Govt’s Q&A on GST refund due to inverted duty rates is controversial

We refer to your article 'GST reforms: Festival cheer for consumers but many suppliers face IDR' (BS-September 22, 2025).

- SME CHATROOM TNC RAJAGOPALAN

You have mentioned that 'a controversial clarification from the government that has rattled dealers says that refunds due to IDR will not be available where input and output are the same'. Please let us know the reference of the clarification, why it is controversial and how, as traders, we should proceed?

· The Q&A no.10 released on September 3, 2025, says that 'refund of accumulated ITC in terms of clause (ii) of first proviso to section 54(3) of the CGST Act, is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. However, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of the first proviso to subsection (3) of section 54 of the CGST Act.' However, Section 54 (3) says that (relevant extracts). ' ....... a registered person may claim refund of any unutilised input tax credit at the end of any tax period provided that no refund of unutilised input tax credit shall be allowed in cases other than-(i) ...... (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except ...... '.