Goods and Services Tax – GST – By: – Sanjeev Singhal – Dated:- 17-5-2017 Last Replied Date:- 17-5-2017 – Input tax credit on input, input services and capital goods is the most contentious issue where always are lot of litigation on admissibility . This is common problem in case of lack of clarity of the provisions and rules under the existing indirect tax as well like Excise , Service Tax and VAT. With the subsuming of one tax , in GST we are hopeful that the present problem will mitigate to certain extent . Before going into detail I will like to explain on the relevant definitions of ITC which make the chapter less cumbersome and will facilitate to understand in better way. Definitions and provisions provided in GST on ITC in comparison to existing laws are more simpler and understandable. Now, We can go through all definitions related to Input tax Credit under CGST Act, 2017 in detail. Definition of Capital Goods , Input , Input Services and Input tax credit Capital Goods -Sec. 2(
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ctive State goods and service tax Act; or Tax payable under the provision of sub section (3) & (4) of Section 7 of the Union territory goods and service tax Act. But does not include tax paid under the composition levy. Sec. 2( 63) Input Tax Credit mean credit of input tax . Now, we will discuss the Input tax Credit provision one by one along with Rules of Input Tax Credit . How to take input tax credit- conditions – Sec. 16 All RP [ Registered Person ] shall take credit of input tax admissible as per the terms and condition specified in Sec. 49 on all goods and supply or both and the said amount shall be credited to his ECL [ electronic credit ledger]. Registered person can claim credit only when possessing; Invoice or debit note Received the goods or services Tax charged on such supply has been paid to Government either in cash or through credit utilisation Person has filed the return u/s 39 Where the goods are received in installment or lots, ITC shall be available at the time r
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ing of the annual return which ever is earlier . Apportionment of credit or blocked credit [Sec. 17] A] where the goods and services are used partly for business or partly for personal purpose by RP , the amount of credit shall be limited to ITC pertain to used for business. B] where the goods or services are used by RP partly for taxable supplies including zero rating supply under this Act or IGST Act and partly for exempted supply , the amount of credit shall be limited to ITC pertain to used for taxable supply. [ Furnish in GSTR-2 the ITC on exempt supplies which shall not be credited to ECL] C] Exempted supply under Point-B as explained in Sec. 2(47) and shall include supplies on which recipient is liable to pay tax under reverse charge basis, transaction in securities, sale of land, subject to clause b of paragraph 5 of schedule-II, sale of building. Exempt Supply[ sec. 2(47) exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be
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namely Food and beverage, outdoor catering , beauty treatment, health services, cosmetic and plastic surgery, except when such inward supply of goods and services is used for output taxable supply of the same category of goods and services. Membership of club, health and fitness services Rent a cab, life insurance, health insurance Travel benefit extended to employee on vocation such as leave or home travel concession. F] work contract service or both when supplied for construction of immovable property other than plant and machinery except when such input services used for further supply of work contract service. G] goods or services used by RP for construction of immovable property ( other than plant and machinery) on his own a/c, even when used in course or furtherance of business. For the purpose of clause F and G , the construction includes reconstruction, renovation, alteration, addition, repair to extent of capitalization to the said immovable property. H] goods and services on
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registration under sec. 25 [3] , will be entitle to claim ITC on input, semi finished and finished goods on immediately proceeding the date of grant of registration. Where the RP ceases to pay tax under Sec.10 , will be entitle to claim ITC on input, semi finished and finished goods and capital goods on immediately proceeding the day on which he is liable to pay tax. The credit on capital goods shall be reduced by percentage point as prescribed. Where an exempt supply of goods and services by RP becomes taxable, will be entitle to claim ITC on input, semi finished and finished goods and capital goods on immediately proceeding the day on which he is liable to pay tax. Provided that credit on capital goods shall be reduced by percentage point. RP can not claim input tax credit under the above said sub sections after the expiry of one year from the date of invoice. Where there is change in the constitution of RP on account of sale, merger, demerger, amalgamation , lease or transfer of the
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ountant/ cost accountants if the ITC is exceeding ₹ 2 lacs. Input tax credit in respect of input and capital goods sent for job Work [ Sec.19 ] Principal as referred in Sec. 143 , shall take the credit of input sent for job work provided the input after job work has been received back within one year from the date of sent out. ITC can be claimed even if the goods directly sent to job worker. One year shall be computed from the date of receipt of material by Job worker. If the goods have not been returned within the stipulated period, the same shall be treated as supply to job worker from the date of goods sent out.[ Rule -10 the input or capital goods shall be sent on challan as per the information contained in Rule -8 of Invoice Rules. The detail of challan shall be furnish in GSTR-1 for the period. Principal shall be entitled to take credit of ITC on capital goods sent to job worker. Credit shall be valid if such goods have been received back within three years of being sent ou
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ient eligible. shall be distributed to attributable recipient . If more than one recipient , it shall be on pro rata basis on the turnover of the state or Union territory of the relevant period. Recipient should be operational in that relevant period. Relevant period ; a] the recipients of credit have turnover in the state or union territory in the financial year proceeding the year in which credit to be distributed. b] if some or all of the recipients of credit have not any turnover in the state or union territory in the financial year proceeding the year in which credit to be distributed. Last quarter preceding the month in which credit to be distributed shall be the period. Rule : ITC available for distribution shall be furnished in GSTR-6 Manner of recovery of credit Distributed in excess [ Sec-21] Where the ISD distribute any credit resulting in excess distribution, the same shall be recovered from such recipient along with interest, and the provision of sec. 73 or 74 [ demand and
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rger, amalgamation etc. A. Yes , it is available as per Sec. 18[3] in the manner as prescribed. Q. A dealer paying tax under compounding scheme and crosses the threshold limit, can he get ITC and from which date. A. As per Sec. 18[1][c] , he can avail the credit on input and input contained in semi finished goods and finished goods on the date immediately proceeding the date from which he becomes liable to pay tax. Q. Weather the principal is eligible to take input on input sent to job worker? A. Yes. As prescribed in sec. 19[2]. Disclaimer : The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon. About the Author: Author is practicing chartered accountant in Gurgaon and having specialisation in Service Tax and Haryana VAT. He can be reached at s
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