions on availing such input tax credit. Thus, input tax credit on materials used for packing and purchased to repair machinery, printing and stationery items, and stores and spares find inclusion in Net ITC to calculate the refund.

How Is The Maximum Refund Available Calculated?

The maximum refund available is calculated according to a particular formula, which is mentioned as follows:

Maximum Refund Amount = (Turnover of inverted rated supply of goods and services X Net input tax credit / Adjusted total turnover) – Tax payable on such inverted rated supply of goods and services.

The components of the given formula can be explained in the following manner:

Net input tax is taken to mean any ITC availed on inputs other than the one whose refund is claimed under the sub-rules of (4A) or (4B) or both during the pertinent tax period.

Turnover of inverted rated supply of goods and services refers to the inverted supply of goods value incurred during the pertinent period.

Adjusted total turnover refers to Clause (112) of section 2 of the CGST Act defined turnover in a State or a Union territory during the pertinent period. This shall exclude exempt supplies’ values except for inverted-rated supplies.

Tax payable on such an inverted rated supply of goods is used to define the taxes paid on inverted rated goods supply belonging to the same head: IGST, CGST, SGST.

Relevant period refers to the time for which the claim is filed.

This may be illustrated through the use of an example, for which we are to consider the following-

Details of Inward Supplies

• Inward supplies used for manufacturing goods which are taxed at 5%, having a value of Rs. 200 lakhs at GST of 12% and GST (ITC) of Rs. 24 lakhs.
• Inward supplies used for manufacturing goods which are taxed at 18%, having a value of Rs. 150 lakhs at GST of 18% and GST (ITC) of Rs. 27 lakhs.
• Therefore, the total input tax credit of GST (ITC) comes to Rs. 51 lakhs.

Details of Outward Supplies

• Turnover of inverted rated supply, which is taxed at 5%, having a value of 300 lakhs at GST of 5% and GST (Liability) of Rs. 15 lakhs.
• Turnover of inverted rated supply, which is taxed at 18%, having a value of Rs. 200 lakhs at GST of 18% and GST (Liability) of Rs. 36 lakhs.
• Total turnover having the value of Rs. 500 lakhs and GST (Liability) of Rs. 51 lakhs.

The Net input tax credit will thus stand at Rs. 51 lakhs, inverted turnover at Rs. 300 lakhs and total adjusted turnover at Rs. 500 lakhs. Therefore, applying the above-stated formula:

Maximum available refund = (300 x 51/500) – 15

= Rs. 15.60 lakhs

How Can A Refund Be Claimed?

Should a person who is registered as a taxpayer want to apply for a refund of the accumulated input tax credit, he/she will have to file GSTR-1 and GSTR-3B for the relevant time period.

The application for a refund of the accumulated input tax credit is to be filed in the prescribed format RFD-01A, which is temporarily being used instead of RFD-01.

The following steps are to be followed:

• RFD-01A form to be filed on GST portal, which will generate an ARN.
• Collect printouts of the RFD-01A application form and the generated ARN.
• The printouts are to be submitted to the jurisdictional authority with relevant supporting documentation.
• The refund application will be processed by the tax officer, following which there will be manual disbursement of the refund.
• Should the jurisdiction authority of the state or centre not be allotted, the taxpayer is to approach the Nodal officer of the respective state/ central.

When Is A Refund Application Filed?

Form RFD-01A is to be filed every month. If a taxpayer with a turnover of up to 1.5 crores has opted for a quarterly return, the taxpayer must file the claim quarterly. RFD-10A requires filing within two years of the end of the financial year during which the refund claim arises.

For refund applications for export, applications may be filed for one calendar month or quarter by clubbing together successive calendar months or quarters, as following circular no. 37/11/2018. Months or quarters of different financial years cannot be clubbed together. For an inverted duty structure, these same provisions will apply.