Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 21-12-2016 Last Replied Date:- 22-12-2016 – Introduction Tax credit is the mechanism which ensured avoidance of cascading effect. Principally cascading means paying tax on tax. Presently an assessee pays excise duty and thereafter pays sales tax in the form of vat on the said excise duty. This is an example of cascading effect. However, when it is required to pay sales tax then assessee is eligible to avail of set off of the tax already paid by it in the form of sales tax while procuring raw materials or inputs or goods in trade. Same concept is applicable with the excise duty and service tax. But inter-credit of sales tax and excise duty is not available presently. However, inter set off of credit between excise duty and service tax is available to certain extent. GST aims at bringing all the taxes viz service tax, excise duty and sales tax at par and ensure that the set off taxes is available to assesses at all the ti
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received, (b) two-third of the total input tax, including the credit availed in the first financial year, in the financial year immediately succeeding the year referred to in clause (a) in which the said goods are received, and (c) the balance of the amount of credit in any subsequent financial year. (2) Notwithstanding anything contained in this section, but subject to the provisions of section 36, no registered taxable person shall be entitled to the credit of any input tax in respect of any supply of goods and/or services to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying document(s) as may be prescribed; (b) he has received the goods and/or services; (c) the tax charged in respect of such supply has been actually paid to the account of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the
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goods or otherwise. (3) 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(43 of 1961), the input tax credit shall not be allowed on the said tax component. (4) A taxable person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services after furnishing of the return under section 34 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. Analysis of the Section 16 1. Every registered taxable person shall be entitled to take input tax credit here in after referred to as ITC. It means in order to avail of input tax credit following are essentialities:- A person should be taxable person or in other words he should not be exempted under GST . Secondly the person should be a registe
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t on such goods shall be allowed as follows: Year Cumulative credit that can be claimed 2017-18 Upto 30,000/- 2018-19 Upto 60,000/- 2019-20 Upto 90,000/- 4.Further, in order to claim input tax credit following conditions are required to be fulfilled cumulatively:- The registered taxable person should be in possession of tax invoice, debit note, other tax-paying document. He should have received goods and/or services. This condition is to ensure that ITC shall not be allowed on the basis of bogus invoice or documents. Further, for this condition it shall be deemed that the taxable person has received goods when goods are sent to any other person on his direction, whether as an agent or otherwise, before or during the movement of goods, either by way of transfer of documents of title to goods or otherwise. Let us understand this with the help of an illustration. Mr. X purchased goods from Mr.Y and paid tax of ₹ 10,000. But Mr. X directs Mr. Y to send goods to Mr.Z ,ultimate consume
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on 7th April 2017 in respect to the entire lot. He will not be eligible to avail of input tax credit proportionately on partial receipt of goods. Condition applicable to services – There is a special provision in respect of services. This is not applicable to goods. The provision states that if the recipient of services fails to pay to the supplier of services the value of service and tax thereon within a period of 3 months from the date of invoice then ITC availed of by the recipient in respect to the said extent of value and tax thereon shall be added to his output tax liability and recovered along with interest. Where depreciation is claimed on the tax component under the provisions of the Income Tax Act 1961, then input tax credit shall not be allowed on the said tax component. This is to avoid double benefit of the single amount. Lastly, input tax credit shall not be allowed in respect of any invoice or debit note for supply of goods or services after furnishing of the return for
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