S 6-Input tax credit under GST

CHAPTER-V OF CGST ACT
Read With Input Tax Credit Rules
Compiled By –
Surabhi Bansal | Exe cutive | I ndirect Tax Ve rtical
Asija & Associates LLP | Charte red Accountants
gst@asija.in

What is Input Tax Credit (ITC)
 It is the credit of Input Tax .
What is Input Tax & how to claim it’s Credit?
Input Tax means: -
 In relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
 The IGST charged on import of goods;
 The tax payable under the provisions of Section 9 (3) & Section 9(4) of
 CGST Act or SGST / UTGST Act or The tax payable under the
provisions of Section 5(3) & Section 5(4) of the IGST Act
 But does not include the tax paid under the composition levy.
gst@asija.inGST Wing | Asija & Associates LLP

Who is eligible to take Input Tax Credit (ITC)?
Every Registered person shall Be entitled to take
 Credit of input tax charged on goods/ services supplied to him,
 Which are used or intended to be used in course or furtherance of
business, and
 The said amount should be credited to his Electronic Credit Ledger.

No, ITC shall not be available in respect of the following: -
Motor vehicles and other conveyances except when they are used
for: –
 Further supply of such vehicles or conveyances; or
 Transportation of passengers; or
 Imparting training on driving, flying, navigating such vehicles or
conveyances;
 For transportation of goods;

Supply of following goods/ services: -
 Membership of a club, health and fitness centre,
 Rent-a-cab, life insurance, health insurance &
 Travel benefits of employees on vacation such as leave or home travel
concession
 On which tax is payed under Composition Scheme (Section 10)
 Received by a non-resident taxable person except on goods imported by
him
 Used for Personal Consumption
 Which are lost, stolen, destroyed, written off or disposed of by way of gift or
free samples;

 Food & beverages, outdoor catering, beauty treatment, health services,
cosmetic & 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
Works contract services
 When supplied for construction of immovable property,
 Other than plant and machinery *,
 Except where it is an input service for further supply of works contract
service

 Construction of an Immovable property:
◦ Goods or services received by a taxable person for construction of an
immovable property on his own account,
◦ other than plant and machinery*,
◦ including when used in course or furtherance of business.
* Plant and Machinery: -
It 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—
 Land, building or any other civil structures;
 Telecommunication towers; and
 Pipelines laid outside the factory premises.

Conditions For Taking Input Tax Credit
8
No registered taxable
person shall be entitled to
take credit of any input tax
unless:
He is in possession of a tax invoice, debit note
or any other tax paying document(s).
He has received the goods and/or
services*
Tax has actually been paid
in respect of such supply to Government
He has furnished the monthly return
*Where goods are supplied to the recipient on direction of a registered person, it shall be deemed
that goods/ services have been received by such registered person.
What are the conditions for taking Input Tax Credit?

Documents For Taking Input Tax Credit
What are the Documentary requirements for taking ITC?
 The Input Tax Credit shall be availed by a registered person, on the basis of
following Documents: -
 Invoice issued to us by the supplier of goods or services; or
 Invoice issued by us under Reverse Charge or for supply from
unregistered person; or
 Debit Note issued by a supplier; OR
 Bill of Entry or any similar document for the assessment of integrated
tax on imports as per Customs Act, 1962; or
 Input Service Distributor invoice or Input Service Distributor credit note
or any document issued by an Input Service Distributor.

IGST
IGST
CGST
SGST
UTGST
CGST
CGST
IGST
SGST
SGST
IGST
UTGST
UTGST
IGST
Can the ITC of CGST, SGST, IGST and UTGST be utilised against each other?
No, Input Tax Credit of CGST, SGST, IGST and UTGST can only be utilised as per
following manner and sequence :
Manner of Taking Input Tax Credit

Some Poser’s on ITC
What if I have the Invoice, but the Goods is received in Lots, when will I get
ITC?
 The registered person shall be entitled to take credit upon receipt of the last lot
or instalment.
What if I fail to make payment to supplier payment with in 180 day from
the date of issuance of Invoice?
 If payment to supplier is not made within 180 days from date of issue of
invoice,
Amount of Input Tax Credit availed by the recipient, shall be added to his
Output Tax Liability, along with interest.
However the disallowed credit shall be allowed as credit, once the payment is
made by him to supplier towards the value of supply and tax thereon.
The said provision is not applicable to tax payable on Reverse Charge Basis

Can Depreciation and ITC both be charged on cost of capital goods?
No, Registered person can either claim depreciation or ITC on the tax
component of cost of capital goods and plant and machinery.
Is there a time limit under which I should claim ITC?
Yes, Input tax credit shall not be allowed after-
 Due date of furnishing return for month of September following the
end of F.Y. to which such invoice relates, or
 Furnishing of relevant Annual Return, whichever is earlier.
Some Poser’s on ITC

Credit Apportionment of ITC
If I use goods/ services partly for business and partly for other purpose,
how will I get ITC?
 Where goods/ services are used
 partly for business purpose and
 partly for other purposes,
 ITC shall be available for input used for business purpose only.
If I supply both taxable as well as exempt goods, how will I get ITC?
 Where goods/ services are used
 Partly for effecting taxable supplies including zero-rated supplies, and
 Partly for effecting exempt supplies (including supplies on which tax is
paid on RCM, transactions in securities, sale of land and sale pf building.)
 Credit shall be available for input tax attributable to taxable supplies
including zero-rated supplies.

ITC Under Special Circumstances
Every person who: -
 Has applied for registration under GST within 30 days from the date
of becoming liable for 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 the day immediately preceding the date of which he becomes
liable to pay tax
Note: ITC can not be claimed w.r.t any supply whose Tax Invoice was issued before 1
year from the date of registration
If my turnover crosses 20 lacs and I want to get registration under
GST, will I get ITC of my existing stock held before registration?

I want to get Voluntary registration under GST, will I get ITC of my
existing stock?
 Every person who: -
 Takes Voluntary 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 the day immediately preceding the date of grant of registration.

I am composition taxpayer but my turnover crossed the limit of 75 lac
so now I have to register as normal taxable person, will I get ITC of my
existing stock?
Every person who: -
 Ceases to be a Composition Taxpayer;
 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 the day immediately preceding the from which he becomes liable to
pay tax under section 9.

If goods/ services supplied by me were earlier exempt but now it has
become taxable, will I get ITC of my existing stock?
Every registered person who: -
 Supplies exempt goods/ services which has now become taxable,
 Shall be entitled to take credit of input tax in respect of inputs held in
stock and 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 from which such supply
becomes taxable

If the constitution of my business has changed, how will my ITC be
Treated?
 Where there is change in constitution of a registered person on account of
 Sale, Merger, Demerger, Amalgamation, Lease or Transfer of the business
 With Specific Provision for transfer of Liabilities,
 Then the said registered person shall be allowed to transfer the input tax
credit
 Which remains unutilised in his electronic credit ledger.
Note:
In case of demerger, the input tax credit shall be apportioned in the ratio of the
value of assets of the new units as specified in the demerger scheme.

THANK YOU
FOR ANY QUERIES KINDLY CONTACT OUR GST TEAM :
CA Rahul Mishra
Partner
(rahul.mishra@asija.in)
CA Amber Agrawal
Associate Director
(amber.agrawal@asija.in)
CA Prakhar Gupta
Associate Director
(prakhar.gupta@asija.in)
ASIJA & ASSOCIATES LLP
CHARTERED ACCOUNTANTS
H.O. : 34/5 , GOKHALE MARG, LUCKNOW
PH. NO. : 0522-4004652,2205072
gst@asija.in

DISCLAIMER
This presentation has been prepared to provide a gist of the applicable
law pertaining to GST as issued till date. (29/06/2017)
For detailed insight and for better understanding of the various
provision of the law, the said presentation should be read along with
related provision of CGST Act, IGST Act, SGST Act & related rules.
We shall not be responsible for any decision taken on the basis of the
said presentation, without obtaining our professional guidance or
consultation on the matter for which reliance was made on this
presentation.”
Input Tax on Works Contract / Job Work and for Input Distributor shall
be covered by us in a presentation exclusively for these subjects.

S 6-Input tax credit under GST

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