Inverted Duty Structure
Definition
A situation where the GST rate on a business's inputs is higher than the rate on its finished output, causing input tax credit to pile up. The rules allow a refund of the accumulated credit arising from such an inverted structure, subject to conditions.
Why it matters
When inputs are taxed higher than outputs, unused credit ties up cash indefinitely. The inverted-duty refund route is how affected manufacturers recover that locked credit.
Related Terms in India GST
Provisional ITC
Input tax credit a buyer claimed before the corresponding invoice was reflected in their auto-drafted statement. Rule changes have progressively tightened this, so credit is now largely restricted to invoices actually appearing in GSTR-2B.
Blocked Credit (Section 17(5))
Categories of input tax credit that GST law specifically disallows even when used for business, such as credit on certain motor vehicles, personal consumption, and some works-contract and construction inputs. Businesses must identify and exclude these from their claims.
Anti-Profiteering (GST)
A GST provision requiring businesses to pass on the benefit of a rate cut or additional input tax credit to customers through lower prices, rather than keeping it as extra margin. Compliance is monitored by the designated authority.
GST Registration Suspension
A state in which a taxpayer's GST registration is temporarily inactive — for example after applying for cancellation or when the department initiates cancellation. During suspension the taxpayer generally cannot issue tax invoices or claim credit.
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