Inverted Duty Structure

Also called Inverted Duty

When the GST you pay on your inputs is higher than the GST you charge on what you sell, so input tax credit piles up faster than you can use it.

Why it matters

Unused credit is cash held by the government, which hurts any business that already runs short of working capital. A refund of the excess can be claimed under GST law, though not for tax paid on capital goods, and the September 2025 rate cuts can widen the gap where a product moved to 5 percent while its inputs stayed at 18.

For example

A brand buys packaging and machine parts at 18 percent GST but sells its finished product at 5 percent, so credit builds up every month and it files for a refund of the excess.

Go deeper

Inverted Duty Refund under GST | A Comprehensive Guide Taxmann · guide A guide to claiming a refund of credit built up by an inverted duty structure: the law behind it, the formula, the form, the time limit, and the circulars and cases that shaped it. It was written in 2023, before the September 2025 rate change. Open taxmann.com →

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