The Hon’ble Apex Court in the Union of India vs VKC Footsteps India Private Limited Civil Appeal No. 4810 of 2021 observed that the existing formula erroneously assumes that the entire output tax will be paid from ITC availed on input goods and the credit on input services will not be utilized for payment of output tax.

GST Council in line with the ruling in VKC Footsteps (supra), has recommended making necessary amendments to the formula prescribed in sub-rule (5) of rule 89 of CGST Rules, 2017 for calculation of refund of unutilized Input Tax Credit on account of inverted rated structure.

Hence, to avoid such an anomaly, the GST Council has proposed a change in the formula for calculation of refund under rule 89 (5) to take into account the utilization of ITC on account of inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services during the said tax period.

The above recommendation in the change in formula would help put rest to the incessant dispute in the industry relating to refund of unutilized Input Tax Credit on account of inverted rated structure.