Input Tax Credit under Goods and Services Tax Act

Latest Update on Input Tax Credit under GST by the CBIC

• It was urged by the Supreme Court, that the GST council shall provide a special note to issues arising within the GST Act and also provide for a solution in respect of the formula for the assessment of claiming GST refund.
• CBDT provided that the taxpayers are quite liberalized and they can utilise the ITC available, to discharge their GST liability, as permissible in law.
• “CBIC has cleared all confusion associated with an input tax credit under the GST regime. The department provided that where the ITC becomes eligible to be claimed, the same gets reflected in GSTR 2B auto-populated form.
• Also, the option for making the payment of tax under section 10 of FY 2020-21, it has been provided that electronic filing of GST CMP-02 intimation shall be signed and verified on the GST portal by the commissioner, on and before the 30th June 2020 and the same shall furnish the shape GST ITC 03, latest by 31st July 2020.

Renovation or Construction of showroom, office or other Business place going on ?

• One may consider below aspect in respect of eligibility of GST Input tax credit before deciding whether single turnkey contract should be given or not ?
• Reduction in cost = Increased profit.

 

Non Consideration of Payment Within 180 Days – Related Distinct Persons

FAQs ON INPUT TAX CREDIT

1. What is the meaning of ITC under GST?

Input Tax Credit refers to the amount of tax, which a taxpayer pays on the inputs purchased, for providing outward taxable supplies. Such an amount of ITC can be used to set off as against the outward tax liability, thereby reducing the outward tax to be paid in relation to taxable supplies.

Such a credit for input tax is the essence of GST. ITC helps in eliminating the cascading effect and thus reduces the events of tax on tax.

2. At what date the goods held in stock, be considered for ITC, where the person applies for registration on 30^th January 2021, and he became liable for registration on 15^th January 2021?

The person applies for registration on 30^th January 2021, which is within 30 days from becoming liable to registration, thus, the said person can claim ITC in respect of goods held by them as of 14^th January 2021.

3. What are the conditions to be fulfilled, to claim the amount of eligible ITC?

Any person, registered under GST, can claim the amount of ITC, provided all the following conditions are fulfilled –

• • The person shall be in possession of a valid tax invoice or a debit note for the supplies made by them.
  • The person should be in receipt of goods or service.
  • The person should have filed their applicable return, on and before the due date.
  • The tax collected on the supplies made by such person, should have been deposited with the government, within the prescribed time.
  • Where the goods are to be received in instalments, the person can claim ITC, only when the last lot is received.
  • The person shall make the payment of invoice, within 180 days from the issuance of such invoice.
  • No ITC be claimed in respect of a capital good, where depreciation has been claimed on tax component of the said capital good
  • Any person registered under section 10 of CGST Act i.e., as a composite taxpayer, shall not be eligible to claim ITC.

4. What is the maximum time by which the payment be made to the supplier?

It is provided, that the person shall make the payment of goods/services availed, within 180 days from the issuance of invoice by the supplier, to claim the amount of ITC on such purchases.

5. Is there any ITC available in respect of goods distributed as gifts or charity?

As per section 17(4)(g) of the GST Act, it is clarified that no ITC shall be available in respect of the goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples.

6. Can the ITC be availed in respect of amount paid for health and life insurance of employees?

Yes, ITC can be claimed on the amount paid on life insurance, health insurance, provided it is made by am employer for its employees, and the same is obligatory under the notification of Government.

7. What are the provisions related to ITC on job work?

It is commonly seen, that a principal manufacturer supplies goods, in the form of raw material, to their job workers, for further processing and manufacturing of final good. In such a case, the principal shall claim the ITC in respect of goods supplied to job worker, provided the goods are sent to job worker, either from principal’s place of business, or is directly delivered by the supplier.

However, the ITC will be valid, provide such goods are received back by the principal within the prescribed time period, which is of 3 years in case of capital goods, and 1 year in case of other goods.

8. Can ITC be availed on zero rated supplies?

Yes, a taxpayer can avail ITC in respect of zero-rated supplies, since the same do not come under the negative list of ITC.

9. What are the repercussions of not making payment to supplier, within 180 days from the issue of invoice?

Where the taxpayer fails to make the payment to the supplier within 180 days from the issue of invoice, the amount of ITC claimed by such taxpayer, in respect of the purchases, is required to be reversed.

10. Can the ITC be claimed after making payment of invoice after 180 days?

Once the payment is made to the supplier, in respect of the value of supply of goods or services or both along with the applicable tax, the taxpayer can claim the amount of ITC.

11. Does the 180 days’ rule for credit applies to the the supplies mentioned under Schedule I?

Since no consideration is required to be paid in respect of supplies under Schedule I, the provisions of 180 days for claiming ITC will not apply.

12. Who will get the credit of ITC in case goods/services are provided on the direction of a third person?

In case, goods/services are provided to a person, on direction of a third person, then the person who receives the goods/services, shall deemed to be the recipient and the ITC credit can be claimed by such person only.

13. What all supplies are eligible for availing ITC under GST?

As per Section 17(5) of the CGST Act, 2017, ITC can be claimed only where the goods or services availed have been made for making further taxable supplies, in the course or furtherance of business. Thus, ITC shall not be available in respect of supply of goods/services made for personal use, Exempt supplies, and supplies in respect of which ITC is specifically disallowed.

14. Can purchase of motor vehicle as daily conveyance of director, eligible for ITC?

As discussed earlier, ITC on motor vehicles be allowed, when supplied in the normal course of business or is used for the following taxable services –

• • transportation of passengers.
  • transportation of goods.
  • imparting training on motor driving skills

thus, the same cannot be available in case of using it as conveyance for directors.

15. Can ITC be availed in respect of goods destroyed and lost, due to calamity or disaster?

As per section 17(4)(g) of the GST Act, it is clarified that no ITC shall be available in respect of the goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples.

16. Can ITC be availed in respect of goods or services used for construction of a building, under a business activity?

As discussed above, ITC can be availed in respect of goods or services by a person for construction of immovable property, provided –

• • The same is supplied for the construction of plant & machinery.
  • Or is supplied as input for another works contract service.

17. What are the provisions related to ITC in case of new registration?

Person applying for GST Registration within 30 days of becoming liable, can claim the amount of ITC in respect of goods held, on the day immediately preceding the date on which the person becomes liable for registration. Provided the invoices related to the inward supplies are not older than a year.

18. What amount of ITC be available in case the taxpayer is making both taxable and exempt supplies?

In case, a taxpayer is undertaking both taxable and exempt supplies, the said person can claim ITC in respect of taxable supplies only. The way of calculating the proportionate ITC is provided in the CGST Rules.

19. What is the treatment of ITC in respect of exempt supplies in the form of exports?

It is provided that exports are termed as zero-rated supplies and the same is included in the definition of taxable supplies for the purpose of claiming input tax credit. Thus, a taxpayer undertaking export shall also be eligible to claim ITC in respect of such exports.

20. What are the provisions relating to ITC in respect of a composite taxpayer, who is compulsory required to convert into normal taxpayer, due to violation of threshold limit of turnover?

In such a case, the taxpayer can claim the amount of ITC in respect of inputs held in stock, semi-finished or finished goods along with the capital goods, as reduced by 5% for each quarter of usage under composition scheme, on the day immediately preceding the date of cessation as composite taxpayer.