This circular provides clarification on the applicability of recent amendments relating to refund of unutilised input tax credit (ITC) arising due to inverted duty structure under section 54(3) of the CGST Act.

It clarifies that the amended formula for computation of refund under rule 89(5) of the CGST Rules, as notified vide Notification No. 14/2022–Central Tax dated 05.07.2022, is prospective in nature. Accordingly, the revised formula applies only to refund applications filed on or after 5 July 2022. Refund applications filed prior to this date are required to be processed in accordance with the formula as it existed before the amendment.

The circular also clarifies the scope of restriction imposed vide Notification No. 09/2022–Central Tax (Rate) dated 13.07.2022, effective from 18.07.2022, which disallows refund of unutilised ITC on account of inverted duty structure for certain goods falling under Chapters 15 and 27. It is clarified that this restriction is also prospective and applies only to refund applications filed on or after 18 July 2022. Refund claims filed before this date are not affected by the said restriction.

These clarifications aim to ensure certainty and uniformity in processing refund claims and to avoid denial of refunds based on retrospective application of amended provisions.