In 2011, Chinese Ministry of Finance and State Taxation Administration jointly launched a taxation reform of allowing some pilot enterprises to refund uncredited input value-added tax (VAT). Prior to the reform, when the input VAT exceeded the output VAT, the uncredited input VAT was only to be carried forward to the subsequent period rather than being refunded. In 2022, micro, small and medium enterprises were eligible for such an uncredited VAT refunding. In order to explore the impact of this uncredited VAT refunding policy from a supply chain perspective, this paper considers the interaction of a Stackelberg game between one upstream supplier and one downstream manufacturer in two periods. With the supplier as the game leader, this paper finds that though alleviating the cash flow shortage predicament, the uncredited VAT refunding sharpens the manufacturer’s behavior of holding strategy inventory. Specifically, this increased inventory knocks down the wholesale price charged by the supplier in the second period, but increases/decreases the wholesale price in the first period under a low/high inventory holding cost. As such, compared with the policy of deferring the uncredited VAT refunding to future periods, if the holding cost is low, both supplier and manufacturer enjoy higher profits with the uncredited VAT refunding policy; if the holding cost is high (such as in the context of micro, small and medium-sized enterprises), both supplier and manufacturer suffer a profit decrease; otherwise, with an intermediate holding cost, the policy effect upon firms’ profits depends on the market size growth. Furthermore, the uncredited VAT refunding policy increases the total sales quantity, the overall tax as well as consumer surplus.