Input Tax Credit under Revised GST Law

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Input Tax Credit under Revised GST Law

As in past in case of other indirect taxes like Service tax , excise etc. Input tax credit will also be allowed in GST. The process of Input tax credit in GST is also more or less same as was in past. We bought you few points which you should know regarding Input tax credit in GST here below :-

Input tax credit in GST
Input tax credit in GST
  1. Input Tax Credit
    • Credit is allowed for input tax charged on supply of goods or services “which are used or intended to be used” in the course or furtherance of his business.
    • Credit of input tax in respect of pipelines and telecommunication tower fixed to earth by foundation or structural support including foundation and structural support thereto is required to be spread equally over a period of three Financial Years starting from the financial year of receipt.
    • Certain provisions in relation to credit on inputs held in stock and semi-finished goods held in stock have been shifted to Section 18 “Availability of credit in special circumstances”.
    • In case the recipient fails to pay to the supplier of services, the amount towards the value of supply of services along with tax payable thereon within a period of three months from the date of invoice issued by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest.
    • No ITC can be availed if the depreciation on the tax component is charged in the books.

 

  1. Apportionment of Credit and Blocked credits
    • Where input is used partly for business and partly for other purpose, credit for taxable portion shall only be allowed to be availed.
    • Input credit can be availed only for taxable supplies including zero rated supplies when they are partly used for the taxable supplies and for effecting exempt supplies including non-taxable supplies.

Exempt supplies include supplies under RCM. Consequently, credit attributable to such supplies is required to be reversed.

  • Banking, NBFCs or Financial institutions to avail the above stated option or to avail full ITC subject to payment of 50% of the eligible ITC every month.
  • Input tax credit is not available for motor vehicles and other conveyances except when they are used:

(i) For making the following 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 vehicles or conveyances;

(ii) For transportation of goods.

  • Input tax credit is not available for supply of goods and services, namely,
  1. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where such inward supply of goods or services of a particular category is used by a registered taxable person for making an outward taxable supply of the same category of goods or services;
  2. membership of a club, health and fitness centre,
  3. rent-a-cab, life insurance, health insurance except where the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession.
  4. 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; and
  5. goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even when used in course or furtherance of business.
  6. under Composition scheme
  7. used for personal consumption;
  8. goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
  9. tax not paid /short paid /erroneously refunded /input tax credit wrongly availed or utilised by reason of fraud, wilful misstatement etc.
  10. goods stored or transported in contravention of the provisions of the Act or Rules made thereunder
  11. confiscation of goods or conveyances due to specified circumstances.

 

 

  1. Availability of Credit in specified circumstances
    • Credit of input tax in respect of inputs /finished goods/semi finished goods held in stock and on capital goods (prescribed %) on the day immediately preceding the day can be availed in the following cases:
  • a person shifts out of composition scheme,
  • an exempt supply is made liable to tax,
  • takes registration under the act within 30 days from the date becomes liable
    • If capital goods or plant and machinery, on which input credit has been taken is supplied , then an amount equivalent to the input tax credit taken on such capital goods or plant and machinery reduced by prescribed percentage points or tax on transaction value, whichever is higher, is required to pay.
    • In case where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person has an option to pay tax on transaction value of such goods.
    • Whenever there is sale, transfer, merger, amalgamation etc., with specific provision of transfer of liabilities, then ITC shall be allowed to be transferred.

 

  1. Taking ITC on inputs sent for job work :
  • Inputs: ITC can be availed in case the goods sent to the job worker are received back by the principal manufacturer within one year of their being sent out.
  • Also, the goods are not required to be received in the factory first and then sent to the job worker. The limit of one year will be counted from the date of receipt of the goods by the job worker.
  • Capital Goods: ITC can be availed in case the goods sent to the job worker are received back by the principal manufacturer within 3 years of their being sent out.
  • Also, the goods are not required to be received in the factory first and then sent to the job worker. The limit of 3 years will be counted from the date of receipt of the goods by the job worker.
  • In case the input/capital goods are not received within the stipulated time limit, the ITC availed shall be paid back by the assesse along with interest. The amount along with interest can be claimed back by the principal manufacturer once the goods are received by the principal manufacturer.

(Time limit for availment of ITC is increased for input and capital goods)

 

  1. Manner & Utilization of Credit by ISD:
    • Credit of tax paid on input services attributable to various recipients of credit may be distributed on pro rata basis the turnover in a State of such recipient, to the aggregate of the turnover of all operational recipients.

Hope you like it also read :-

All you need to know About GSTR-1 | OUTWARD SUPPLIES RETURN (GSTR-1)

All you need to know About GSTR-2 | INWARD SUPPLIES RETURN (GSTR-2)

All you need to know About GSTR-3 | MONTHLY RETURN (GSTR-3)

Easy Guide for GST Enrolment for existing Central Excise & Service Tax Assessees