Input tax credit in GST

1
ITC ( INCL. TRANSITIONALPROVISIONS),
ISD,
CROSS UTILIZATION OFIGST
&
FUNDTRANSFER
S.Nagalingam IRS
ASSISTANTCOMMISSIONER(AR)
CESTAT, Chennai

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SectionsSections SectionsSections SectionsSections SectionsSections SectionsSections SectionsSections

Relevant Legal ProvisionsRelevant Legal Provisions
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INPUT TAX CREDIT: CONCEPTSINPUT TAX CREDIT: CONCEPTS….….
 Input tax credit means credit of input tax -Input tax credit means credit of input tax -
section 2 (58)section 2 (58)
 Input tax means - section 2 (57):Input tax means - section 2 (57):
 Basket of CGST & IGST under CGST ActBasket of CGST & IGST under CGST Act
 Basket of SGST & IGST under SGST ActBasket of SGST & IGST under SGST Act
 Basket of IGST, CGST & SGST under section 2(1)Basket of IGST, CGST & SGST under section 2(1)
(d) of IGST Act(d) of IGST Act
 Tax charged on supply of goods and / or servicesTax charged on supply of goods and / or services
used or intended to be usedused or intended to be used
 iin the course of businessn the course of business
 iin furtherance of businessn furtherance of business
 Includes tax payable on reverse charge basis underIncludes tax payable on reverse charge basis under
section 7(3)section 7(3)

InwardInward
supplysupply
outwardoutward
supplysupply IGSTIGSTCGSTCGST SGSTSGST
CGSTCGST IGSTIGST SGSTSGST
------------------------------------------------------------------
Section 35(5)Section 35(5)

GST – Input Tax CreditGST – Input Tax Credit
InputInput OutputOutput
SGSTSGST
CGSTCGST
SGSTSGST
CGSTCGST
IGSTIGST IGSTIGST
CreditCredit
poolspools
SGSTSGST CGSTCGST IGSTIGST
SGSTSGST 11 XX 22
CGSTCGST XX 11 22
IGSTIGST 33 22 11

35(5)(b) The amount of input tax credit on account35(5)(b) The amount of input tax credit on account
of CGST available in the electronic credit ledgerof CGST available in the electronic credit ledger
shall first be utilized towards payment of CGSTshall first be utilized towards payment of CGST
and the amount remaining, if any, may be utilizedand the amount remaining, if any, may be utilized
towards the payment of IGST.towards the payment of IGST.
(c) The input tax credit on account of CGST shall(c) The input tax credit on account of CGST shall
not be utilized towards payment of SGST.not be utilized towards payment of SGST.
Note: This provision is to be incorporated in CGST Act.Note: This provision is to be incorporated in CGST Act.

Sec 35(5)(b) The amount of input tax creditSec 35(5)(b) The amount of input tax credit
on account of SGST available in theon account of SGST available in the
electronic credit ledger shall first beelectronic credit ledger shall first be
utilized towards payment of SGST and theutilized towards payment of SGST and the
amount remaining, if any, may be utilizedamount remaining, if any, may be utilized
towards the payment of IGST.towards the payment of IGST.
(c) The input tax credit on account of SGST(c) The input tax credit on account of SGST
shall not be utilized towards payment ofshall not be utilized towards payment of
CGST.CGST.
Note: This provision is to be incorporated inNote: This provision is to be incorporated in
SGST Act.SGST Act.

Goods/Services are receivedGoods/Services are received
Not listed as ineligible creditsNot listed as ineligible credits
Tax invoice receivedTax invoice received
Vendor paid the taxVendor paid the tax
Vendor uploaded the tax to theVendor uploaded the tax to the
customers accountcustomers account
II
TT
CC

Rules of preference for adjustment of creditRules of preference for adjustment of credit
prescribedprescribed
Each state a separate basketEach state a separate basket
Refund only in case of inverted rate structureRefund only in case of inverted rate structure
and exports-all other cases, only carryand exports-all other cases, only carry
forward excess creditforward excess credit

GST-Input Tax Credit(within the State –Illustration 1)GST-Input Tax Credit(within the State –Illustration 1)
ManufacturerManufacturer
(Producer of(Producer of
Finished goods-Finished goods-
FG)FG)
State AState A
VendorVendor
(Seller of(Seller of
Inputs)Inputs)
State AState A
WholesalerWholesaler
(Buyer of(Buyer of
FG)FG)
State AState A
Sale of FG Rs.200Sale of FG Rs.200
CGST Rs.20 SGST Rs.20CGST Rs.20 SGST Rs.20
Sale of inputs Rs.100Sale of inputs Rs.100
Input CGST of Rs.10 to beInput CGST of Rs.10 to be
used against output CGST ofused against output CGST of
Rs.20. Similarly input SGST ofRs.20. Similarly input SGST of
Rs.10 to be used againstRs.10 to be used against
output SGST of Rs.20output SGST of Rs.20

GST-Input Tax Credit(Between the States –Illustration 2)GST-Input Tax Credit(Between the States –Illustration 2)
FG)FG)
State AState A
VendorVendor
Inputs)Inputs)
State AState A
(Buyer of(Buyer of
FG)FG)
State BState B
IGST Rs.20IGST Rs.20
Input CGST of Rs.10 andInput CGST of Rs.10 and
input SGST of Rs.10 shouldinput SGST of Rs.10 should
be available as credit againstbe available as credit against
the output IGST of Rs.40.the output IGST of Rs.40.

FG)FG)
State BState B
VendorVendor
Inputs)Inputs)
State AState A
(Buyer of(Buyer of
FG)FG)
State BState B
Input IGST of Rs.20 should be availableInput IGST of Rs.20 should be available
as credit against the output CGST ofas credit against the output CGST of
Rs.10 and output SGST of Rs.10Rs.10 and output SGST of Rs.10
IGST may be available for setoff in aIGST may be available for setoff in a
sequential manner against IGST, CGSTsequential manner against IGST, CGST
and SGST in that orderand SGST in that order

Sec. 35(5)(a) The amount of input tax credit onSec. 35(5)(a) The amount of input tax credit on
account of IGST available in the electronic creditaccount of IGST available in the electronic credit
ledger shall first be utilized towards payment ofledger shall first be utilized towards payment of
IGST and the amount remaining, if any, may beIGST and the amount remaining, if any, may be
utilized towards the payment of CGST and SGST,utilized towards the payment of CGST and SGST,
in that order.in that order.

FG)FG)
State BState B
VendorVendor
Inputs)Inputs)
State AState A
(Buyer of(Buyer of
FG)FG)
State BState B
Input IGST of Rs.20 should be available asInput IGST of Rs.20 should be available as
credit against the output IGST ofRs. 20credit against the output IGST ofRs. 20
IGST may be available for setoff in aIGST may be available for setoff in a
sequential manner against IGST, CGSTsequential manner against IGST, CGST
and SGST in that orderand SGST in that order

….INPUTTAX CREDIT: CONCEPTS….
 Input means- section 2 (54):
 any goods(subject to certain exceptions) other than capital goods
 used or intended to beused by supplier
 for making an outward supply in the course or furtherance of
business
 Capital goods specified in section 2 (20)
 Input services means- section 2 (55):
 any services(subject to certain exceptions)
 used or intended to beused by supplier
 for making an outward supply in the course or furtherance of
business
 Exceptions(Negativelist) - section 16(9)

2(57) "input tax" in relation to a taxable"input tax" in relation to a taxable
person, means the {IGST and CGST}/{IGSTperson, means the {IGST and CGST}/{IGST
and SGST} charged on any supply of goodsand SGST} charged on any supply of goods
and/or services to him which areand/or services to him which are used, orused, or
are intended to be usedare intended to be used,, in the course orin the course or
furtherance of his businessfurtherance of his business and includesand includes
the tax payable under sub-section (3) ofthe tax payable under sub-section (3) of
section 7;section 7;

16(1)16(1) Every registered taxable personEvery registered taxable person
shall, subject to such conditions andshall, subject to such conditions and
restrictions as may be prescribed andrestrictions as may be prescribed and
within the time and manner specified inwithin the time and manner specified in
section 35, be entitled to take credit ofsection 35, be entitled to take credit of
input taxinput tax admissible to him and the saidadmissible to him and the said
amount shall be credited to theamount shall be credited to the electronicelectronic
credit ledgercredit ledger of such person.of such person.

•Used-Implies Nexus theory, with business or withUsed-Implies Nexus theory, with business or with
taxable output?taxable output?
•In the course of furtherance of BusinessIn the course of furtherance of Business
•(use for personal purposes not eligible)(use for personal purposes not eligible)
•In case of partial use, the amount of credit shallIn case of partial use, the amount of credit shall
be restricted to so much of the input tax as isbe restricted to so much of the input tax as is
attributable to the purposes of his business-attributable to the purposes of his business-
Section 16(5)Section 16(5)
•Taxable outward supply requiredTaxable outward supply required
•In case of partial use, exempt supplies butIn case of partial use, exempt supplies but
excluding zero- rated supplies, the amount ofexcluding zero- rated supplies, the amount of
credit shall be restricted to so much of thecredit shall be restricted to so much of the
input tax as is attributable to the taxableinput tax as is attributable to the taxable
supplies including zero-rated supplies-sectionsupplies including zero-rated supplies-section

CAPITALGOODS…..
 Capital goods means– section 2(20):
 thefollowing goods, namely:-
 all goods falling within Chapter 82, 84, 85, 90, heading 6805,
grinding wheels and the like and parts thereof falling under heading
6804 of theSchedule;
 pollution control equipment;
 components, sparesand accessoriesof thegoodsspecified above;
 mouldsand dies, jigsand fixtures;
 refractoriesand refractory materials;
 tubesand pipesand fittingsthereof;
 storagetank; and
 motor vehicles other than those falling under tariff headings 8702,
8703, 8704, 8711 & their chassisbut including dumpersand tippers

….CAPITALGOODS….
 Capital goods means:
 used-
 at theplace of business for supply of goods; or
 outsidetheplaceof businessfor generation of electricity for captive
useat theplaceof business; or
 for supply of services
o Capital goodscan beused at theplaceof businessin caseof a
taxableperson engaged in supply of goods
o Capital goodscan beused anywherein caseof ataxableperson
engaged in supply of services

….CAPITALGOODS
 motor vehicle designed for transportation of goods including their
chassis registered in the name of the supplier of service, when used
for
 supplying theserviceof renting of such motor vehicle; or
 transportation of inputsand capital goodsused for supply of service; or
 supply of courier agency service
 motor vehicle designed to carry passengers including their chassis,
registered in the name of the supplier of service, when used for
supplying theserviceof-
 transportation of passengers; or
 renting of such motor vehicle; or
 imparting motor driving skills

 components, spares & accessories of motor vehicles which are
capital goodsfor thetaxableperson

GOODS /SERVICES NOTELIGIBLEFORITC….
 ITC not availablein respect of following:
 motor vehicles, except when they aresupplied in theusual courseof businessor are
used for providing thefollowing taxableservices—
 transportation of passengers, or
 transportation of goods, or
 imparting training on motor driving skills
 goodsand / or servicesprovided in relation to
 food and beverages,
 outdoor catering,
 beauty treatment,
 health services,
 cosmetic and plastic surgery,
 membership of aclub,
 health and fitnesscenter,
 lifeinsurance,
 health insurance,
 travel benefits extended to employees on vacation such as leave or home travel
concession,
when such goods and/or services are used primarily for personal use or
consumption of any employee

….GOODS /SERVICES NOTELIGIBLEFORITC
 goodsand/or servicesacquired by theprincipal in theexecution
of works contract when such contract results in construction of
immovableproperty, other than plant and machinery
 goods acquired by a principal, the property in which is not
transferred (whether as goods or in some other form) to any
other person, which are used in the construction of immovable
property, other than plant and machinery
 goods and/or services on which tax has been paid under
compounding scheme(section 8)
 goodsand/or servicesused for privateor personal consumption,
to theextent they areso consumed

….INPUTTAX CREDIT: CONCEPTS….
 Electronic credit ledger means ITC ledger in electronic form
maintained at GSTN - section 2 (41)
 Inward supply means receipt of goods and / or services whether by
purchase, acquisition or any other means and whether or not for
consideration – section 2 (61)
 Output tax means CGST / SGST chargeable on taxable supply of
goods and / or services made by him or by his agent and excludes
tax payable on reverse charge basis – section 2 (72) / IGST
chargeable– section 2(1)(g) of IGST Act
 Outward supply means supply of goods and / or services whether
by sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made in the course or furtherance of business
except such supplies where tax is payable on reverse charge
basis – section 2 (73)

….INPUTTAX CREDIT: CONCEPTS
 Place of Business includes a place from where the business is
ordinarily carried on and includes a warehouse, a godown or any
other place where a taxable person stores his goods, provides or
receives goods and / or services or where he maintains his books of
accounts or where he is engaged in business through an agent -
section 2 (75)
 Reverse charge means the liability to pay tax by the recipient
instead of the supplier in respect of such categories of supplies as
notified under section 7(3) – section 2 (85)
 Supply meansthesupply asper section 3 – section 2(92)
 Valid return means return filed with payment of full tax as self
assessed asper thesaid return – section 2 (106) r/w section 27(3)

WHO IS ELIGIBLEFORITC
 Every registered taxableperson - section 16(1)
 A person who has applied for registration within 30 days of
becoming liablefor registration - section 16(2):
 entitled to ITC of input tax in respect of goods held in stock* (inputs as
such and inputs contained in semi-finished or finished goods) held in stock
on the day immediately preceding the date from which he becomes liable
to pay tax
 A person who has taken voluntary registration u/s 19(3) - section
16(2A):
 entitled to ITC of input tax in respect of goods held in stock* on the
day immediately preceding thedateof registration
 A person switching over to normal scheme from composition
schemeu/s8 - section 16(3):
 entitled to ITC of input tax in respect of goods held in stock* on the
day immediately preceding the date from which he becomes liable to
pay tax asnormal taxpayer

FEATURES OFITC PROVISIONS….
 Full ITC allowed on capital goods in one goFull ITC allowed on capital goods in one go
 ITC of input tax paid on goods and / or servicesITC of input tax paid on goods and / or services
used for making taxable supplies by a taxableused for making taxable supplies by a taxable
person allowed subject to fulfillment of fourperson allowed subject to fulfillment of four
conditions – section 16(11):conditions – section 16(11):
 he should be in possession of tax paying document issuedhe should be in possession of tax paying document issued
by a supplier;by a supplier;
 he has received the goods and / or services;he has received the goods and / or services;
 the tax charged on such supply has been actually paid tothe tax charged on such supply has been actually paid to
the government;the government;
 he has furnished the returnhe has furnished the return
 ITC entitlement only on receipt of last lot of goodsITC entitlement only on receipt of last lot of goods
where goods are received in lots / instalmentswhere goods are received in lots / instalments ––
proviso toproviso to section 16(11)section 16(11)

….FEATURES OFITC PROVISIONS….
 Normally the ITC would be admissible only whenNormally the ITC would be admissible only when
the goods and / or services have been receivedthe goods and / or services have been received
by the taxable personby the taxable person
 Explanation to section 16(11) provides forExplanation to section 16(11) provides for
dealing withdealing with “Bill to Ship to“Bill to Ship to” Model:” Model:
 Taxable person would be deemed to have receivedTaxable person would be deemed to have received
the goods where the goods are delivered by thethe goods where the goods are delivered by the
supplier to a recipient / any other person on thesupplier to a recipient / any other person on the
direction of such taxable person, whether acting asdirection of such taxable person, whether acting as
an agent or otherwise, before or during movementan agent or otherwise, before or during movement
of goods, either by way of transfer of documentsof goods, either by way of transfer of documents
of title to goods or otherwiseof title to goods or otherwise

 Transfer of ITC permitted in case of changeTransfer of ITC permitted in case of change
in constitution due to sale, merger,in constitution due to sale, merger,
amalgamation etc. with specific provision foramalgamation etc. with specific provision for
transfer of liabilities - section 16 (8)transfer of liabilities - section 16 (8)
 No ITC on an invoice after the expiry ofNo ITC on an invoice after the expiry of
one year from the date of issue of suchone year from the date of issue of such
invoice - section 16 (3A)invoice - section 16 (3A)
 No ITC beyond September of the followingNo ITC beyond September of the following
FY to which invoice pertains or date of filingFY to which invoice pertains or date of filing
of annual return, whichever is earlier -of annual return, whichever is earlier -
 No change in return is permitted after September of nextNo change in return is permitted after September of next
FY or filing of annual return whichever is earlierFY or filing of annual return whichever is earlier

 Proportionate ITC allowed:Proportionate ITC allowed:
 wwhere goods and/or services are partly usedhere goods and/or services are partly used
for business and non- business purposes -for business and non- business purposes -
 wwhere goods and/or services are partly usedhere goods and/or services are partly used
for taxable and non-taxable (including exemptfor taxable and non-taxable (including exempt
but excluding zero-rated) supplies - sectionbut excluding zero-rated) supplies - section
16 (6)16 (6)
 ITC not allowed, in case of capital goods,ITC not allowed, in case of capital goods,
to the extent depreciation is claimed onto the extent depreciation is claimed on
tax component of capital goods undertax component of capital goods under
Income Tax Act - section 16 (10)Income Tax Act - section 16 (10)

 Reversal / Payment of ITC on switchingReversal / Payment of ITC on switching
over from normal to composition schemeover from normal to composition scheme
or taxable goods and / or servicesor taxable goods and / or services
becoming exempt - section 16 (12)becoming exempt - section 16 (12)
 Reversal / Payment of ITC or payment ofReversal / Payment of ITC or payment of
tax on TV, whichever is higher, in case oftax on TV, whichever is higher, in case of
supply of capital goods on which ITC wassupply of capital goods on which ITC was
availed - section 16 (14)availed - section 16 (14)
 Recovery of wrongly availed ITCRecovery of wrongly availed ITC –– sectionsection
16(16) r/w section 5116(16) r/w section 51

 ITC available only on provisional basis onITC available only on provisional basis on
the basis of the return filed under sectionthe basis of the return filed under section
27 – section 2827 – section 28
 ITC cannot be utilized by the recipient until aITC cannot be utilized by the recipient until a
valid return has been filed by himvalid return has been filed by him
 ITC allowed for a period of two monthsITC allowed for a period of two months
until payment of tax and filing of validuntil payment of tax and filing of valid
return by the supplier – section 29return by the supplier – section 29
 ITC to be confirmed only after matching ofITC to be confirmed only after matching of
supplier’s and recipient’s invoice details–supplier’s and recipient’s invoice details–
section 29section 29

 ITC as self assessed in return to beITC as self assessed in return to be
credited to electronic credit ledger –credited to electronic credit ledger –
section 35(2)/ 7(2) of IGST Actsection 35(2)/ 7(2) of IGST Act
 ITC can be used for making payment of taxITC can be used for making payment of tax
only – section 35(4) / 7(4) of IGST Actonly – section 35(4) / 7(4) of IGST Act
 Manner of utilization of ITC – section 35(5)Manner of utilization of ITC – section 35(5)
/ 7(5) of IGST Act:/ 7(5) of IGST Act:
 ITC of IGST can be utilized towards payment ofITC of IGST can be utilized towards payment of
IGST, CGST and SGST in that orderIGST, CGST and SGST in that order
 ITC of CGST can be utilized towards paymentITC of CGST can be utilized towards payment
of CGST and IGST in that orderof CGST and IGST in that order
 ITC of SGST can be utilized towards paymentITC of SGST can be utilized towards payment
of SGST and IGST in that orderof SGST and IGST in that order
 No cross-utilization of CGST and SGST creditsNo cross-utilization of CGST and SGST credits

INPUT
MANUFACTURER
CAR
MANUFACTURER
DEALER CONSUMERA B C
VAT : 11
VAT = 13.31
ITC = (12.10)
Cash = 1.21
CENTRAL
TAX TOTAL
= RS. 11
(10+1)
CENVAT = 11
ITC = (10)
Cash = 1
TAX INVOICE A
VALUE = 100
CENVAT = 10
VAT = 11
INVOICE VALUE = 121
E
STATE TAX
TOTAL =
RS.13.31
(11+1.10+1.21)
CENVAT = 10
CENVAT = 10%
VAT = 10%
VALUE ADDITION = 10%
ITC = INPUT TAX
CREDIT
VAT = 12.10
ITC = (11)
Cash = 1.10
Invoice Value = 121
(-) ITC _Cenvat = 10
(-) ITC_VAT = 11
Cost = 100
Invoice Value = 121
(-) ITC _Cenvat = 10
(-) ITC_VAT = 11
Cost = 100
Invoice Value = 133.10
(-) ITC _VAT = 12.10
Cost = 121
(-) ITC _VAT = 12.10
Cost = 121

INPUT
MANUFACTURE
R
DEALERCAR
MANUFACTURER
CONSUMER
SSGST =10
TAX INVOICE A
VALUE = 100
CGST = 10
SGST = 10
INVOICE VALUE = 120
ECGST = 10
TAX INVOICE B
COST = 100
VALUE = 110
CGST = 11
SGST = 11
INVOICE VALUE = 132
SGST = 11
ITC = (10)
Cash= 1
STATE TAX
TOTAL =
RS.12.10
(10+1+1.10)
A
CENTRAL TAX
TOTAL =
RS.12.10
(10+1+1.10)
CGST = 11
ITC = (10)
Cash = 1
TAX INVOICE C
COST = 110
VALUE = 121
CGST = 12.10
SGST = 12.10
INVOICE VALUE = 145.20
B C
SGST = 12.10
ITC = (11)
Cash = 1.10
CGST = 12.10
ITC = (11)
Cash = 1.10
CGST = 10%
SGST = 10%
ITC = INPUT TAX CREDIT
Invoice Value = 120
(-) ITC_CGST = 10
(-) ITC_SGST = 10
Cost = 100
Invoice Value = 120
(-) ITC_CGST = 10
(-) ITC_SGST = 10
Cost = 100
Invoice Value = 132
(-) ITC_CGST = 11
(-) ITC_SGST = 11
Cost = 110
Invoice Value = 132
(-) ITC_CGST = 11
(-) ITC_SGST = 11
Cost = 110

INPUT
MANUFACTURER
CAR
MANUFACTURER
DEALER CONSUMER
C
VAT = 11
CENTRAL
TAX
TOTAL =
Rs.11
(10+1)
TAX INVOICE A
VALUE = 100
CENVAT = 10
VAT = 11
INVOICE VALUE =
TAX INVOICE C
COST = 126.42
VALUE = 139.06
VAT = 13.91
INVOICE VALUE = 152.97
E
STATE TAX
(X)
TOTAL = RS. 11
(11+0)
CENVAT= 10
CST = 2.42
ITC = (2.42)
Cash = 0
A B
CENVAT = 11
ITC = (10)
Cash = 1
VAT = 13.91
STATE
TAX
(Y)
TOTAL =
RS. 16.91
(13.91+3)
CENVAT = 10%
VAT = 10%
CST = 2%
ITC = INPUT TAX
CREDIT
(+) Entry Tax = 3___
Cost = 126.42
(+) Entry Tax = 3___
Cost = 126.42
Invoice Value = 121
(-) ITC CENVAT = 10
(-) ITC VAT = 11__
Cost = 100
Invoice Value = 121
(-) ITC CENVAT = 10
(-) ITC VAT = 11__
Cost = 100

INPUT
MANUFACTURER
CAR
MANUFACTURER
DEALER CONSUMER
STATE (X)
TAX
TOTAL =
RS. 1.10
(10-10*+
1.10)
STATE (Y)
TAX TOTAL
= RS. 12.22
(2.44 +
9.78**)
TAX INVOICE A
VALUE = 100
CGST (10%) = 10
SGST (10 %) = 10
INVOICE VALUE = 120
CENTRAL
TAX TOTAL
= Rs.12.22
(10+2+10*-
9.78**)CGST = 10TE
SSGST = 10
A B
IGST = 22
CGST = (10)
SGST = (10)
Cash = 2
C
CGST = 12.22
IGST = (12.22)
Cash= 0
SGST = 12.22
IGST = (9.78)
Cash = 2.44
* STATE (X) WILL TRANSFER RS.
10 ( SGST) USED FOR PAYMENT
OF IGST TO CENTRE
** CENTRE WILL TRANSFER
RS.9.78 (IGST) USED FOR
PAYMENT OF SGST TO STATE
(Y)
ADDL.
TAX =
1.10
(-) ITC_IGST = 22___
Cost = 111.10
(-) ITC_IGST = 22___
Cost = 111.10
Invoice Value = 120
(-) ITC_CGST = 10
(-) ITC_SGST = 10_
Cost = 100
Invoice Value = 120
(-) ITC_CGST = 10
(-) ITC_SGST = 10_
Cost = 100

COMPARISON
S. No. Particulars Intra-State Inter-state
Present GST Present GST
1. Initial Value 100.00 100.00 100.00 100.00
2. Centre’s Tax 11.00 12.10 11.00 12.22
3. State (X)’s Tax
13.31 12.10
11.00 1.10
4. State (y)’s Tax 16.91 12.22
5. State’s Total Tax 13.31 12.10 27.91 13.32
6. Total Tax paid to Govt. 24.31 24.20 38.91 25.54
7. Non-Vatable Tax borne by
Business
11.00 0.00 25.00 1.10
8. Total Tax paid by Consumer 13.31 24.20 13.91 24.44
9. Final value paid by Consumer 146.41 145.20 152.97 146.65

….FEATURES OFITC PROVISIONS
 Unutilized ITC can be claimed asUnutilized ITC can be claimed as
refund in certain situations – sectionrefund in certain situations – section
38(2)38(2)
 in case of exports of goods and / orin case of exports of goods and / or
services except where exported goods areservices except where exported goods are
subject to export dutysubject to export duty
 in case where rate of tax on inputs isin case where rate of tax on inputs is
higher than rate of tax on outputhigher than rate of tax on output
 In other cases, unutilized ITC to beIn other cases, unutilized ITC to be
carried forwardcarried forward

TRANSITIONALPROVISIONS .…
 ITC carried forward in the last return furnished under earlier lawITC carried forward in the last return furnished under earlier law
admissible as ITC in GST regime - section 143admissible as ITC in GST regime - section 143
 credit should have been admissible under the earlier lawcredit should have been admissible under the earlier law
 credit should be admissible under the present lawcredit should be admissible under the present law
 ccredit so availed but found to be recoverable as a result ofredit so availed but found to be recoverable as a result of
proceedings under the earlier lawproceedings under the earlier law –– to be recovered under theto be recovered under the
present lawpresent law
 ITC on capital goods, not availed due to restrictions under earlierITC on capital goods, not availed due to restrictions under earlier
law, admissible as ITC in GST regime - section 144law, admissible as ITC in GST regime - section 144
 credit should have been admissible under the earlier lawcredit should have been admissible under the earlier law
 credit should be admissible under the present lawcredit should be admissible under the present law
proceedings under the earlier lawproceedings under the earlier law –– to be recovered under theto be recovered under the

….TRANSITIONALPROVISIONS .…
 Registered taxable person, who was not liable for registration underRegistered taxable person, who was not liable for registration under
earlier law or who was making exempted supplies but is liable to taxearlier law or who was making exempted supplies but is liable to tax
under the present law, eligible to avail ITC of tax paid on goodsunder the present law, eligible to avail ITC of tax paid on goods
(inputs, inputs contained in semi-finished or finished goods) held in(inputs, inputs contained in semi-finished or finished goods) held in
stock - section 145stock - section 145
 ggoods are used for making taxable supplies under the present lawoods are used for making taxable supplies under the present law
 he was eligible for taking ITC under earlier law but forhe was eligible for taking ITC under earlier law but for not being liablenot being liable
for registration or goods being exempt under earlier lawfor registration or goods being exempt under earlier law
 he is eligible for ITC under the present lawhe is eligible for ITC under the present law
 he is in possession of invoice, etc. not issued earlier than twelvehe is in possession of invoice, etc. not issued earlier than twelve
months from the appointed daymonths from the appointed day
proceedings under the earlier lawproceedings under the earlier law –– to be recovered under the presentto be recovered under the present
lawlaw

….TRANSITIONALPROVISIONS ….
 A person paying tax under composition scheme underA person paying tax under composition scheme under
earlier law eligible to take credit of taxes paid onearlier law eligible to take credit of taxes paid on
goods (inputs, inputs contained in semi-finished orgoods (inputs, inputs contained in semi-finished or
finished goods) held in stock while switching over tofinished goods) held in stock while switching over to
normal scheme under the present law - section 146normal scheme under the present law - section 146
 ggoods are used for making taxable supplies under the present lawoods are used for making taxable supplies under the present law
 he was eligible for taking ITC under earlier law but for being ahe was eligible for taking ITC under earlier law but for being a
composition taxpayercomposition taxpayer under earlier lawunder earlier law
 he is not under composition scheme under the present lawhe is not under composition scheme under the present law
 he is eligible for ITC under the present lawhe is eligible for ITC under the present law
 he is in possession of invoice, etc. not issued earlier than twelve monthshe is in possession of invoice, etc. not issued earlier than twelve months
from the appointed dayfrom the appointed day
 ccredit so availed but found to be recoverable as a result of proceedingsredit so availed but found to be recoverable as a result of proceedings
under the earlier lawunder the earlier law –– to be recovered under the present lawto be recovered under the present law

….TRANSITIONALPROVISIONS….
 A person paying tax under normal scheme under theA person paying tax under normal scheme under the
earlier law and switching over to composition schemeearlier law and switching over to composition scheme
under GST shall payunder GST shall pay –– section 147section 147
 an amount equivalent to ITC taken on goods (inputs, inputsan amount equivalent to ITC taken on goods (inputs, inputs
contained in semi-finished or finished goods) held in stockcontained in semi-finished or finished goods) held in stock
 balance of ITC, if any, shall lapsebalance of ITC, if any, shall lapse
 Every proceeding relating to refund claim of ITCEvery proceeding relating to refund claim of ITC
under the earlier law to be disposed of under theunder the earlier law to be disposed of under the
earlier lawearlier law –– section 155section 155
 aamount of credit found admissible - to be refunded in cashmount of credit found admissible - to be refunded in cash
subject to provisions of unjust enrichment & will not besubject to provisions of unjust enrichment & will not be
admissible as ITC under the present lawadmissible as ITC under the present law
 amount of credit found recoverableamount of credit found recoverable –– to be recovered asto be recovered as
arrears of tax under the present law & will not be admissiblearrears of tax under the present law & will not be admissible
as ITC under the present law

….TRANSITIONALPROVISIONS
 Agent can take ITC of tax paid on goods orAgent can take ITC of tax paid on goods or
capital goods belonging to principal but lyingcapital goods belonging to principal but lying
with him - section 162A & 162B:with him - section 162A & 162B:
 aagent is a regsitered taxable peson under thegent is a regsitered taxable peson under the
 both principal and agent declare the details ofboth principal and agent declare the details of
stock lying with agent on the date immediatelystock lying with agent on the date immediately
preceding the appointed daypreceding the appointed day
 iinvoices for such goods had been issued not earliernvoices for such goods had been issued not earlier
than twelve months from the appointed daythan twelve months from the appointed day
 pprincipal has either reversed or not availed of ITCrincipal has either reversed or not availed of ITC
in respect of such goodsin respect of such goods

49
INPUTSERVICEDISTRIBUTOR
(ISD)

ISDLEGALPROVISIONS
 Section 2 (56): ISD
 Section 17: Manner of distribution of credit by ISD
 Section 18: Manner of recovery of credit distributed in
excessby ISD
 Section 19 r/w clause (vii) of Para 5 of Schedule-III:
Liability to beregistered
 Transitional Provisions:
 Section 143: Amount of credit carried forward in a return to be
allowed asITC
 Section 162: Credit distribution of service tax by ISD (only in
CGST Act)

INPUTSERVICEDISTRIBUTOR
 Input ServiceDistributor (ISD) means- section 2 (56)
 an officeof supplier of goodsand / or services
 which receives tax invoices towards receipt of input
services
 which issues a prescribed document to a supplier of
taxable goods and / or services having same PAN as that
of ISD
 for the purposes of distributing the credit of CGST, SGST
or IGST paid on said services
 ISD would be deemed to be a supplier of services for the
purposesof distributing thecredit

FEATURES OFISDPROVISIONS.…
 Generally the supplier of goods and / or services are
eligible for exemption threshold which also grants them
exemption from requirement from obtaining registration –
Section 9 r/w Section 19
 Exemption threshold not applicableto ISD – ISD liableto
obtain registration without any threshold limit – Clause
(vii) of Para5 of Schedule-III
 ISD would have to obtain fresh registration as they would
not bemigrated – Proviso to Section 19(1)

….FEATURES OFISDPROVISIONS.…
 ISD provision is required to transfer ITC on input services
availed in one office but the said services are actually used in
different units registered in different States or business
verticalslocated in aState
 ISD may distribute credit, if ISD & recipient are located in
different States, of – section 17(1)
 CGST asIGST
 IGST asIGST
 SGST asIGST
 ISD may distribute credit, if ISD & business verticals are
located in sameState, of – section 17(2)
 CGST & IGST asCGST
 SGST & IGST asSGST

….FEATURES OFISDPROVISIONS….
 Conditions for distribution of credit by ISD - section
17(3)
 credit to bedistributed under aprescribed document
 amount of credit to be distributed shall not exceed credit
availablefor distribution
 credit of tax paid on input service exclusively used by a
supplier should bedistributed only to that supplier
 credit of tax paid on input services used by more than one
supplier should be distributed to all such suppliers in the
ratio of their turnover during therelevant period

….FEATURES OFISDPROVISIONS
 Relevant period:
 if all the recipients of credit have turnover in the FY preceding
theyear during which credit isto bedistributed – thesaid FY
 if some of recipients of credit do not have turnover in the FY
preceding the year during which credit is to be distributed – the
last quarter for which details of turnover of all recipients are
available preceding the month during which credit is to be
distributed
 Recovery from ISD in case of excess distribution by him
- section 18(1)
 Recovery from supplier (i.e. receipient of credit) in case
of inter se excessdistribution by ISD - section 18(2)

TRANSITIONALPROVISIONS
 ITC carried forward in the last return furnished under
earlier law admissibleas ITC in GST regime- section
143
 credit should havebeen admissibleunder theearlier law
 credit should beadmissibleunder thepresent law
 credit so availed but found to be recoverable as a result of
proceedings under the earlier law – to be recovered under the
present law
 ITC in respect of services received under the earlier
law can be distributed by ISD as credit under the
present law even if the invoices are received on or
after theappointed day - section 162

Head OfficeHead Office
State AState A
EstablishmentEstablishment
State BState B
EstablishmentEstablishment
State CState C

58
CROSS UTILIZATION OFIGST
&
FUNDTRANSFER

CROSS UTILIZATION &FUNDTRANSFER….
 Relevant provisions – section 35(5) & 37A of MGL/ section
7(5), 9 & 10 of IGST Act
 Section 37A of MGL
 ITC of CGST used for payment of IGST – CG to transfer
amount so utilised from CGST A/c to IGST A/c
 ITC of SGST used for payment of IGST – SG to transfer
amount so utilised from SGST A/c to IGST A/c
 Section 9 of IGST Act
 ITC of IGST used for payment of CGST – CG to transfer
amount so utilised from IGST A/c to CGST A/c
 ITC of IGST used for payment of SGST – CG to transfer
amount so utilised from IGST A/c to SGST A/c

….CROSS UTILIZATION &FUNDTRANSFER….
 Out of IGST paid on inter-state supplies, CGST portion to
betransferred from IGST A/c to CGST A/c by CG
 on B2C suppliesor on suppliesto acompounding taxpayer
 On B2B supplies where recepient is either not eligible for
ITC or do not avail ITC within specified time
 Out of IGST paid on import of goods and / or services,
CGST portion to be transferred from IGST A/c to CGST
A/c by CG
 on B2C suppliesor on suppliesto acompounding taxpayer
 On B2B supplies where recepient is either not eligible for
ITC or do not avail ITC within specified time

….CROSS UTILIZATION &FUNDTRANSFER....
 Balance amount in IGST A/c (IGST – CGST) to be transferred
by CG to the SGST A/c of the States where such supply has
taken placeasper section 5 or 6 of IGST Act
 Apportionment of interest and penalty would also be done on the
basis of same formula as applied in case of transfer of tax from
IGST A/c to CGST A/c and SGST A/c
 Information about cross utilisation between CGST / SGST
with IGST and that about payment of IGST in case of B2C
supplies, etc. would be available in the return to be filed
under section 25, 26 and 27

 Balancein CGST A/c:
 CGST on intra-statesupplies
 Add: Transfer from IGST on account of utilization of ITC of
IGST for payment of CGST liability
 Add: CGST component of IGST from inter-state / import
transactionson account of supply of goodsand/or services:
 to an unregistered person
 to acompounding taxpayer
 to aregistered taxableperson not eligiblefor ITC
 to aregistered taxableperson who hasnot availed ITC
 Less: Transfer from CGST on account of utilization of ITC
of CGST for payment of IGST liability

 Balancein SGST A/c:
 SGST on intra-statesupplies
 Add: Transfer from IGST on account of utilization of ITC of
IGST for payment of SGST liability
 Add: SGST component of IGST (IGST less CGST) from inter-
state / import transactions on account of supply of goods and/or
services:
 Less: Transfer from SGST on account of utilization of ITC of
SGST for payment of IGST liability

 Balancein IGST A/c:
 IGST on inter-statesupplies
 Add: Transfer from CGST on account of utilization of ITC
of CGST for payment of IGST liability
 Add: Transfer from SGST on account of utilization of ITC
of SGST for payment of IGST liability
 Less: Transfer from IGST on account of utilization of ITC
of IGST for payment of CGST liability
 Less: Transfer from IGST on account of utilization of ITC
of IGST for payment of SGST liability

….CROSS UTILIZATION &FUNDTRANSFER
 Balancein IGST A/c:
 Less: CGST & SGST (IGST less CGST) component of IGST
from inter-state / import transactions on account of supply of
goodsand/or services:
 Balance in IGST A/c, if any, to be devolved to States
under Article270

Payment of IGST and its utilization as ITC
ITC_CGSTITC_CGST
ITC_IGSTITC_IGST
CashCash
GST_CGSTGST_CGST
GST_IGSTGST_IGST
Payment of CGST Utilisation of CGST
Let this be “A
Let this be ”B”

ITC_SGSTITC_SGST
ITC_IGSTITC_IGST
CashCash
GST_IGSTGST_IGST
GST_SGSTGST_SGST
Payment of SGST Utilisation of SGST
Let this be “A
Let this be ”B”

ITC_IGSTITC_IGST
ITC_CGSTITC_CGST
ITC_SGSTITC_SGST
CashCash
GST_IGSTGST_IGST
GST_CGSTGST_CGST
GST_SGSTGST_SGST
Payment of IGST Utilisation of IGST
Let this be “A
Let this be ”B”

IGST Account Settlement
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Settlement Amount=∑A- ∑B for
n=1 to n=1000
∑A- ∑B may be +ve or -ve
Settlement Amount=∑A- ∑B for
n=1 to n=1000
∑A- ∑B may be +ve or -ve
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Deale
r 1
ITC_SGST used for
payment of IGST
Say “A”
ITC_SGST used for
payment of IGST
Say “A”
ITC_IGST used for
payment of SGST
Say “B”
ITC_IGST used for
payment of SGST
Say “B”
Dealer
1000
State
“Aa”
Informa
tion in
captured
in the
return

IGST Act (An overview)
ITC claims and transferof funds
 Claim of ITC, provisional acceptance, matching, reversal,
reclaim [Sec 8]
 Transfer of input tax credit [Sect 9]
ITC_IGST used for payment of
CGST
Transfer of such amount to
CGST
ITC_IGST used for payment of
SGST
Transfer of amount to
appropriate State
70

IGST Act (An overview)
Apportionment of Tax
 To Central Government-Amount equivalent to CGST
o On the supplies to unregistered person or to a composition
taxpayer [Sec 10(1)]
o On the supplies to a registered person who could not take ITC [
Sec 10(2)]
o On imports by an unregistered person or by a composition
taxpayer [Sec 10(3)]
o On imports by a registered person who could not take ITC [Sec
10 (4)]
 To the State Government
o The balance IGST, in above four categories, to the POS State
[Sec 10(5) ] 71

Input tax credit in GST

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