Documentary requirements and conditions for claiming input tax credit
Every registered person shall be entitled to take input tax credit on input charged on any supply of goods or services which is intended to be used, during furtherance of his business and said amount shall be credit to electronic credit ledger.
input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents,
1. Possession of a tax invoice or debit note or document evidencing payment
2. The tax charged in respect of such supply is actually paid to the government by the supplier.
3. Registered persons has received goods and services. On instalments than the tax credit shall be allowed only when last instalment has been received.
4. Furnishing of a return
5. No lnput tax credit be allowed if depreciation have been claimed on tax component of a capital good
6. If registered person has not made the payment to the supplier evevn in that credit shall be allowed but such registered person should make payment for supply plus tax within 180 days from the date of issue of invoice ,otherwise amount of itc is to be paid along with interest.
Input tax credit Capital Goods are use for taxable as well as exempted supply
1. Where the goods and services or both are used by the registered person partly for the purpose of any business and partly for other purposes , the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
2. Where the goods and services or both are used by the registered person partly for effecting taxable supplies including Zero –rated supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is the input tax as is attributable to the taxable supplies including zero rated supplies.
ITC in case of banking company
Tax credit in case of shifting form composition to normal scheme /exempt supply become taxable supply
uch person shall be entitled to take credit of input tax in respect of inputs held in stock/semi-finished /finished goods and on capital goods on the day immediately preceding the date from which he becomes liable ta pay tax or such supply becomes taxable.
The tax credit on capital goods shall be reduced by 5% per quarter of a year or part of there of from the date of invoice.
Ex. A machinery purchase on 15th july 2017 of rupees 20 lakh and input tax will be 1.8 lakh it is used for taxable goods as on 25th march 2018 in case of tax credit shall be allowed
Total input 180000
Less: 5% per quarter 180000*5%*5 =45000
Amount of credit allowed 135000
Reversal of Tax Credit In case of cancellation of registration certificate
In case of supply of capital goods on which input tax credit has been taken , the registration person shall pay an amount on the basis of remaining life considering total life to be 60 months however part of the months shall be ignored.
A machinery was purchased of 20,00,000 and input tax credit 2,00,000 and machinery sold after 1 year and 2 months and 15 days , amount to be reversed shall be :
Remaining life shall be 45months 15 days i.e 45 months
Amount reversed 20,00,000*60/45 =1,50,000
Transfer of credit on sale, merger, amalgamation, lease or transfer of a business
A registered person shall, on sale, merger, de-merger, amalgamation, lease or transfer or change in ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02 electronically on the Common Portal along with a request to transfer the unutilized input tax credit lying in his electronic credit ledger to the transferee:
Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.
Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.
The transferor shall also submit a copy of a certificate issued by a practicing chartered account or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for transfer of liabilities.
The transferee shall, on the Common Portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.
Reversal of input tax credit in case of non-payment of consideration
A registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof the value of such supply along with the tax payable thereon within the time limit specified in the second proviso to sub-section (2) of section 16, shall furnish the details of such supply and the amount of input tax credit availed of in FORM GSTR-2 for the month immediately following the period of one hundred and eighty days from the date of issue of invoice.
The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered person for the month in which the details are furnished.
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The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is paid.
Conditions and restriction in respect of inputs and capital goods sent to the job worker
The inputs or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where the inputs or capital goods are sent directly to job-worker.
The challan issued by the principal to the job worker shall contain the details specified in rule Invoice.8:
The details of challans in respect of goods dispatched to a job worker or received from a job worker during a tax period shall be included in FORM GSTR-1 furnished for that period.
If the inputs or capital goods are not returned to the principal within the time stipulated in section 143, the challan issued under sub-rule (1) shall be deemed to be an invoice for the purposes of this Act.
Explanation.- For the purposes of this Chapter,-
(1) “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17;
(2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17:-
(a) the value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and
(b) the value of security shall be taken as one per cent. of the sale value of such security.
Cases are mentioned under GST where no input tax credit shall be available to the applicant.
ITC is not available in some cases as mentioned in section 17(5) of CGST Act, 2017. Some of them are as follows:
a. motor vehicles and other conveyances except under specified circumstances.
b. goods and/or services provided in relation to:
- Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, except under specified circumstances;
- Membership of a club, health and fitness center;
- Rent-a-cab, life insurance, health insurance except where it is obligatory for an employer under any law;
- Travel benefits extended to employees on vacation such as leave or home travel concession;
c. Works contract services when supplied for construction of immovable property, other than plant & machinery, except where it is an input service for further supply of works contract;
d. Goods or services received by a taxable person for construction of immovable property on his own account, other than plant & machinery, even when used in course or furtherance of business;
e. Goods and/or services on which tax has been paid under composition scheme;
f. Goods and/or services used for private or personal consumption, to the extent they are so consumed;
g. Goods lost, stolen, destroyed, written off, gifted, or free samples;
h. Any tax paid due to short payment on account of fraud, suppression, mis-declaration, seizure, detention.
Yes. The definition of input tax includes the tax payable under the reverse charge.
Following four conditions are to be satisfied by the registered taxable person for obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying documents
(b) he has received the goods or services or both;
(c) the supplier has actually paid the tax charged in respect of the supply to the government; and
(d) he has furnished the return under section 39.
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.
A registered person cannot take ITC in respect of any invoice or debit note for supply of goods or services after the due date for furnishing the return under section 39 for the month of September following the end of financial year to which such invoice/invoice relating to debit note pertains or furnishing of the relevant annual return, whichever is earlier. So, the upper time limit for taking ITC is 20th October of the next FY or the date of filing of annual return whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next FY. If annual return is filed before the month of September, then no change can be made after filing of annual return.
A person applying for registration can take input tax credit of inputs held in stock and inputs contained in semifinished 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 semifinished or finished goods held in stock on the day immediately preceding the date on which he became liable to pay tax can be taken.
A banking company or a financial institution including a non-banking financial company engaged in supply of specified services would either avail proportionate credit or avail 50% of the eligible input tax credit.
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