Input Tax Credit under the GST Law
By: – Sanjeev Singhal
Goods and Services Tax – GST
Dated:- 26-10-2016
Input Tax Credit under GST Law
Before understanding the Input tax credit under GST Law it is essential to understand the changes made in earlier Law i.e. CENVAT under Rule , 2004 to the new law. After giving the due consideration, it is clear from the given table below that except few minor changes, Capital Goods under Rule 2(a) and Section 2(20) are same.
As per Section 2(20) of GST Law
As per 2(a) of CCR 2004
“capital goods” means: –
(A) the following goods, namely:-
(i) all goods falling within Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the Schedule to this Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory mater
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cle; or
(iii) imparting motor driving skills;
(D) Components, spares and accessories of motor vehicles which are capital goods for the taxable person.
"capital goods" means:- definition of “capital goods” is amended by notification no. 28/2012 dated 20.6.2012.
(A) the following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading no. 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof;
(vii) storage tank; and
(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers have been inserted w.e.f. 1.7.2012 used-
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tor vehicles which are capital goods for the assessee
After the comparison of both the definition of capital goods and under earlier law and new law it is very clear that both the definition at the most are same except few words here and there but it is copy of definition of Rule 2(a) of CCR,2004.
Capital Good covered in Clause (A)(i)
Chapter 82 : tools hand tools Knives etc
Chapter 84 : machinery
Chapter 85 : Electrical Machinery
Chapter 90 : Measuring, Checking and testing machine
Sub heading 6804 : Grinding wheel and the like and parts thereof
Sub heading 6805 : Abrasive powder or grain on base of textile material, of paper, of paper board, or other material
Description of tariff heading discussed in hereinbefore is given as under.
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Tariff Heading Type of vehicle
8702 Motor vehicle for the transport of ten or more person, including the driver
of persons (other than those specified in heading 8702) including station wagon and racing cars.
8704 Motor veh
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.
Definition of Input and Input Services under GST Law
Sec. 2(54) “input” means any goods other than capital goods, subject to exceptions as may be provided under this Act or the rules made there under, used or intended to be used by a supplier for making an outward supply in the course or furtherance of business;
Sec.2 (55) “input service” means any service, subject to exceptions as may be provided under this Act or the rules made there under, used or intended to be used by a supplier for making an outward supply in the course or furtherance of business;
Yes, there are drastic changes in the definition of “input” and “Input Services” under GST law than the earlier law.
Now, we will discuss the Input tax provision under the GST Law
How to take input tax credit – Sec. 16
* All RTP [ registered taxable person ] shall take credit of input tax admissible and the said shall be credited to his ECL [ electronic credit ledger ].
* Person who voluntarily get registeredshall be
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constitution of RTP on account of sale, merger, demerger, amalgamation, leased or transfer of business , the unutilised ITC in these cases shall be allowed to transfer to the new unit after the said change of constitution.
* Under the following situation ITC shall not allowed [ Sub Section -9]
* Motor vehicle except when they are used for the following purpose
* > transportation of passenger
* > transportation of goods
* > imparting training on motor driving skill
* Goods and services provided for food and beverage , outdoor catering , beauty treatment, health services, cosmetic and plastic surgery, membership of club , health and fitness centre , life insurance , health insurance, travel benefit extended to employees on vacation, when such goods or services are used primarily for personal use and consumption of employee.
* Goods and services acquired by principal in execution of work contract for when such contract relates to construction of immovable property other than
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f supply of capital goods on which ITC has been claimed , RTP shall pay amount of tax availed on such goods reduced by the percentage point as prescribed or the tax on transaction value of such capital goods which ever is higher.
* RTP shall not allowed to take ITC after the filing of return u/s 27 for the month of September following the end ofFinancial year or filing the Annual Return , whichever is earlier.
* Where credit is taken wrongly shall be recovered as prescribed.
Input Tax Credit in case of Input sent for job work [ Section- 16A]
* Principal as referred in Sec. 43A , shall take the credit of input sent for job work provided the input after job work has been received back within 180 days from the date of sent out. ITC can be claimed even if the goods directly sent to job worker. 180 days shall be computed from the date of receipt of material by Job worker.
* If the input or capital goods have not been received by principal in the period mentioned above, he shall pa
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* ISD can distribute the ITC subject to the following :
* only on prescribed document containing the details as prescribed.
* The amount of credit distributed can not exceed the amount of credit
* ITC can be distributed only to that supplier eligible.
* Can be distributed to attributable supplier. If more than one supplier , it shall be on pro rata based on the turnover of the state, of the relevant period. Supplier should be operational in that relevant period.
Manner of recovery of credit Distributed in excess [ Section-18]
* Where the credit distributed by ISD is more than he credit available , same shall be recovered from ISD along with the interest as per Sec.51 of the Act.
* Where ISD distribute the credit in contravention of Sec.17 and distribute the same in excess of proportion of Supplier as discussed above , shall be recover from Supplier along with interest.
* Explanation of relevant period as per Section -17
* If the recipient has turnover during the proce
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