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    Input Tax Credit

     

    Important Definitions:

     

     

     

    Section

     

     

    Phrase

    Definition

     

     

     

     

     

     

     

     

     

     

     

     

    2(59)

     

    Input

     

     

     

     

     

     

    means any goods other than capital goods used or intended to be

     

     

     

     

     

     

     

     

     

     

     

    used by a supplier in the course or furtherance of business.

     

     

     

     

     

     

     

     

    2(19)

     

    Capital Goods

     

     

    means goods, the value of which is capitalised in the books of

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    accounts of person claiming the input tax credit and which are

     

     

     

     

     

     

     

     

     

     

     

    used or intended to be used in course or furtherance of business.

     

     

     

     

     

     

     

     

    2(60)

     

    Input Service

     

     

    means any service used or intended to be used by a supplier in the

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    course or furtherance of business.

     

     

     

     

     

     

     

    2(63)

     

    Input Tax Credit

     

    means the credit of input tax.

     

     

     

     

     

     

     

     

     

     

     

    2(62)

     

    Input Tax

     

    In relation to a registered person, means the central tax, state tax,

     

     

     

     

     

     

     

     

     

     

     

    integrated tax or UT charged on supply of goods or services or both

     

     

     

     

     

     

     

     

     

     

     

    made to him and includes –

     

     

     

     

     

     

     

     

     

     

     

    a)the integrated goods and services tax charged on import of goods

     

     

     

     

     

     

     

     

     

     

     

    b)the tax payable under the provisions of Section 9(3) and 9(4)

     

     

     

     

     

     

     

     

     

     

     

    c)the tax payable under the provisions of Section 5(3) and 5(4) of IGST

     

     

     

     

     

     

     

     

     

     

     

    d)the tax payable under the provisions of Section 9(3) and 9(4) of SGST

     

     

     

     

     

     

     

     

     

     

     

    e)the tax payable under the provisions of Section 7(3) and 7(4) of UGST

     

     

     

     

     

     

     

     

     

     

     

    But does not include the tax paid under composition levy.

     

     

     

     

     

     

     

    2(82)

     

    Output Tax

     

    In relation to a taxable person, means the tax chargeable under

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    this Act on taxable supply of goods or services or both made by

     

     

     

     

     

     

     

     

     

     

     

    him or by his agent but excludes tax payable by him on reverse

     

     

     

     

     

     

     

     

     

     

     

    charge basis.

     

     

     

     

     

     

     

     

     

     

     

     


     

     

    Sec 16 – Eligibility and Conditions:

     

     

     

     

     

     

     

     

     

    Section

    Title

    Covers

     

    • Eligibility and Conditions   Every registered person shall subject to such conditions

     

    for taking ITC

    and restrictions as may be prescribed and in the manner

     

    specified in Section 49, be entitled to take ITC on any supply

     

    of goods or services or both to him which are used or

     

    intended to be used in course or furtherance of his business

     

    and the said amount shall be credited to electronic credit

     

    ledger.

     

    2.  Notwithstanding anything contained in this section, no

     

    registered person shall be entitled to the credit of any input

     

    tax in respect of any supply of goods or services or both to him

     

    unless -

     

    a) he is in possession of tax invoice or debit note issued by a

     

    supplier registered under this Act, or such other tax paying

     

    doc as may be prescribed (Rule 36 of CGST Rules, 17)

     

    • Eligibility and Conditions   Notwithstanding anything contained in this section, no

     

    for taking ITC

    registered person shall be entitled to the credit of any input

     

    tax in respect of any supply of goods or services or both to

     

    him unless -

     

    b) he has received the goods or services or both

     

    Explanation  - For the purposes of this clause, it shall be

     

    deemed that the registered person has received the goods

     

    where the goods are delivered by the supplier to a recipient

     

    or any other person on directions of such registered person,

     

    whether acting as agent or otherwise, before or during the

     

    movement of goods, either by way of transfer of docs of title

     

    to goods or otherwise;

     

    c) Subject to provisions of Section 41, the tax charged in

     

    respect  of  such  supply  has  been  actually  paid  to

     

    Government, either in cash or through utilisation of ITC

     

    admissible in respect of said supply


     

     

    Section

    Title

    Covers

    • Eligibility and Conditions   Notwithstanding anything contained in this section, no

     

    for taking ITC

    registered person shall be entitled to the credit of any input

     

    tax in respect of any supply of goods or services or both to

     

    him unless -

     

    d) he has furnished the return under Section 39

     

    Provided that where goods against an invoice are received in

     

    lots or instalments, the registered person shall be entitled to

     

    take credit upon the receipt of last lot or instalment.

     

    Provided further that where a recipient fails to pay supplier

     

    of goods or services or both, other than supplies on which tax

     

    is payable on reverse charge basis, the amount towards

     

    value of supply along with tax payable thereon within a

     

    period of 180 days from date of issue of invoice by supplier,

     

    an amount equal to ITC availed by recipient shall be added to

     

    his output tax liability, along with interest thereon, in such

     

    manner as my be prescribed (Rule 37 of CGST Rules, 17)

    • Eligibility and Conditions   Notwithstanding anything contained in this section, no

     

    for taking ITC

    registered person shall be entitled to the credit of any input

     

    tax in respect of any supply of goods or services or both to

     

    him unless -

     

    Provided also that the recipient shall be entitled to avail

     

    credit of input tax payment made by him of the amount

     

    towards value of supply of goods or services or both along

     

    with tax payable thereon.

     

    3.  Where the registered person has claimed depreciation on

     

    the tax component of the cost of capital goods and plant and

     

    machinery under the provisions of Income Tax Act, 1961, the

     

    input tax credit on said tax component shall not be allowed.

     

    4.  A registered person shall not be entitled to take ITC in

     

    respect  of  any  invoice/debit  note  for  supply  of

     

    goods/services/both after due date of furnishing the return

     

    under Section 39 for month of Sept following the end of FY to

     

    which such invoice/debit note pertains or furnishing of

     

    relevant annual return, whichever is earlier.

    Sec 17 – Apportionment and Blocked:

     

     

     

     

     

     

     

     

     

     

     

    Section

    Title

    Covers

     

     

     

     

     

     

    17

    Apportionment of Credit

    1.

    Where goods/services/both used by registered person

     

    and Blocked Credits

     

    partly for purposes 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 purposes of his

     

     

     

     

    business.

     

     

     

    2.  Where goods/services/both used by registered person

     

     

     

     

    partly for effecting taxable supplies including zero rated

     

     

     

     

    supplies and partly for effecting exempt supplies, amount

     

     

     

     

    of credit shall be restricted to so much of input tax as is

     

     

     

     

    attributable to the said taxable supplies including zero

     

     

     

     

    rated supplies.

     

     

     

    3.  The value of exempt supply under sub-section (2) shall be

     

     

     

     

    such as may be prescribed, and shall include supplies on

     

     

     

     

    which recipient is liable to pay tax under RCM, transactions

     

     

     

     

    in securities, sale of land subject to Para 5(b) of Schedule II,

     

     

     

     

    sale of building (Rule 42 of CGST Rules, 17 – Inputs & Input

     

     

     

     

    Services) & (Rule 43 of CGST Rules, 17- Capital Goods)

     

     

     

     

    17

    Apportionment of Credit

    4.

    A banking company or a financial institution including

     

    and Blocked Credits

     

    NBFC, engaged in supplying services by way of accepting

     

     

     

     

    deposits, extending loans or advances shall have option to

     

     

     

     

    either comply with provisions of sub-section (2), or avail of,

     

     

     

     

    every month, an amount equal to 50% of eligible input tax

     

     

     

     

    credit on inputs, capital goods and input services in that

     

     

     

     

    month and the rest shall lapse. Option once exercised

     

     

     

     

    applies for entire FY. Provided further that restriction of

     

     

     

     

    50% shall not apply to tax paid on supplies made by one

     

     

     

     

    registered person to another registered person having the

     

     

     

     

    same PAN (Rule 38 of CGST Rules, 17)

     

     

     

     

     

     

     

     

     

    5.  Notwithstanding anything contained in Section 16(1) and

     

     

     

     

    18(1), input tax credit shall not be available in respect of

     

     

     

     

    the following namely –

     

     

     

     

    a)  Motor Vehicles and other conveyances except when they

     

     

     

     

    are used –

     

     

     

     

    I. For making taxable supplies, namely –

     

     

     

     

    A.Further supply of such vehicles or conveyances or

     

     

     

     

    B.Transportation of passengers or

     

     

     

     

    C.Imparting training on driving, flying, navigating such

     

     

     

     

    vehi/conve

     

     

     

     

    ii. Transportation of goods

     

     

     

     

     

     

     

     

     


    • and Blocked Credits
                                  and 18(1), input tax credit shall not be available inApportionment of Credit
      Notwithstanding anything contained in Section 16(1)

    respect of the following namely –

     

    1. b) The following supply of goods or services or both –
    2. Food and beverages, outdoor catering, beauty

    treatment, health services, cosmetic and plastic

    surgery except where an inward supply of goods or

     

    services or both of a particular category is used by a

    registered person for making an outward taxable

    supply of the same category of goods or services or

     

    both as an element of a taxable composite or mixed

    supply

    1. membership of a club, health and fitness centre

    iii.   Rent-a-cab, life insurance and health insurance

    except where –

    1. the government notifies the services which are

    obligatory from an employer to provide to its

     

    employees under any law for time being in force

    1. such inward supply of goods/services/both of a

    particular category is used by registered person

    for making an outward supply of same category

    of  goods/services/both/as  part  of  taxable

    composite/mixed supply

    • Apportionment of Credit   Notwithstanding anything contained in Section 16(1) and

    and Blocked Credits                     18(1), input tax credit shall not be available in respect of

    the following namely –

    1. Travel benefits extended to employees on vacation

    such as leave or home travel concession

     

    1. c) works contract services when supplied for construction

    of  an  immovable  property  (other  than  plant  or

    machinery) except where it is an input service for

    further supply of works contract service

     

    1. d) goods or services or both received by a taxable person

    for construction of an immovable property (other than

    plant or machinery) on his own account including when

     

    such goods or services or both are used in the course or

    furtherance of business.

     

    Explanation – for the purposes of clause (c) and (d), the

    expression  ‘construction’  includes  re-construction,

    renovation, additions or alterations or repairs, to the

    extent of capitalisation, to said immovable property

     

     

     

    Section

    Title

    Covers

    • Apportionment of Credit Notwithstanding anything contained in Section 16(1) and

    and Blocked Credits                    18(1), input tax credit shall not be available in respect of

    the following namely –

     

    1. e) goods or services or both on which tax has been paid

    under Section 10

    1. f) goods or services or both received by a NR taxable

    person except import of goods

    1. g) goods or  services  or  both  used  for  personal

    consumption

    1. h) goods lost, stolen, destroyed, written off or disposed by

    way of gift/free samples

    1. I) Any tax paid in accordance with Section 74, 129 and 130.

     

    Explanation – For purposes of this chapter, the expression ‘plant and machinery’ means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes –

     

    1. Land, building or any other civil structure ii. Telecommunication towers

    iii. Pipelines laid outside the factory premises

    Sec 18 – Availability of Credit in Special Circumstances

     

     

     

     

     

    Section

    Title

    Covers

     

     

     

    18

    Availability of Credit in

    1.  Subject to such conditions and restrictions as may be

     

    special circumstances

    prescribed –

     

     

    a)

    a person who has applied for registration within 30 days

     

     

     

    from date on which he becomes liable for registration

     

     

     

    and has been granted such registration shall be entitled

     

     

     

    to take credit of input tax in respect of inputs held in

     

     

     

    stock and inputs contained in semi-finished or finished

     

     

     

    goods held in stock on day immediately preceding the

     

     

     

    date from which he becomes liable to pay tax under

     

     

     

    provisions of the act.

     

     

    b)

    a person who takes registration under Section 25(3)

     

     

     

    shall be entitled to take credit of input tax in respect of

     

     

     

    inputs held in stock and inputs contained in semi-

     

     

     

    finished or finished goods held in stock on day

     

     

     

    immediately  preceding  the  date  of  grant  of

     

     

     

    registration.

     

     

    c)

    where any registered person ceases to pay tax under

     

     

     

    Section 10, he shall be entitled to take credit of input tax

     

     

     

    in respect of inputs held in stock and inputs contained

     

     

     

    in semi-finished or finished goods held in stock and on

     

     

     

    capital goods on day immediately preceding the date

     

     

     

    from which he becomes liable to pay tax under Section

     

     

     

    9. Provided credit on capital goods shall be reduced by

     

     

     

    such percentage points as may be prescribed.

     

     

    d)

    Where an exempt supply of goods/services/both by a

     

     

     

    registered person becomes a taxable supply, such

     

     

     

    person shall be entitled to take credit of input tax in

     

     

     

    respect of inputs held in stock and inputs contained in

     

     

     

    semi-finished or finished goods held in stock relatable to

     

     

     

    such exempt supply and on capital goods exclusively

     

     

     

    used for such exempt supply on the day immediately

     

     

     

    preceding the date from which such supply becomes

     

     

     

    taxable. Provided that the credit on capital goods shall

     

     

     

    be reduced by such percentage points as may be

     

     

     

    prescribed.

     

     

     

     

     

     

     

     

    Section

    Title

    Covers

     

     

     

    18

    Availability of Credit in

    2.  A registered person shall not be entitled to take ITC under

     

    special circumstances

    sub-section (1) in respect of supply of goods or services or

     

     

    both to him after the expiry of 1 year from the date of issue

     

     

    of tax invoice relating to such supply.

     

     

    3.  Where there is a change in constitution of a registered

     

     

    person  on  account  of  sale,  merger,  demerger,

     

     

    amalgamation, lease or transfer of business with specific

     

     

    provisions for transfer of liabilities, the said registered

     

     

    person shall be allowed to transfer ITC which remains

     

     

    unutilised in his ledger to such sold, merged, demerged,

     

     

    amalgamated, leased or transferred business in such

     

     

    manner as may be prescribed.

     

     

    4.  Where any registered person who has availed ITC opts to

     

     

    pay tax under Section 10 or where goods/services/both

     

     

    supplied by him become wholly exempt, he shall pay an

     

     

    amount, by way of debit in electronic credit ledger or

     

     

    electronic cash ledger, equivalent to credit of input tax in

     

     

    respect of inputs held stock in stock and inputs contained in

     

     

    semi-finished or finished goods held in stock and on capital

     

     

    goods, reduced by such percentage points as may be

     

     

    prescribed,  on  day  immediately  preceding  date  of

     

     

    exercising of such option or, as the case maybe, date of such

     

     

    exemption. Provided that after payment of such amount,

     

     

    the balance of input tax credit, if any, lying in his electronic

     

     

    ledger shall lapse.

     

     

    5.  The amount of credit under 18(1) and 18(4) shall be in

     

     

    manner specified as Rule 44 of CGST Rules, 17

     

     

    6.  In case of supply of capital goods or P&M, on which ITC has

     

     

    been taken, the registered person shall pay an amount

     

     

    equal to ITC taken on said capital goods or P&M reduced by

     

     

    such percentage points as may be prescribed or TC of such

     

     

    capital goods or P&M determined under Section 15,

     

     

    whichever is higher [same as specified in Rule 44].

     

     

     

     

     

    Sec 19 – Taking ITC in respect of Inputs & CG –JW

     

     

     

     

    Section

    Title

    Covers

     

     

     

    19

    Taking ITC in respect of

    1.  The  principal  shall,  subject  to  such  conditions  and

     

    inputs & capital goods

    restrictions as may be prescribed, be allowed ITC on

     

    sent for Job Work

    inputs/CG sent to a job-worker for job-work.

     

     

    2.  Notwithstanding anything contained in Section 16(2)(b),

     

     

    the principal shall be entitled to take ITC on inputs/CG even

     

     

    if inputs are directly sent to job worker for job work without

     

     

    being first brought to his place of business.

     

     

    3.  Where inputs sent for job work are not received back by

     

     

    principal after completion of job work or otherwise are not

     

     

    supplied from place of business of job worker in accordance

     

     

    with Section 143(1)(b) within 1 year (inputs)/3 years (CG) of

     

     

    being sent out, it shall be deemed that such inputs had

     

     

    been supplied by principal to job worker on day when the

     

     

    said inputs/CG were sent out. Provided that where inputs

     

     

    are sent directly to a job worker, the period 1/3 year shall be

     

     

    counted from date of receipt of inputs by job worker.

     

     

    4.  Where inputs or capital goods are not returned to principal

     

     

    within time stipulated in Section 143, it shall be deemed

     

     

    that such inputs or capital goods had been supplied by

     

     

    principal to JW on day when such inputs/capital goods were

     

     

    sent out and said supply shall be declared in GSTR-1 and

     

     

    principal shall be liable to pay tax along with interest – Rule

     

     

    45(4) of CGST Rules, 17.

     

     

     

     

     

     

    Sec 20 – Manner of Distribution of Credit by ISD

     

     

     

     

     

     

     

     

    Section

    Title

    Covers

     

               
    • Manner of Distribution   ISD shall distribute the credit of CT as CT/IT, IT as IT/CT, ST as

    of Credit by ISD

    ST/IT and IT as IT/ST by way of issue of document containing

     

    the amount of input tax being distributed in such manner as

     

    may be prescribed.

     

    2.  The ISD may distribute credit subject to following conditions –

     

    a) credit can be distributed to recipients of credit against a

     

     

    doc containing such details as may be prescribed

     

    b) amount of credit distributed shall not exceed the amount

     

     

    of credit available for distribution

     

    c)

    credit  of tax paid on input service attributable to a

     

     

    recipient of credit shall be distributed only to that

     

     

    recipient

     

    d)

    credit of tax paid on input services attributable to more

     

     

    than one recipient of credit shall be distributed amongst

     

     

    such recipients to whom input service is attributable and

     

     

    such distribution shall be pro rata on basis of turnover in a

     

     

    state  of  such  recipient,  during  relevant  period,  to

     

     

    aggregate of turnover of all such recipients to whom such

     

     

    input service is attributable and which are operational in

     

     

    current year, during the said relevant period.

     

    e)

    Credit of tax paid on input services attributable to all

     

     

    recipients of credit shall be distributed amongst such

     

     

    recipients and such distribution shall be pro rata on basis

     

     

    of turnover in a state of such recipient, during relevant

     

     

    period, to aggregate of turnover of all recipients and

     

     

    which are operational in current year, during said relevant

     

     

    period.

     

     

    Explanation –

     

     

    ?Relevantperiod –

     

     

    ?Ifrecipients of credit have turnover in state in FY

     

     

    preceding the year during which credit is to be

     

     

    distributed, said FY

     

     

    ?Ifsomeor all recipients of credit do not have

     

     

    turnover in their states in FY preceding the year

     

     

    during which credit is distributed, last quarter for

     

     

    which details of such turnover of all recipients are

     

     

    available, previous to the month during which

     

     

    credit is distributed

     

     

    24 | P a g e


    Input Tax Credit

     

     

     

    SBS Wiki

     

     

    www.sbsandco.com/wiki

     

     

    Recovery of Credits:

     

     

     

     

     

     

     

     

     

    Section

    Title

    Covers

     

     

     

     

     

     

     

    21

    Manner of Recovery of

    Where the ISD distributes the credit in contravention to Section

     

     

     

    Credit  distributed  in

    20 resulting in excess of distribution of credit to one or more

     

     

     

    excess

    recipients of credit, the excess credit so distributed shall be

     

     

     

     

     

    recovered  from  such  recipients  along  with  interest  and

     

     

     

     

     

    provisions of Section 73 or Section 74 , as the case may be

     

     

     

     

     

    mutatis mutandis apply for determination of amounts to be

     

     

     

     

     

    recovered.

     

    • Determination of  ITC   Where it appears to proper officer that ITC has been

     

    wrongly  availed  orwrongly availed or utilised for any reason, other than

     

    utilised for any reasonreason of fraud or any wilful-misstatement or suppression

     

    other than fraud or any

    of facts to evade tax, he shall serve notice on person who

     

    wilful-misstatement

    or

    has wrongly availed or utilised ITC, requiring him to show

     

    suppression of facts

     

    cause why he should not pay amount specified in notice

     

     

     

    along with interest and penalty.

     

     

     

    2.  The proper officer, after considering the representation, if

     

     

     

    any, made by person chargeable with tax, determine the

     

     

     

    amount of tax, interest and a penalty equivalent to 10% or

     

     

     

    10,000 whichever is higher, due from such person and issue

     

     

     

    an order.

     

     

     

    3.  The proper officer shall issue above order within 3 years

     

     

     

    from the due date for furnishing of annual return for FY to

     

     

     

    which ITC wrongly availed or utilised relates.

     

     

     

     

    74

    Determination  of

    ITC

    1.  Where it appears to proper officer that ITC has been

     

    wrongly  availed

    or

    wrongly availed or utilised by reason of fraud or any wilful-

     

    utilised  by  reason

    of

    misstatement or suppression of facts to evade tax, he shall

     

    fraud  or  any  wilful-

    serve notice on person who has wrongly availed or utilised

     

    m i s s t a t e m e n t

    o r

    ITC, requiring him to show cause why he should not pay

     

    suppression of facts

     

    amount specified in notice along with interest and penalty

     

     

     

    equivalent to tax specified in notice.

     

     

     

    2.  The proper officer, after considering the representation, if

     

     

     

    any, made by person chargeable with tax, determine the

     

     

     

    amount of tax, interest and a penalty due from such person

     

     

     

    and issue an order.

     

     

     

    3.  The proper officer shall issue above order within 5 years

     

     

     

    from the due date for furnishing of annual return for FY to

     

     

     

    which ITC wrongly availed or utilised relates.

      

    Section 54 - Refunds:

     

    Refunds

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Section

     

    Title

    Covers

     

     

     

     

     

     

     

     

    54

     

    Refunds

     

     

     

    1.  Any person claiming refund of any tax and interest, if any,

     

     

     

     

     

     

     

     

     

    paid on such tax or any other amount paid by him, make an

     

     

     

     

     

     

     

    application before expiry of 2 years from relevant date in

     

     

     

     

     

     

     

    such form and manner as may be prescribed.

     

     

     

     

     

     

     

    2.  A registered person may claim refund of any unutilised

     

     

     

     

     

     

     

    input tax credit at end of any tax period. Provided that no

     

     

     

     

     

     

     

    refund of unutilised input tax credit shall be allowed in

     

     

     

     

     

     

     

    cases other than –

     

     

     

     

     

     

     

    I.  Zero rated supplies made without payment of tax

     

     

     

     

     

     

     

    ii. Where credit has accumulated on account of rate of tax

     

     

     

     

     

     

     

    on inputs being higher than the rate of tax on output

     

     

     

     

     

     

     

    supplies, except supplies of goods or services or both as

     

     

     

     

     

     

     

    may be notified by Govt

     

     

     

     

     

     

     

    Provided further no refund of unutilised ITC shall be

     

     

     

     

     

     

     

    allowed in cases where goods are exported out of India

     

     

     

     

     

     

     

    which are subject to export duty.

     

     

     

     

     

     

     

    Provided also no refund of ITC shall be allowed, if supplier

     

     

     

     

     

     

     

    of goods/services/both avails of drawback in respect of CT

     

     

     

     

     

     

     

    or claims refund of IT on such supplies.

     

     

     

     

     

     

     

     

     

     

    Sec 49(5) – Manner of Utilization:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Section

     

    Title

    Relevant Sub-Section

     

     

     

     

     

    49

     

    Payment of Tax, Interest,

    5.  The amount of input tax credit available in the electronic

     

     

     

    Pe n a l t y  a n d  o t h e r

    credit ledger of registered person on account of –

     

     

    amounts

     

     

     

     

     

     

     

     

     

     

    a) IT shall first be utilised towards payment of IT and

     

     

     

     

     

     

     

    amount remaining, if any, may be utilised towards the

     

     

     

     

     

     

     

    payment of CT and ST, or as the case may be, UT, in that

     

     

     

     

     

     

     

    order

     

     

     

     

     

     

     

    b) CT shall first be utilised towards payment of CT and the

     

     

     

     

     

     

     

    amount remaining, if any, may be utilised towards

     

     

     

     

     

     

     

    payment of IT

     

     

     

     

     

     

     

    c) ST shall first be utilised towards payment of ST and

     

     

     

     

     

     

     

    amount remaining, if any, may be utilised towards

     

     

     

     

     

     

     

    payment of IT

     

     

     

     

     

     

     

    d) CT shall not be utilised towards payment of ST or UT and

     

     

     

     

     

     

     

    e) ST or UT shall not be utilised towards payment of CT.

     

     

     

     

     

     

     

     

     

     

     

     

    Rule 36 – Documentary Requirements and Conditions:

     

     

     

     

     

     

    Section

    Title

    Deals with

     

     

     

     

     

    36

    Documentary

    1.  The input tax credit shall be availed by a registered person

     

     

    Requirements and

    on basis of invoice/challan for RCM/Debit Note/BOE in case

     

     

    Conditions for claiming

    of imports/ISD Invoice/ISD credit note.

     

     

    ITC

    2.  ITC shall be availed by a registered person only if all

     

     

     

     

     

     

    applicable  particulars  as  specified  in  Chapter  VI  are

     

     

     

    contained  in  said  doc,  and  relevant  information,  as

     

     

     

    contained in said doc, is furnished in GSTR-2 by such

     

     

     

    person.

     

     

     

    3.  No Input tax credit shall be availed by a registered person in

     

     

     

    respect of any tax that has been paid in pursuance of any

     

     

     

    order where any demand has been confirmed on account

     

     

     

    of fraud, willlful misstatement or suppression of facts.

     

     

     

     

     

     

    Rule 37 – Reversal of ITC:

     

    Section

    Title

    Deals with

     

     

     

    37

    Reversal of ITC in case of

    1.  A registered person who has availed ITC but fails to pay to

     

    n o n - p a y m e n t  o f

    the supplier, the value of supply along with tax payable,

     

    consideration

    within 180 days, shall furnish the details of such supply,

     

     

    amount of value not paid and amount of ITC availed of

     

     

    proportionate to such amount not paid to supplier in GSTR-

     

     

    2 for the month immediately following period of 180 days.

     

     

    Provided  that  the  value  of  supplies  made  without

     

     

    consideration as specified in Schedule I shall be deemed to

     

     

    have been paid for purposes of second proviso to Section

     

     

    16(2).

     

     

    2.  The amount of ITC specified above, shall be added to output

     

     

    tax liability of registered person for month in which details

     

     

    are furnished.

     

     

    3.  The registered person shall be liable to pay interest in terms

     

     

    of Section 50(1) for period starting from 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).

     

     

    4.  The time limit specified in Section 16(4) shall not apply to a

     

     

    claim for re-availing of any credit, in accordance with

     

     

    provisions of this act or provisions of this chapter, that has

     

     

    been reversed earlier.

     

     

     

    Rule 42 – Manner of Distribution – Input/Input Services:

     

     

     

     

     

     

     

     

     

     

    Section

    Title

    Deals with

     

     

    • Manner of distribution The manner for determining reversal of credit as specified in of ITC in respect of input Section 17(1) and 17(2) is as under:

    or  input  services

    and

    reversal thereof

    Total Credit:

     

    ?TotalITCinvolved on inputs and input services in a tax period = T

     

    Eliminate Exclusive Credits for Exempted & Ineligible Credits:

     

    ?ITCexclusively used for purposes other than business = T1

     

    ?ITCexclusively used for purposes of exempted supplies = T2

     

    ?AmountofITC on which credit is not allowed as per 17(5) = T3

     

    ?AmountofITC credited to credit ledger = C1 = T – (T1 + T2 + T3)

     

    Identify Exclusive Credits for Taxable Supplies:

     

    ?ITCexclusively used for taxable supplies = T4

     

    Arrive at Common Credits:

     

    ?CommonCredits = C2 = C1 – T4

     

    Arrive at Common Credits pertaining to Exempt Supplies:

     

    ?Amountof common ITC towards exempt supplies = D1 = E/F *

     

    C2

     

    E = Aggregate value of exempt supplies during tax period

     

    F = Total turnover in the state of registered person during tax

     

    period

     

    Arrive at Common Credits pertaining to Other than business

     

    purposes:

     

    ?Amountof common ITC towards non-business = D2 = 5% * C2

     

    Identify Common Credits for business purposes and Taxable

     

    Supplies:

     

    ?Amountof common ITC for taxable and business purposes =

     

    C3 = C2 – (D1+D2)

     

    Adding D1 & D2 to output tax liability for the tax period:

     

    ?D1andD2 shall be added to output tax liability and to be

     

    checked with final turnovers.

     

     

     

     

     

     

     

     

    Section

    Title

     

    Deals with

     

     

     

     

     

     

     

     

    42

    Manner

    of distribution

    The ITC determined under sub-rule (1) shall be calculated finally

     

     

     

    of ITC in respect of input for financial year before the due date of furnishing of return for

     

     

     

    or  input

    services  and

    month of September following the end of financial year to which

     

     

     

    reversal thereof

    such credit relates, in manner specified as under:

     

     

     

     

     

    ?Ifthefinal D1 and D2 are greater than provisional D1 and D2,

     

     

     

     

     

    then such excess D1 and D2 shall be added to output tax

     

     

     

     

     

    liability in month not later than month of September

     

     

     

     

     

    following the end of financial year to which such credit

     

     

     

     

     

    relates and said person shall be liable to pay interest on said

     

     

     

     

     

    amount in terms of Section 50(1) starting from first day of

     

     

     

     

     

    April of succeeding financial year till date of payment

     

     

    ?Ifthefinal D1 and D2 are lesser than the provisional D1 and D2, such excess D1 and D2 shall be claimed as credit by registered person in his return for month not later than the month of September following end of FY to which such credit relates.

     

    Total Credits

     

     

     

    Credit on Inputs & Input Services

    T

     

    15,00,00

    Elimination of Ineligible & Exempt Credi

     

     

     

    Exclusively used for Non-Business

    T1

     

    1,00,00

    Exclusively used for Exempt

    T2

     

    3,00,00

    Ineligible under Sec 17(5)

    T3

     

    75,00

    Credit allowed in Ledger

     

     

     

    ITC credited to ledger

    C1

    T - (T1+T2+T3)

    10,25,00

    Credit Exclusively used for Taxable Supp

     

     

     

    Exclusively used

    T4

     

    3,25,00

    Common Credits both for Taxable & Exempted

     

     

    Common ITC

    C2

    C1- T4

    7,00,00

    Common Credits for Exempted & Non-Business

     

     

    Common ITC for Exempted

    D1

    E/F * C2

    1,86,66

    Common ITC for Non-Business

    D2

    5%*C2

    35,00

    Common Credits for Taxable

     

     

     

    Common ITC for Taxable

    C3

    C2-(D1+D2)

    4,78,33

    Addition to Output Tax Liability

     

     

     

    To be added to Output Tax

     

    D1+D2

    2,21,66

    Net Credit Allowed for tax period

     

     

     

    ITC allowed

     

    C1-(D1+D2)

    8,03,33

     

     

    Rule 43 – Manner of Distribution – Capital Goods:

     

     

     

     

     

     

     

     

    Section

    Title

     

    Deals with

     

     

     

     

     

     

    43

    Manner

    of distribution

    The manner for determining reversal of credit as specified in

     

     

    of  ITC  in  respect  of

    Section 17(1) and 17(2) is as under:

     

     

    Capital

    Goods  and

    a)

    Credit of ITC in respect of CG used exclusively for non-

     

     

    reversal thereof

     

     

     

     

     

    business or exempted supplies shall not be taken in credit

     

     

     

     

     

    ledger

     

     

     

     

    b) Credit of ITC in respect of CG used exclusively for effecting

     

     

     

     

     

    supplies shall be taken in credit ledger

     

     

     

     

    c)  Amount of ITC in respect of CG not covered above, demoted

     

     

     

     

     

    as ‘A’, shall be credited to credit ledger and useful life of

     

     

     

     

     

    goods shall be taken as 5 years from date of invoice for such

     

     

     

     

     

    goods

     

     

     

     

    d)

    The aggregate of amounts ‘A’ credited to ledger under

     

     

     

     

     

    clause (c) to be denoted as Tc, shall be common credit in

     

     

     

     

     

    respect of capital goods for a tax period

     

     

     

     

    e) The amount of ITC attributable to a tax period on common

     

     

     

     

     

    capital goods during their useful life, be denoted as Tm and

     

     

     

     

     

    calculated as – Tm = Tc/60

     

     

     

     

    f)  The amount of ITC, at the beginning of a tax period, on all

     

     

     

     

     

    common capital goods whose useful remains during tax

     

     

     

     

     

    period, be denoted as Tr and shall be aggregate of Tm for all

     

     

     

     

     

    such capital goods

     

     

     

     

    g)

    The  amount  of  common  credit  attributable  towards

     

     

     

     

     

    exempted supplies, be denoted Te= (E/F) * Tr

     

     

     

     

     

    E = Aggregate value of exempt supplies during tax period

     

     

     

     

     

    F = Total turnover in the state of registered person during

     

     

     

     

     

    tax period

     

     

     

     

    h) The amount of Te along with applicable interest shall,

     

     

     

     

     

    during every tax period of the useful life of concerned

     

     

     

     

     

    capital goods, be added to output tax liability of person

     

     

     

     

     

    making such claim of credit.

     

     

     

     

     

     

     

     

     

    Rule 38 – Claim of Credit by Bank/FI/NBFC:

     

    Section

    Title

    Deals with

     

     

     

    38

    Claim  of  Credit  by  a

    1.  A banking company or a FI (including NBFC), engaged in

     

    Banking Company or a

    supply of services by accepting deposits or extending loans

     

    Financial Institution

    or advances that chooses not to comply with Section 17(2),

     

     

    they can follow the procedure namely –

     

     

    ?saidcompany/institution shall not avail credit of –

     

     

    ?taxpaidon input and input services that are used for

     

     

    non-business purposes

     

     

    ?creditattributable to supplies specified in 17(5)

     

     

    ?saidcompany or institution shall avail the credit of tax

     

     

    paid on inputs and input services referred to in the

     

     

    second proviso to Section 17(4) and not covered under

     

     

    17(5) or 17(1)

     

     

    ?50%ofremaining amount of input tax shall be input tax

     

     

    credit admissible to the company or institution and shall

     

     

    be furnished in GSTR-2.

     

     

     

     

    Rule 44 – Manner of Reversal of Credit:

     

    Section

    Title

    Deals with

     

    • Manner of Reversal of The amount of ITC relating to inputs held in stock, input Credit under Special contained in semi-finished and finished goods held in stock,

    Circumstances

    and capital goods held in stock shall, for purposes of Section

     

    18(4), be determined in the following manner, namely –

     

    1. For inputs held in stock and inputs contained in semi-finished goods held in stock, the ITC shall be calculated proportionately on basis of corresponding invoice on which credit has been availed by registered taxable person on such inputs

     

    1. For Capital Goods held in stock, the ITC involved in remaining useful life in months shall be computed on pro-rata basis, taking useful life as 5 years.

     

     

     

     

     

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