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1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesAs of 11 October 2026, a Government of India FAQ posted on 9 October reports GST Council recommendations to expand the ITC considered for certain refunds under CGST Rules 89(4) and 89(5). The changes are proposals with future dates, not established amendments in the available official material: confirm an implementing notification and the current rule text before relying on them. The FAQ proposes including qualifying input-service ITC in inverted-duty calculations from 1 November 2026, and attributable capital-goods ITC in both relevant refund calculations from 1 April 2027.
What the two refund routes cover
Rule 89(4) concerns refunds for eligible zero-rated supplies made without payment of IGST under a bond or Letter of Undertaking (LUT). Rule 89(5) concerns accumulated ITC arising from an inverted duty structure: broadly, where the tax rate on input goods is higher than the rate on output supplies. They are distinct routes, with different eligibility conditions and Net ITC calculations. The current rule definitions and filing framework appear on the CBIC refund rules page.
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In its FAQ posted 9 October 2026, the Government of India describes Council recommendations to change how Net ITC is treated prospectively. The comparison below separates the existing framework described by CBIC from the proposed changes; it does not treat the recommendations as already in force.
| Question | Rule 89(4): zero-rated supply | Rule 89(5): inverted duty |
|---|---|---|
| What kind of supply or condition? | Eligible zero-rated supply made without payment of IGST under bond or LUT. | Qualifying inversion, with input-goods tax rates higher than output-supply tax rates. |
| Input-service ITC | Current Net ITC definition includes inputs and input services. The 9 October FAQ does not propose an additional input-service change for this route. | The FAQ proposes inclusion for eligible input-service ITC availed on or after 1 November 2026. |
| Capital-goods ITC | The FAQ proposes inclusion from 1 April 2027, limited to the amount attributable to the relevant period. | The FAQ proposes inclusion from 1 April 2027, limited to the amount attributable to the relevant period. |
| Capital-goods attribution proposed by the FAQ | One-sixtieth per month over 60 months, beginning in the month ITC is availed. | One-sixtieth per month over 60 months, beginning in the month ITC is availed. |
| Important boundary | The proposal does not concern zero-rated supplies made on payment of IGST. | Higher tax on input services alone does not establish an inverted duty structure. |
These points are set out in the Government of India FAQ on refunds of ITC accumulated on input services and capital goods. Rule 89(4)’s existing Net ITC definition includes ITC on inputs and input services for the relevant period; Rule 89(5) has a narrower definition, as reflected in the CBIC rules.
Proposed dates and what they mean
The FAQ gives two prospective dates. They describe the Council’s recommendations, not proof that a legal amendment has commenced. Check the relevant notification and consolidated Rule 89 text before including these credits in a claim.
- 1 November 2026: the proposed start date for eligible input-service ITC in Rule 89(5) inverted-duty calculations. It applies to ITC availed on or after that date, subject to the route’s eligibility requirements.
- 1 April 2027: the proposed start date for capital-goods ITC in Rule 89(4) and Rule 89(5) calculations, to the extent attributable to the relevant period.
The FAQ does not propose adding input services to Rule 89(4) through this change. That route’s current Net ITC definition already includes input services. Nor does the proposed Rule 89(4) capital-goods treatment extend to zero-rated supplies made on payment of IGST.
How the proposed 60-month capital-goods attribution works
The FAQ says a capital asset is used over an extended period, so its ITC would not be included in full in the tax period when availed. Instead, the proposed calculation takes one-sixtieth of eligible capital-goods ITC per month for 60 months, beginning with the month of availment. Only the portion attributable to the claim’s relevant period would be considered under the applicable Rule 89 formula.
The FAQ describes relevant-period eligibility by reference to qualifying capital goods with ITC availed on or after 1 April 2027 in a month no earlier than 59 months before the last month of the relevant period. Since the final amended rule and formula were not verified as of 11 October 2026, use the FAQ’s description as a proposal rather than as an operative calculation instruction; do not assume the entire capital-goods credit is refundable at once.
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Why input services alone do not create inverted-duty eligibility
The FAQ emphasizes that the inverted-duty condition continues to turn on the tax rates for input goods and output supplies. A higher rate on services used in the business, by itself, does not create Rule 89(5) eligibility when the goods inputs and output supplies have equal rates. The proposed inclusion of qualifying input-service ITC changes the Net ITC calculation for an otherwise eligible inverted-duty claim; it does not replace the underlying inversion test.
CBIC Circular 125/44/2019-GST described the historic treatment: “inputs” excluded input services and capital goods for the inverted-duty refund, while Net ITC covered qualifying inputs during the relevant period irrespective of each input’s rate. The circular is available at CBIC Circular 125/44/2019-GST. The 2026 FAQ’s proposed treatment should not be confused with that earlier position or treated as already operative.
Admissibility, reversals, and filing
A change to Net ITC would not make every service or capital-goods credit refundable. The FAQ says only eligible ITC is included; blocked or otherwise inadmissible credit and required reversals remain relevant. Establish that the credit is legally admissible and attributable to the relevant period, then apply the formula and documentary requirements that govern the particular refund category.
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- Identify the claim category. Determine whether the claim is for a qualifying zero-rated supply without payment of IGST under bond/LUT (Rule 89(4)) or accumulated ITC from an inverted duty structure (Rule 89(5)).
- Check the operative text and date. Consult CBIC notifications and the consolidated rules for the claim period. Do not use a Council recommendation or FAQ as a substitute for a notified amendment.
- Reconcile eligible ITC. Separate inputs, input services, and capital goods; confirm admissibility, relevant-period attribution, and any required reversals. Apply any new capital-goods apportionment only if the implementing rule confirms it.
- File through the prescribed route. CBIC says refund applications are generally filed electronically in FORM GST RFD-01 through the Common Portal, subject to category-specific evidence and conditions. The relevant period is the period for which the claim is filed; consult the refund rules and applicable category requirements.
Keep the 2022 Rule 89(5) changes separate
The 2026 FAQ proposals are separate from earlier amendments and clarifications. CBIC Circular 181/13/2022-GST states that the Rule 89(5) formula amended by Notification 14/2022-Central Tax applies prospectively to refund applications filed on or after 5 July 2022; under the circular’s stated position, applications filed before that date used the previous formula. The circular also discusses a restriction for specified goods under Chapters 15 and 27 that took effect on 18 July 2022. Neither date is a commencement date for the 2026 recommendations. See CBIC Circular 181/13/2022-GST.
Practical status check before claiming
- For claims involving the proposed 1 November 2026 or 1 April 2027 dates, verify that an implementing notification has been issued and check its exact commencement, scope, and formula.
- Confirm the rule version applicable to the refund application and relevant period; the FAQ alone does not establish that the recommended amendments took effect.
- Keep the route-specific conditions in view: zero-rated supply without payment under bond/LUT for the relevant Rule 89(4) claim, or the input-goods/output-supply rate comparison for Rule 89(5).
- Check whether the credit is admissible and whether reversals apply before counting it in Net ITC.
The official FAQ is also listed through the GST Council FAQ index.
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