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A manufacturer claims a refund of unutilised input tax credit under the inverted duty structure for a period in which all its credit was availed in November 2026. Under rule 89(5) of the CGST Rules,…

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A manufacturer claims a refund of unutilised input tax credit under the inverted duty structure for a period in which all its credit was availed in November 2026. Under rule 89(5) of the CGST Rules, 2017, as amended by Notification No. 05/2026–Central Tax, which credits form part of “Net ITC” for that claim?

  1. Credit on inputs and on capital goods

  2. Credit on inputs only

  3. Credit on inputs and on eligible input services

  4. Credit on inputs, input services and capital goods

Answer and explanation

Correct answer: C - Credit on inputs and on eligible input services

Notification No. 05/2026–Central Tax amended rule 89(5) of the CGST Rules, 2017 so that Net ITC includes eligible input services for credit availed on or after 1 November 2026, alongside inputs. Credit on capital goods enters Net ITC only for credit availed on or after 1 April 2027, so it stays out of a claim for credit availed in November 2026. Before the amendment, Net ITC covered inputs alone, an exclusion of input services the Supreme Court had upheld in Union of India v. VKC Footsteps India Pvt. Ltd. (2021).

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