Draft Circular on refund of accumulated ITC on fabrics
Draft Circular on refund of accumulated ITC on fabrics
Following is the Draft Circular on refund of accumulated ITC on fabrics:
F. No. 354/290/2018-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
North Block, New Delhi
XX August 2018
To,
The Principal Chief Commissioners/Chief Commissioners/
Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarification regarding removal of restriction of refund of accumulated ITC on fabrics – reg.
Certain doubts have been raised regarding the applicability and intent of notification No. 20/2018-Central Tax (Rate) dated 26th July, 2018 (which seeks to amend notification No. 5/2017-Central Tax (Rate) dated 28.06.2017) relating to the provision for lapsing of input tax credit on account of inverted duty structure on fabrics for the period up to the 31st July,
2018.
2. The said notification No. 5/2017-Central Tax (Rate) was issued in exercise of powers vested under section 54 of the Central Goods and Services Tax Act, 2017(CGST Act, 2017). It notifies the items on which refund of accumulated input tax credit on account of inverted duty structure is not allowed. Some of the items notified under this notification are fabrics. A
total 10 categories of fabrics covered in the notification are as follows:
| S. No. | Tariff item, heading, subheading or Chapter | Description of Goods |
| (1) | (2) | (3) |
| 1. | 5007 | Woven fabrics of silk or of silk waste |
| 2. | 5111 to 5113 | Woven fabrics of wool or of animal hair |
| 3. | 5208 to 5212 | Woven fabrics of cotton |
| 4. | 5309 to 5311 | Woven fabrics of other vegetable textile fibers, paper yarn |
| 5. | 5407, 5408 | Woven fabrics of manmade textile materials |
| 6. | 5512 to 5516 | Woven fabrics of man-made staple fibers |
| 6A. | 5608 | Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials |
| 6B. | 5801 | Corduroy fabrics |
| 6C. | 5806 | Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive |
| 7. | 60 | Knitted or crocheted fabrics [All goods] |
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3. In the 28th GST Council meeting, it was decided to remove the restriction of not allowing the refund of ITC accumulated on account of inverted duty structure on fabrics with prospective effect on the input supplies received after the date of issue of notification. It was also decided to simultaneously lapse the accumulated ITC, lying unutilized, for the past period, after the payment of GST for the month of July 2018. Accordingly, to give effect to this decision, the notification No. 20/2018–Central Tax (Rate) has been issued amending notification No. 5/2017-Central Tax(Rate). To keep the accounting simple, it was decided to make these changes effective from the 1st day of August 2018.
4. Vide the said notification No. 20/2018-Central Tax (Rate), the following proviso has been inserted in notification No. 5/2017-Central Tax (Rate).
“Provided that,-
(i) nothing contained in this notification shall apply to the input tax credit accumulated on supplies received on or after the 1st day of August 2018, in respect of goods mentioned at serial numbers 1, 2, 3, 4, 5, 6, 6A, 6B, 6C and 7 of the Table below;
and
(ii) in respect of said goods, the accumulated input tax credit lying unutilized in balance, after payment of tax for and up to the month of July 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse.”.
Consultant
