Question

I am a job worker doing job work of textile materials (dying and gray work of textile material). Now as per new notifications (circular no. 48/22/2018 dated 14/06/2018). I am allowed to take refund on account of inverted duty structure under section 54(3) of the cgst act, 2017. My question is: - as my outward supply is service i.e (jobwork service) will i get the refund of all input tax credit i.e ( inputs, input services). Please guide with relevant provisions of the act

Answer

The refund of GST in case of Inverted duty structure is allowed u/s 54(3) of CGST Act. The same is reproduced as follows:
(3) Subject to the provisions of sub-section (10), 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) zero rated supplies made without payment of tax;
(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 supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:
Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
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The plain reading of this section envisage that the refund is allowed when the credit is accumulated on account of higher rate of tax on inputs.

The plain reading will conclude that it does not include Input services because the only term used in section is input. But this is not intention of law. The intention of law is to permit the refund of recurring credit and to not allow refund of credit claimed on Capital goods through this route. You should file refund of input as well as input service.

In our opinion this is technical flaw. If your refund is rejected then go for appeal. If this flaw will be detected there will be some amendment or clarification. (Reply dt. 20/09/2018)