How to Claim Online Refund of ITC Accumulated Due to Inverted Tax Structure

The term Inverted Tax Structure refers to a situation where the input GST rate (i.e. GST rate paid on inputs received) is more than the output GST rate (i.e. GST rate payable on outward supplies).

Latest Update

05th July 2022
Taxpayers can exclude the COVID pandemic period (1st March 2020 and 28th February 2022) while calculating the time limit for filing GST refund applications under Sections 54 or 55 of the CGST Act.

1st February 2022
Budget 2022 update-
1. Section 54 is amended to provide that refund claim of any balance in the electronic cash ledger can be made in a particular form and manner prescribed.
2. The time limit to claim refund by UN agencies is now two years from last day of quarter when supply was received instead of six months.
3. The restriction to refund taxpayers for tax defaults, that earlier applied to unutilised ITC refund, is now extended to other types of refunds.
4. The relevant date to file refund claim application for supplies to SEZ is clarified in new sub-clause (ba) of clause (2) of the explanation.

1st May 2021
Where the time limit to pass orders for rejecting any refund claim fully or partly falls between 15th April 2021 and 30th May 2021, it is extended. The extended time limit shall be later of two dates:
(1) 15 days after reply to notice OR
(2) 31st May 2021

Simply speaking, a taxpayer will end up paying more tax on purchases when compared with the tax on sales. The taxpayer is eligible for the refund of accumulated input tax credit (ITC) due to the inverted tax structure.

Form RFD-01 has to be filed within two years from the end of the financial year in which such claim for refund arises. Further, a taxpayer can apply GST refund for multiple months in a single refund application. Important

Note:  The application can be saved up to a maximum of 15 days at any stage of completion. If the same is not submitted within 15 days, saved draft will be removed from the GST portal. Go to ‘Services’ > ‘Refunds’ > ‘My Saved/Filed Application’ to view the saved applications.

RFD-01: Steps for claiming the online refund of ITC accumulated due to inverted tax structure

The following guide explains the steps to file RFD-01 on the GST portal:

Step 1: Login to the GST portal, go to ‘Services’ > ‘Refunds’ > ‘Application for Refund’.

Step 2: Select the refund type and choose whether or not to file NIL refund application. Select the refund type as ‘Refund on account of ITC accumulated due to inverted tax structure’.  Select the ‘Financial Year’, ‘From Month’, ‘To Month’, and then click on ‘CREATE’.  

In the next screen, the user must select either ‘Yes’ or ‘No’ and choose either to file ‘Nil Refund’ or not respectively. If you choose to file NIL refund application, tick the checkbox and complete filing by signing as authorised signatory. If you choose ‘No’ to file ‘Nil Refund’, then the application for the ‘Refund on account of ITC accumulated due to inverted tax structure’ will be displayed.

Step 3: Download the offline utility of the refund application and enter all the refund details. Click on ‘Download Offline Utility’ to get the Statement 1A, unzip the downloaded file and open the ‘GST_REFUND_S01A.xlsb’ template.  

Enter the following details in the downloaded file:

1. a) ‘GSTIN’ of the applicant 
2. b) ‘From Return Period’ and ‘To Return Period’ for which refund has to be claimed 
3. c) ‘Details of Invoices of Inward Supplies Received’ 
4. d) ‘Tax paid on Inward Supplies’
5. e) ‘Details of Invoices of Outward Supplies’ 
6. f) ‘Tax paid on Outward Supplies’

Click on ‘Validate & Calculate’ and then click on ‘OK’ when the total number of records in the sheet gets displayed. Rectify all the errors, if any and revalidate.

Note: Check whether the ‘Error’ column is blank after rectification.

Save the filled-in file on the computer by clicking on ‘Create file to Upload’. Select the location and click on ‘SAVE’.

Note: A message is displayed on successfully saving the file.

Step 4: Upload the saved file and validate the Statement 1A on the GST portal. On the GST portal, select ‘Click to fill the details of invoices for inward and outward supplies’ Select ‘CLICK HERE TO UPLOAD’. Select the file to upload the Statement 1A.

Click on ‘Download Unique Invoices’ to view the uploaded invoices. Select the declaration checkbox and click on ‘PROCEED’.

Click on ‘VALIDATE STATEMENT’. If the statement is validated with error, click on ‘Download Invalid Invoices’

Rectify the errors and re-upload the corrected invoices once again by clicking the ‘CLICK HERE TO UPLOAD’.

Note: Click on ‘DELETE STATEMENT’ only if you want to update/delete the validated statement. At first, delete the statement and thereafter, upload the new statement of invoices.

Click on ‘PROCEED’ once you get this confirmation message: ‘Your statement has been submitted successfully for validation’.  

Step 5: Compute the eligible refund amount to be claimed in Statement 1 and fill in the amount to be claimed as a refund. Enter the following details to calculate the eligible refund claim:

1. ‘Turnover of inverted rated supply of goods and services’
2. ‘Tax payable on such inverted rated supply of goods and services’
3. ‘Adjusted total turnover’
4. ‘Net input tax credit’

The net input tax credit is auto-populated from Electronic Credit Ledger; the taxpayer can edit the net ITC amount by reducing the same.

Enter the amount to be claimed as a refund in ‘Refund to be Claimed’.

Note:  You can always check for any outstanding dues before submitting a refund claim by pressing ‘Click to view Electronic Liability Ledger’. The details of liabilities/dues relating to returns/other demands are displayed. Click on ‘GO BACK TO REFUND FORM’ after viewing the outstanding demand, if any that might get adjusted against the refundable amount in future.

Step 6: Select the requisite bank account for getting the credit of the refund amount. Select the ‘Bank Account Number’ (in which you want the refund to be credited) from the drop-down.

Step 7: Upload supporting documents (if any). Click on the ‘Delete’ icon if you want to delete the uploaded document.

Step 8:  Preview, verify and submit the refund application. Click on ‘PREVIEW’ to download the form in PDF.

After reviewing the draft, select the declaration and undertaking checkbox and then click on ‘SUBMIT’.

After getting confirmation of ‘Statement submitted successfully’, click on ‘PROCEED’.

Step 9: Affix signature of the authorised signatory to complete filing. Select the checkbox in the declaration. Select the name of the ‘Authorised Signatory’ from the drop-down. Based on the type of your organisation, click on ‘SUBMIT WITH DSC’ or ‘SUBMIT WITH EVC’.

In case of DSC, select the certificate of the authorised signatory and click on the ‘SIGN’ button. In case of EVC, enter the OTP received on the mail ID or mobile number of the authorised signatory and click on ‘VERIFY’. A message is displayed for successfully filing the application, and the status gets changed to ‘Submitted’. 

Click on the downloaded ARN receipt to view the application.

Note: 

a) Application Reference Number (ARN) receipt is downloaded and sent to the registered email ID and mobile phone number for future reference.

b) In case the ARN receipt is to be downloaded on a future date, Go to the homepage > ‘Services’> ‘My Applications’. Click on ‘Refund ARN Receipt’ and download it as a PDF document.

c) Filed applications can be tracked using the ‘Track Application Status’ under ‘Refunds’.

d) Once the application is processed by the refund processing officer, the refund will be credited to the applicant’s bank account.