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

Updated on:  

08 min read

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

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

27th June 2020
A full or part of the amount applied for refund may have been rejected via a notice issued by the authority. After completing the due proceedings, a final order must be issued within 60 days from the date of receipt of the refund application.

In case this time limit is expiring between 20th March to 30th August 2020, the last date to issue order shall be extended to the later of following dates:
1. 15 days from the date of receiving a reply from the applicant towards the notice, or
2. 31st August 2020

3rd April 2020
The time limit for completion or compliance has been extended to 30th June 2020, where the time limit/time limit/ date of expiry falls between the period from 20th March 2020 to 29th June 2020. It includes cases where the time limit to apply for GST refund in RFD-01 expires between 20th March 2020 and 29th June 2020.


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’.

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’.  

Selection of inverted duty structure

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.

Refund on account of ITC accumulated due to Inverted Tax Structure

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.  

Download offline utility

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’
details in template

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.

validate & calculate

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.

create file to upload
click to fill details

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 here to upload

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

download unique invoices

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

declaration & validate statement

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

download invalid invoices

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.

delete statement

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

proceed after 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.

computation of refund claimed

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.

refund to be claimed

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.

selection of bank account

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

upload supporting docs

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

preview

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

submit

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

proceed after submit

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’. 

declaration at the end

Click on the downloaded ARN receipt to view the application.

display of ARN
Refund ARN receipt

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.

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