Input Tax Credit
GST FAQ 2nd Edition – June 2017 as Updated as on 1.1.2018 – GST Frequently Asked Questions (FAQs)
GST
Q 1. What is input tax?
Ans. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services or both made to a registered person. It also includes tax paid on reverse charge basis and integrated tax goods and services tax charged on import of goods. It does not include tax paid under composition levy.
Q 2. Can GST paid on reverse charge basis be considered as input tax?
Ans. Yes. The definition of input tax includes the tax payable under the reverse charge.
Q 3. Does input tax includes tax (CGST/IGST/SGST) paid on input goods, input services and capital goods?
Ans. Yes, it includes taxes paid on input goods, input services and capital goods. Credit of tax paid on capital goods is permitted to be availed in one instalment.
Q 4. Is credit of all input tax charged on
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on be entitled to ITC?
Ans. The registered person shall be entitled to the credit only upon receipt of the last lot or installment.
Q 7. Can a person take input tax credit without payment of consideration for the supply along with tax to the supplier?
Ans. Yes, the recipient can take ITC. But he is required to pay the consideration along with tax within 180 days from the date of issue of invoice. This condition is not applicable where tax is payable on reverse charge basis.
Q 8. What would happen of the ITC taken by the registered person if he has not paid the consideration along with tax within 180 days from the date of issue of invoice?
Ans. The amount of ITC would be added to output tax liability of the person. He would also be required to pay interest. However, he can take ITC again on payment of consideration and tax.
Q 9. Who will get the ITC where goods have been delivered to a person other than taxable person ('bill to'- 'ship to 'scenarios)?
Ans. It would be deem
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an be made after filing of annual return.
Q 11. Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act,1961, will ITC be allowed in such cases?
Ans. The input tax credit shall not be allowed on the said tax component in respect of which depreciation has been claimed.
Q 12. Is credit of tax paid on every input used for supply of taxable goods or services or both is allowed under GST?
Ans. Yes, except a small list of items provided in the law, the credit is admissible on all items. The list covers mainly items of personal consumption, inputs use of which results into formation of an immovable property (except plant and machinery), telecommunication towers, pipelines laid outside the factory premises, etc. and taxes paid as a result of detection of evasion of taxes.
Q 13. A taxable person is in the business of information technology. He buys a motor vehicle for use of his Executive
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es land and building, among other things.
Q 16. What is the ITC entitlement of a newly registered person?
Ans. A person applying for registration can take input tax credit of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration. If the person was liable to take registration and he has applied for registration within thirty days from the date on which he became liable to registration, then input tax credit of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date on which he became liable to pay tax can be taken.
Q 17. A person becomes liable to pay tax on 1st August, 2017and has obtained registration on 15th August, 2017. Such person is eligible for input tax credit on inputs held in stock as on:
(a) 1st August, 2017
(b) 31st July, 2017
(c) 15th August, 2017
(d) He cannot take credit for the pas
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rvices or both attributable only to taxable supplies can be taken by registered person. The manner of calculation of eligible credit is provided in the CGST Rules.
Q 21. If input tax credit is allowed only in respect of goods or services or both for effecting taxable supplies, would it not lead to loss of input tax credit on exempt supplies when exported?
Ans. No. Zero-rated supplies have been covered within taxable supplies for the purpose of allowing input tax credit. Moreover, IGST Act specifically allows availment of input tax credit for making zero rated supplies, notwithstanding that such supply may be exempt.
Q 22. Which of the following is included for computation of taxable supplies for the purpose of availing credit?
(a) Zero-rated supplies
(b) Exempt supplies
(c) Both
Ans. Zero rated supplies.
Q 23. Where goods or services received by a registered person are used partly for the purpose of business and partly for other purposes, whether the input tax credit is
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nate credit or avail 50% of the eligible input tax credit.
Q 26. Mr. A, a registered person was paying tax under composition scheme up to 30th July, 2017. However, w.e.f 31st July, 2017, Mr. A becomes liable to pay tax under regular scheme. Is he eligible for ITC?
Ans. Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock and capital goods (reduced by such percentage points as has been prescribed by the ITC Rules) as on 30th July, 2017. The Input Tax Credit on capital goods shall be claimed after reducing the tax paid on such capital goods by five percentage points per quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods were received by the him.
Q 27. Mr. B applies for voluntary registration on 5th July, 2017 and obtained registration on 22nd July, 2017. Mr. B is eligible for input tax credit on inputs in stock as on…………..
Ans. Mr. B i
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put tax credit involved in the remaining useful life in months shall be computed on pro-rata basis, taking the useful life as 5 years. Assume capital goods have been in use for 4 years, 6 months and 15 days. The useful remaining life in months will be 5 months ignoring the part of the month. If ITC on such capital goods is taken as C, ITC attributable to the remaining useful life will be C multiplied by 5/60. This would be the amount payable on capital goods. The ITC amount shall be determined separately for integrated tax, central tax and state tax. The payment can be made by debiting electronic credit ledger, if there is sufficient balance in the said ledger, or by debiting electronic cash ledger. If any balance remains in the electronic credit ledger, it would lapse.
Q 29. Is there any restriction on period for availment of ITC?
Ans. In cases of new registration, change from composition to normal scheme, from exempt to taxable supplies, the concerned person cannot avail ITC afte
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