This circular provides clarification on the admissibility of refund of accumulated input tax credit (ITC) under the inverted duty structure in cases where the supplier supplies goods at a lower rate under a concessional notification.

It clarifies the intent of para 3.2 of Circular No. 135/05/2020-GST dated 31 March 2020, which had stated that refund under inverted duty structure is not admissible where the input and output goods are the same. The circular explains that this restriction was meant to apply only to situations where the difference in tax rates arises due to change in rates over different time periods, and not to cases where lower output tax arises at the same point of time due to a concessional notification.

Accordingly, it is clarified that refund of accumulated ITC is admissible under section 54(3)(ii) of the CGST Act where the same goods are used as inputs and outputs, but the outward supply is made at a concessional rate resulting in a lower output tax rate compared to the input tax rate at the same time. Such refund shall be allowed subject to fulfilment of other prescribed conditions, and provided the outward supply is neither nil-rated nor fully exempt, and is not specifically notified for exclusion from refund.

The circular substitutes the earlier clarification to remove ambiguity and ensure uniform implementation of refund provisions in genuine inverted duty structure cases arising due to concessional rate notifications.