Indirect
Taxation
Goods
and Services Tax
Input
Tax Credit
Section 16(1) of the CGST Act, 2017
Every registered person shall, subject to
such conditions and restrictions as may be prescribed and in the manner
specified in section 49, be entitled to take credit of input tax charged on any
supply of goods or services or both to him which are used or intended to be
used in the course or furtherance of his business and the said amount shall be
credited to the electronic credit ledger of such person.
Input tax credit priorities
|
Particulars |
IGST |
CGST |
SGST |
Total |
|
|
Rs |
Rs |
Rs |
Rs |
|
Output GST (GST Liability) |
××× |
××× |
××× |
××× |
|
LESS: Input GST (Input Tax Credit): |
|
|
|
|
|
Input IGST credit (Priority-wise) |
First |
Second |
Third |
××× |
|
Input CGST credit (Priority-wise) |
Second |
First |
NA |
××× |
|
Input SGST credit (Priority-wise) |
Second |
NA |
First |
××× |
|
Net GST payable |
××× |
××× |
××× |
××× |
Input Tax Credit – Important Points
1.
Input
tax credit on capital goods can be availed at the time of capitalisation of the
capital goods in the books of accounts.
2.
Input
tax credit of one State cannot be used to set off output GST liability of
another State.
3.
A supplier cannot take Input Tax Credit of GST paid on
goods or services used to make supplies on which the recipient is liable to pay
tax under reverse charge mechanism.
4.
Recipient of supply of goods or service while paying GST under reverse
charge mechanism is not eligible to avail the input tax credit. This is because
any amount payable under reverse charge shall be paid by
debiting the electronic cash ledger. In other words, reverse charge liability
cannot be discharged by using input tax credit.
5.
After discharging reverse
charge liability, credit of the same can be taken by the recipient of such goods
or services at the time of paying his output GST, if he is otherwise eligible
i.e. if such goods or services are used for his business or
furtherance of his business.
6.
A person registered under the Composition Scheme is not eligible for
input tax credit.
7.
A buyer of goods who buys such goods from a person registered under the
Composition Scheme is also not eligible for input tax credit at the time of
selling of such goods and paying his output GST on such goods.
8.
Input tax credit is not available on exempt supplies. But input tax
credit is available on goods and services for which applicable GST rate is 0%.
Examples of goods and services for which GST rate is 0% are:
a) Export goods and services,
b) Supply of goods and services to Special
Economy Zone.
9. Input
tax credit is available as soon as inputs of goods and services are received.
In other words, there is no need to wait for taking input tax credit till these
inputs are actually used in production. In practice, entire input tax credit
forms a common pool which is used as adjustment at the time of paying the
output GST liability as and when goods and services are sold.
Conditions for taking input tax credit
1.
As
per Section 16(1) of the CGST Act, 2017, a registered person is not entitled to
take credit of the input tax charged to him on any supply of goods or services
or both, if such goods or services or both are neither used nor intended to be
used in the course or furtherance of his business.
2.
To
take input tax credit the dealer should be registered under the GST Law.
3.
To
avail the benefit of input tax credit the dealer should be in possession of a
tax invoice or debit note or bill of entry issued by a registered supplier of
goods or services or both.
4.
No
input tax credit can be availed by a registered supplier in respect of any tax
that has been paid in pursuance of any ‘order’ where any demand has been
confirmed on account of any fraud, wilful miss-statement or suppression of
facts.
5.
Input
tax credit is available only if the registered dealer has actually received the
goods or services or both.
6.
As
per the first proviso to Section 16(2), where the goods against an invoice are
received in lots or instalments, the registered person shall be entitled to
take credit of input tax paid on such goods only upon receipt of the last lot
or instalment.
7.
Input
tax credit can be availed by the dealer only if the input tax has actually been
paid to the Government by the supplier of goods/services either in cash or
through utilisation of input tax credit as might be admissible to the supplier.
8.
Input
tax credit is available to a registered person as soon as the goods or services
are received by him. But a registered person shall not be entitled to take
input tax credit in respect of any invoice or debit note for supply of goods or
services or both after the date which is earlier of the following two dates:
a.
The
30th November following the end of financial year to which such
invoice or debit note pertains; or
b.
Actual
date of filing the annual return in form GSTR–9 relating to the same financial
year.
9. Input tax credit on any inward supply of
goods or services or both is available to a registered person, if he pays to
the supplier of such goods or services or both the value of such supply along
with the tax payable thereon within 180 days from the date of issue of invoice
by the supplier. If the payment is not made within
180 days, the input tax credit, if already taken by the registered person on
such inward supply of goods or services or both, shall be reversed.
10. Where a registered dealer has claimed
depreciation on GST component of the cost of capital goods and plant and
machinery under the provision of Income Tax Act, 1961, the input tax credit
with respect to the said GST component shall not be allowed to the said registered
dealer u/s 16(3) of the GST Act, 2017.
Example: 1
Dealer A buys a machine from B
at a price of Rs 10, 00,000 + GST @ 18%. Therefore, total capitalised value of
the machine = Rs 10, 00,000 + 18% of Rs 10, 00,000 = Rs 10, 00,000 + 1, 80,000
= Rs 11, 80,000. Here, Rs 1, 80,000 is the input GST on the machine bought.
Option: 1
If Mr. A charges depreciation
u/s 32 of the Income Tax Act, 1961 @ 15% of the capitalised value of the
machine, total depreciation charged = Rs 11, 80,000 × 15% = Rs 1,77,000, which
includes depreciation
on the GST component of the capitalised value of the machine = Rs 1,80,000 × 15%
= Rs 27,000. Therefore, in this case, Mr. A shall not be entitled to
take input tax credit of the input GST paid Rs 1, 80,000 on the machine bought.
Option: 2
On the other hand, if Mr. A
charges depreciation @ 15% u/s 32 of the Income Tax Act, 1961 on the purchase
price of the machine only, total depreciation charged = Rs 10,00,000 × 15% = Rs
1,50,000. In
this case, Mr. A shall be entitled to take the input tax credit of the input
GST paid Rs 1, 80,000: Credit of input CGST Rs 90,000 and credit of input SGST
Rs 90,000.
Apportionment of Credit
[Section 17(1)/ (2)/ (3) of the CGST
Act, 2017]
1.
Where the goods or services or both are used by the
registered person partly for the purpose 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 the purposes of his business.
2.
Where the goods or services or both are used by the
registered person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the IGST Act, 2017 and partly for effecting
exempt supplies under the said Acts, the amount of credit shall be restricted
to so much of the 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 the recipient
is liable to pay tax on reverse charge basis, transactions in securities, sale
of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building.
Explanation:
“For the purposes of this sub- section, the expression
‘‘value of exempt supply’’ shall not include the value of activities or
transactions specified in Schedule III, except those specified in paragraph 5
of the said Schedule”.
4. The Government may prescribe the manner in
which the credit referred to in sub-sections (1) and (2) may be attributed.
Explanation: For the purposes of
this Chapter and Chapter VI, 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—
i. Land,
building or any other civil structures;
ii. Telecommunication
towers; and
iii. Pipelines
lay outside the factory premises.
Manner of determination of input tax
credit in respect of inputs or input services and reversal thereof [Rule 42(1)
of the CGST Rules, 2017]:
The input tax credit in respect of inputs or input services, which
attract the provisions of sub-section (1) or sub-section (2) of section 17,
being partly used for the purposes of business and partly for other purposes,
or partly used for effecting taxable supplies including zero rated supplies and
partly for effecting exempt supplies, shall be attributed to the purposes of
business or for effecting taxable supplies in the following manner, namely:-
Step 1: Calculate common input tax credit on inputs and input
services which are used to supply taxable as well as exempted output supplies:
|
Particulars |
Rs |
Rs |
|
Total ITC on inputs and input services |
|
××× |
|
Less: ITC on supplies exclusively used for the
purpose other than business (T1) |
(××) |
|
|
Less: ITC on supplies exclusively used for providing
exempted supplies (T2) |
(××) |
|
|
Less: ITC not available u/s 17(5) of the CGST Act,
2017 (T3) |
(××) |
(××) |
|
Input tax credit which are used to supply taxable as
well as exempted output supplies (C1) |
|
××× |
|
Less: ITC on supplies used exclusively for taxable
supply including Zero rated supply (T4) |
|
(××) |
|
Common ITC, which are used to supply taxable as well
as exempted output supplies (denoted as C2) |
|
××× |
Important Note:
As per Rule 42(1) (g) of the CGST Rules, 2017,
information relating to Rule 42(1) (b), (c), (d) and (f) shall be determined
and declared by the registered person at the invoice level in Form GSTR-2;
Step 2: Amount of reversal of ITC attributable towards exempt
supplies as per Rule 42(1) (i) of the CGST Rules, 2017 (denoted as D1)
D1 = C2 × E/F
(Common ITC which are used to supply taxable as well
as exempted output supplies) × [Exempted Supplies (i.e. exempted outputs +
exempted output services) during the Tax Period ('E') ÷ Total turnover in the
State of the registered person during the tax period ('F')]
Provided that where the registered person does not have any
turnover during the said tax period or the aforesaid information is not
available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and
‘F’ of the last tax period for which the details of such turnover are
available, previous to the month during which the said value of ‘E/F’ is to be
calculated;
Explanation:
For the purposes of this clause, it is hereby
clarified that the aggregate value of exempt supplies and the total turnover
shall exclude the amount of any duty or tax levied under entry 84 of List I of
the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the
said Schedule;
Notification No. 3/2018-Central Tax,
dated 23rd January 2018:
For the purposes of rule 42 and this rule, it is
hereby clarified that the aggregate value of exempt supplies shall exclude:—
(a)
The value of services by way of accepting deposits,
extending loans or advances in so far as the consideration is represented by
way of interest or discount, except in case of a banking company or a financial
institution including a non-banking financial company, engaged in supplying
services by way of accepting deposits, extending loans or advances; and
(b)
The value of supply of services by way of
transportation of goods by a vessel from the customs station of clearance in
India to a place outside India.
Tax period:
As per section 2(106) of the CGST Act, 2017 tax period
means the period for which return is required to be furnished. As per section
39 return is required to be furnished on monthly basis by the registered person
except the person opting for composition scheme or persons eligible to file
return quarterly basis on their aggregate turnover not exceeding Rs 150 lakhs.
Important note:
This rule is not applicable to persons opting for composition scheme.
Computing proportionate amount
attributable to use for non-business purposes (i.e. Personal purpose) [Rule
42(1) (j) of the CGST Act, 2017]:
The amount of credit attributable to non-business
purposes, if common inputs and input services are used partly for business and
partly for non-business purposes, denoted as D2, shall be equal to five per
cent of C2. Therefore, Amount of reversal of ITC
attributable towards non-business purpose as per Rule 42(1) (j) of the CGST
Rules, 2017 (denoted as D2):
D2 = C2 × 5%
Thus, if inputs or input services have been used for
non-business purpose, as per rule 42(1) (j) of the CGST Rules, 2017, credit of
5% of “C2” will be required to be reversed. It means the same should be deducted
from input tax credit on inputs or input services exclusively used for taxable
supply in the electronic credit ledger.
Quantum of eligible ITC [Rule 42(1) (k)
of the CGST Act, 2017]:
The remainder of the common credit shall be the
eligible input tax credit attributed to the purposes of business and for
effecting supplies other than exempted supplies but including zero rated
supplies and shall be (denoted as C3)
C3 = C1 − (D1 + D2)
[Rule
42(1) (i) of the CGST Rules, 2017]:
Eligible ITC
shall be computed separately for different taxes i.e. C3 shall be computed separately for CGST, SGST, UTGST and
IGST.
[Rule 42(1) (m) of the CGST Rules,
2017]:
A registered person shall compute D1 and D2 (i.e. ineligible credits) in
addition to ineligible credit at invoice level and add that amount to the
output tax liability. This will be added on monthly basis and the
registered person should pay the amount.
[Rule
42(2) of the CGST Rules, 2017]:
The input tax credit determined under sub-rule (1)
shall be calculated finally for the financial year before the due date for
furnishing of the return for the month of September following the end of the
financial year to which such credit relates, in the manner specified in the
said sub-rule and –
(A)
Where [Yearly (D1
+ D2)] > [Monthly (D1 + D2)]
Where the aggregate of the amounts calculated finally
in respect of D1
and D2 exceeds the aggregate of the
amounts determined under sub-rule (1) in respect of D1 and D2, such excess shall be added to the output tax liability
of the registered person in the month not later than the month of
September following the end of the financial year to which such credit relates
and the said person shall be liable to pay interest on the said excess amount at
the rate specified in Section 50 (1) for the period starting from the first day
of April of the succeeding financial year till the date of payment; or
(B)
Where [Monthly
(D1 + D2)] > [Yearly (D1 + D2)]
Where the aggregate of the amounts determined under
sub-rule (1) in respect of D1 and D2 exceeds the aggregate of the amounts calculated
finally in respect of D1 and D2, such excess amount shall be claimed as credit by the
registered person in his return for the month not later than the month
of September following the end of the financial year to which such credit
relates.
Example: 2
Mr. M. P. Agarwal, a registered person, provides the
following information for the month of March, 2022:
|
Particulars |
Rs |
|
Input tax in respect of inward supply |
2,00,000 |
|
Taxable outward supply (excluding zero-rated supply) |
10,00,000 |
|
Export i.e. zero-rated supply |
5,00,000 |
|
Exempt outward supplies |
3,00,000 |
|
Outward supplies on which the recipient is liable to
pay tax on reverse charge basis |
2,00,000 |
In this case, ITC available to Mr. Agarwal shall be
calculated as follows:
|
Particulars |
|
Rs |
|
Taxable outward supply (excluding zero-rated supply) |
|
10,00,000 |
|
Export i.e. zero-rated supply |
|
5,00,000 |
|
Exempt outward supplies |
|
3,00,000 |
|
Outward supplies on which the recipient is liable to
pay tax on reverse charge basis |
|
2,00,000 |
|
Total outward supply |
A |
20,00,000 |
|
Total taxable outward supply including zero-rated
supplies [Rs 10,00,000 + Rs 5,00,000] |
B |
15,00,000 |
|
Input tax in respect of inward supply |
C |
2,00,000 |
|
ITC available for the month of March, 2022 [C × B/A] |
|
1,50,000 |
Example: 3
M/s Munot Industries Limited has given the following
information for the month of May, 2022:
|
|
Particulars |
Rs |
|
1 |
Total input tax credit (ITC) on inputs and input
services |
2,00,000 |
|
2 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for non-business purposes |
20,000 |
|
3 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting exempt supplies |
20,000 |
|
4 |
ITC (out of total ITC as in Sl. No. 1) in respect of
inputs on which credit is not available u/s 17(5) |
10,000 |
|
5 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting taxable supplies (including zero-rated supplies) |
1,00,000 |
|
6 |
Total turnover |
40,00,000 |
|
7 |
Aggregate value of exempt supplies |
10,00,000 |
a) State the quantum of common credit.
b) State the amount of ITC to be reversed as per Rule
42.
In this case, quantum of common credit and amount of
ITC with respect to the exempt supplies to be reversed for the month of May,
2022 shall be calculated as follows:
|
Particulars |
|
Rs |
|
Total input tax credit (ITC) on inputs and input
services |
T |
2,00,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for non-business purposes |
T1 |
20,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting exempt supplies |
T2 |
20,000 |
|
ITC (out of total ITC as in Sl. No. 1) in respect of
inputs on which credit is not available u/s 17(5) |
T3 |
10,000 |
|
Total |
T1 + T2 + T3 |
50,000 |
|
ITC credited to Electronic Credit Ledger |
C1 = T – (T1 + T2 + T3) |
1,50,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting taxable supplies (including zero-rated supplies) |
T4 |
1,00,000 |
|
Common Credit |
C2 = C1 – T4 |
50,000 |
|
Aggregate value of exempt supplies |
E |
10,00,000 |
|
Total turnover |
F |
40,00,000 |
|
Proportion of common credit not allowed |
D1 = C2 × E/F |
12,500 |
|
5% of common credit not allowed |
D2 = C2 × 5% |
2,500 |
|
ITC to be reversed out of common credit |
D1 + D2 |
15,000 |
|
Net ITC available after reversal |
C1 – (D1 + D2) |
1,35,000 |
BLOCK
CREDIT
[Section 17(5) of the CGST Act, 2017]
Notwithstanding
anything contained in section 16 (1) and section 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 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.
(b) The following
supply of goods or services or both—
i. 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
or as an element of a taxable composite or mixed outward
supply;
ii. Membership of a club, health and fitness centre;
iii. Rent-a-cab, life insurance and health insurance
except where
(A) 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; or
(B) Such
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 or as part of a taxable composite or mixed supply; and
iv. Travel benefits
extended to employees on vacation such as leave or home travel concession;
(c) Works contract services when supplied for construction of
an immovable property (other than plant and
machinery) except where it
is an input service for further supply of works contract service;
(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 clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or alterations
or repairs, to the extent of capitalisation, to the said immovable property;
(e) Goods or services or both on which tax has been paid u/s
10 (i.e. under the composition levy);
(f) Goods or
services or both received by a non-resident taxable person except on Goods imported by him;
(g) Goods or
services or both used for personal consumption;
(h) Goods lost,
stolen, destroyed, written off or disposed of by way of gift or free samples;
and
(i) Any tax paid in
accordance with the provisions of sections 74 (Determination
of tax not paid or short paid or erroneously refunded or input tax credit
wrongly availed or utilised by reason of fraud or any wilful misstatement or
suppression of facts.), 129 (Detention, seizure and release of goods and conveyances in
transit.) and 130 (Confiscation of goods or conveyances and levy of penalty.)
Indirect Taxation
Goods and Services Tax
Input Tax Credit
Selected Problems and Solutions
Illustration:
1
M/s X Ltd., manufacturer of textile products, received order from
Government to supply goods to defence (exempted supply). The turnover of the
other taxable goods and exempted goods are Rs 4 crore and Rs 1 crore
respectively. Value of common inputs on which GST paid is Rs 20,000.
Calculate the eligible ITC on common inputs.
Solution: 1
|
Particulars |
|
Rs |
|
Common Credit |
C2 |
20,000 |
|
Aggregate value of exempted goods |
E |
1,00,00,000 |
|
Aggregate value of taxable goods |
|
4,00,00,000 |
|
Total turnover |
F |
5,00,00,000 |
|
Proportion of common credit not allowed |
D1 = C2 × E/F |
4,000 |
|
Net ITC available after reversal |
C2 – D1 |
16,000 |
Assumption:
Entire ITC credited to Electronic Credit Ledger is
Common Credit.
Illustration:
2
Y Ltd. manufactures taxable and
exempted goods. Y Ltd. also simultaneously provides taxable as well as exempted
output services. Raw material 10,000 units were purchased @ Rs 100 per unit
used commonly during the month of January 2018 to produce all final products.
GST paid on inputs 12%. Input services commonly used for all goods and services
in the month of January 2018. Total ITC on inputs and input services taken into
books of account in the relevant tax period is Rs 1, 74,000.
Turnover for the month of January 2018 (excluding all taxes) was as
follows:
|
|
Particulars |
Rs |
|
1 |
Taxable supply of goods |
2,00,000 |
|
2 |
Exempted supply of goods (Rs 80 per unit) |
1,00,000 |
|
3 |
Taxable supply of services |
1,00,000 |
|
4 |
Exempted supply of services |
50,000 |
|
|
Total |
4,50,000 |
You are required to compute the
amount of reversal of input tax credit as per rule 42(1) (i) of the CGST Rules,
2017 of the month of January 2018.
Note: Each unit of exempted final
product needs 2 units of raw materials. Assume that there is no process loss.
Solution: 2
|
Particulars |
|
Rs |
|
Total input tax credit (ITC) on inputs and input
services |
T |
1,74,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for non-business purposes |
T1 |
Nil |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting exempt supplies [(Rs 1,00,000 ÷ 80) × 2 × Rs 100 × 12%] |
T2 |
30,000 |
|
ITC (out of total ITC as in Sl. No. 1) in respect of
inputs on which credit is not available u/s 17(5) |
T3 |
Nil |
|
Total |
T1 + T2 + T3 |
30,000 |
|
ITC credited to Electronic Credit Ledger |
C1 = T – (T1 + T2 + T3) |
1,44,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting taxable supplies (including zero-rated supplies) [{10,000 – (1,00,000 ÷ 80) × 2} × 100 × 12%] |
T4 |
90,000 |
|
Common Credit |
C2 = C1 – T4 |
54,000 |
|
Aggregate value of exempt supplies |
E |
1,50,000 |
|
Total turnover |
F |
4,50,000 |
|
Proportion of common credit not allowed |
D1 = C2 × E/F |
18,000 |
|
Net ITC available after reversal |
C1 – D1 |
1,26,000 |
Illustration:
3
M/s Abhishek Industries Limited has given the following
information pertaining to the month of October, 2022:
|
|
Particulars |
Rs |
|
1 |
Total input tax credit (ITC) on inputs and input
services |
18,00,000 |
|
2 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for non-business purposes |
1,50,000 |
|
3 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting exempt supplies |
6,50,000 |
|
4 |
ITC (out of total ITC as in Sl. No. 1) in respect of
inputs on which credit is not available u/s 17(5) |
50,000 |
|
5 |
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting taxable supplies (including zero-rated supplies) |
5,50,000 |
|
6 |
Total turnover |
1,12,65,000 |
|
7 |
Aggregate value of exempt supplies |
54,16,000 |
a)
State
the quantum of common credit.
b)
State
the amount of ITC to be reversed as per Rule 42.
Solution: 3
Computation of amount common credit and amount of ITC
with respect to the exempt supplies to be reversed for the month of October,
2022
|
Particulars |
|
Rs |
|
Total input tax credit (ITC) on inputs and input
services |
T |
18,00,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for non-business purposes |
T1 |
1,50,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting exempt supplies |
T2 |
6,50,000 |
|
ITC (out of total ITC as in Sl. No. 1) in respect of
inputs on which credit is not available u/s 17(5) |
T3 |
50,000 |
|
Total |
T1 + T2 + T3 |
8,50,000 |
|
ITC credited to Electronic Credit Ledger |
C1 = T – (T1 + T2 + T3) |
9,50,000 |
|
ITC (out of total ITC as in Sl. No. 1) attributable
exclusively for effecting taxable supplies (including zero-rated supplies) |
T4 |
5,50,000 |
|
Common Credit |
C2 = C1 – T4 |
4,00,000 |
|
Aggregate value of exempt supplies |
E |
54,16,000 |
|
Total turnover |
F |
1,12,65,000 |
|
Proportion of common credit not allowed |
D1 = C2 × E/F |
1,92,312 |
|
5% of common credit not allowed |
D2 = C2 × 5% |
20,000 |
|
ITC to be reversed out of common credit |
D1 + D2 |
2,12,312 |
|
Net ITC available after reversal |
C1 – (D1 + D2) |
7,37,688 |
Illustration:
4
P Ltd., a registered
manufacturer of Jaipur, entered into a contract with a supplier for supply of
input ‘Z’ in October, 2022. As per contract it was agreed that 10,000 kgs of
input ‘Z’ will be supplied for Rs 7, 28,000 (inclusive of CGST and SGST @ 6%
each) in lots. Invoice of Rs 7, 28,000 has been issued with supply of first lot
of input ‘Z’. Following further information has been provided regarding supply
of input received in subsequent lots. Briefly explain whether P Ltd. is
eligible to take credit on proportionate basis.
|
Input ‘Z’ (in lots) |
Quantity in kgs |
Date of receipt of supply |
|
First lot |
2,500 |
19-10-2022 |
|
Second lot |
3,000 |
21-10-2022 |
|
Third lot |
1,500 |
12-11-2022 |
|
Fourth lot |
3,000 |
01-12-2022 |
Solution: 4
P Ltd. is not eligible to take credit
on proportionate basis, because as per first proviso to Section 16(2), where
the goods against an invoice are received in lots or instalments, the
registered person shall be entitled to take credit upon receipt of the last lot
or instalment. In the given case input ‘Z’ has been received in lots and hence
the credit of input tax Rs 78,000 [i.e. Rs 7, 28,000 × (12/112)] paid on such
input shall be taken by P Limited only after receipt of the fourth lot i.e. on
01.12.2022.
Illustration:
5
Compute the input tax credit
available with MS Motors Ltd., manufacturer of cars, in respect of the
following services availed GST paid by it in the month of October, 2022:
|
|
Particulars |
Rs |
|
1 |
Accounting and auditing services |
17,200 |
|
2 |
Health insurance services for employees (Services
are not provided under Government obligation) |
6,200 |
|
3 |
Routine maintenance of the cars manufactured by MS
Motors Ltd. |
28,000 |
|
4 |
Repair services for office building (Cost of repairs
is charged to Profit and Loss Account) |
28,400 |
|
5 |
Hotel accommodation and conveyance facility to employees
on vacation |
13,360 |
|
6 |
Testing services availed for car engines |
19,000 |
Solution: 5
Statement showing computation of
total Input Tax Credit available with MS Motors Ltd
|
|
Particulars |
Rs |
|
1 |
Accounting and auditing services |
17,200 |
|
2 |
Health insurance services for employees (Services
are not provided under Government obligation) – Block credit u/s 17(5) |
Nil |
|
3 |
Routine maintenance of the cars manufactured by MS
Motors Ltd. |
28,000 |
|
4 |
Repair services for office building (Cost of repairs
is charged to Profit and Loss Account) |
28,400 |
|
5 |
Hotel accommodation and conveyance facility to
employees on vacation – Block credit u/s 17(5) |
Nil |
|
6 |
Testing services availed for car engines |
19,000 |
|
|
Total input tax credit available |
92,600 |
Illustration:
6
Compute the amount of input
tax credit admissible to Sonam Ltd. in respect of various inputs purchased
during the month of September, 2022.
|
|
Particulars |
GST Paid (Rs) |
|
1 |
Goods purchased without invoice |
75,000 |
|
2 |
Goods purchased from Akhil Ltd. (Full payment is
made by Sonam Ltd. to Akhil Ltd. against such supply but tax has not been
deposited by Akhil Ltd.) |
2,20,000 |
|
3 |
Purchase of goods not to be used for business
purpose |
38,000 |
|
4 |
Purchase of goods from Komal Ltd. (Invoice of Komal
Ltd. is received in the month of September, 2022, but goods were received in
the month of October, 2022.) |
44,000 |
|
5 |
Goods purchased against valid invoice from Vikram
Ltd. in the month of September, 2022, but Sonam Ltd. has made payment to
Vikram Ltd. for such purchase in the month of October, 2022. |
38,000 |
Solution: 6
Statement showing computation of
total Input Tax Credit available with Sonam Ltd. for Sept. 2022
|
|
Particulars |
Rs |
|
1 |
Goods purchased without invoice |
Nil |
|
2 |
Goods purchased from Akhil Ltd. (Full payment is
made by Sonam Ltd. to Akhil Ltd. against such supply but tax has not been
deposited by Akhil Ltd.) |
Nil |
|
3 |
Purchase of goods not to be used for business
purpose |
Nil |
|
4 |
Purchase of goods from Komal Ltd. (Invoice of Komal
Ltd. is received in the month of September, 2022, but goods were received in
the month of October, 2022.) |
Nil |
|
5 |
Goods purchased against valid invoice from Vikram
Ltd. in the month of September, 2022, but Sonam Ltd. has made payment to
Vikram Ltd. for such purchase in the month of October, 2022. |
38,000 |
|
|
Total input tax credit available for September, 2022 |
38,000 |
Illustration:
7
W Ltd., a registered
supplier, is engaged in the manufacture of Tanks. The company provides the
following information pertaining to GST paid on the purchases made and input
services received by it during the month of January, 2023:
|
|
Particulars |
GST Paid (Rs) |
|
1 |
Purchase of machinery where debit note is issued |
2,15,000 |
|
2 |
Input purchased and directly delivered to Mr. X, a
job worker and a registered supplier. |
1,00,000 |
|
3 |
Computers purchased (Depreciation was claimed on the
said GST portion under the Income Tax Act, 1961.) |
5,000 |
|
4 |
Works contract services availed for construction of
Staff Quarters within the company premises |
2,25,000 |
Determine the amount of ITC available
to the company for the month of January, 2023. Subject to the information given
above, all the conditions necessary for availing the ITC have been fulfilled.
Solution: 7
Statement showing computation of ITC
available to W Ltd. for the month of January, 2023
|
|
Particulars |
GST Paid (Rs) |
|
1 |
Purchase of machinery where debit note is issued |
2,15,000 |
|
2 |
Input purchased and directly delivered to Mr. X, a
job worker and a registered supplier. |
1,00,000 |
|
3 |
Computers purchased (Depreciation was claimed on the
said GST portion under the Income Tax Act, 1961.) |
|
|
4 |
Works contract services availed for construction of
Staff Quarters within the company premises [Block credit u/s 17(5)] |
|
|
|
Total ITC available for the month of January, 2023 |
3,15,000 |
Illustration:
8
X Private Ltd., a registered
supplier is engaged in the manufacture of taxable goods. The company provides
the following information of GST paid on the purchases made and input services
availed by it during the month of September, 2022:
|
|
Particulars |
GST Paid (Rs) |
|
1 |
Purchase of cab used for the transportation of its
employees |
1,00,000 |
|
2 |
Inputs consisting of four lots, out of which second
lot was received during the month |
2,25,000 |
|
3 |
Capital goods (out of three items, invoice for one
item was missing and GST paid on that item was Rs 50,000) |
2,50,000 |
|
4 |
Outdoor catering service availed on Women’s Day |
72,000 |
Determine the amount of ITC available
with M/s X Private Ltd. for the month of September, 2022. Subject to the
information given above, all the conditions necessary for availing the ITC have
been fulfilled.
Solution: 8
Statement showing computation of ITC
available to M/s X Private Ltd. for the month of Sept., 2022
|
|
Particulars |
GST Paid (Rs) |
|
1 |
Purchase of cab used for the transportation of its
employees [Block credit u/s 17(5)] |
Nil |
|
2 |
Inputs consisting of four lots, out of which second
lot was received during the month [Available on receipt of the last lot] |
Nil |
|
3 |
Capital goods (out of three items, invoice for one
item was missing and GST paid on that item was Rs 50,000) [Invoice pertaining
to GST payment of Rs 50,000 is not available] |
2,00,000 |
|
4 |
Outdoor catering service availed on Women’s Day [Block
credit u/s 17(5)] |
Nil |
|
|
Total ITC available for the month of Sept., 2022 |
2,00,000 |
Illustration:
9
JD Private Ltd. purchased machinery
worth Rs 10, 00,000 (excluding GST) on 20-07-2022 on which it paid GST @ 18%
and availed the ITC. On 05-03-2023, it sold the machinery for Rs 8, 00,000
(excluding GST) to PB Ltd. Output GST rate is also 18%. What will be the course
of action for JD Private Ltd. to follow under the CGST Act, 2017?
Solution: 9
Where capital goods or plant and
machinery on which input tax credit has been taken are supplied outward by a
registered person, he must pay an amount that is higher of the following two:
a) ITC taken on such goods reduced by 5%
per quarter of a year or part thereof from the date of issue of invoice for
such goods; or
b) Tax on transaction value.
Accordingly, the amount of output GST
payable on supply of machinery by JD Private Ltd. shall be computed as follows:
|
Particulars |
Rs |
|
ITC taken on acquisition of the
machine [Rs 10,00,000 × 18%] |
1,80,000 |
|
Time gap in terms of quarters
between the date of purchase and outward supply of the machine |
3 quarters |
|
Amount of output GST to be paid [higher
of the following two]: |
|
|
a) ITC taken on the machine reduced
by 5% × 3 i.e. 15% [Rs 1, 80,000 × (1 – 15%)] |
1,53,000 |
|
b) Output GST on transaction value
[Rs 8,00,000 × 18%] |
1,44,000 |
|
\ Net Output GST Liability on sale of the machine = |
1,53,000 |
Illustration:
10
M/s VMA, a registered
taxable person under regular scheme provides the following information in
respect of supplies made by it during the month of April, 2022:
|
|
Particulars |
Rs |
|
|
Outward supplies made by M/s VMA: |
|
|
1 |
Inter-State supply of goods |
2,00,000 |
|
2 |
Intra-State supply of 1,000 packets of detergent @
Rs 400 each along with a plastic bucket worth Rs 100 each given free of cost
with each packet, being a mixed supply. (Rate of GST on detergent is 18% and
on plastic bucket is 28%) |
4,00,000 |
|
3 |
Supply of online educational journals to M/s PB
Education, a private coaching centre providing tuitions to students of Class
X–XII, being Intra-State supply |
1,00,000 |
|
|
M/s VMA has also received the following inward supplies: |
|
|
4 |
Inter-State supply of goods (out of which invoice
for goods worth Rs 40,000 is missing and no other tax-paying document is
available) |
1,40,000 |
|
5 |
Repairing of bus with seating capacity of 20
passengers used to transport its employees from their residences, being
Intra-State supply |
1,00,000 |
|
|
Details of opening balances of ITC as on 1-4-2022 are as follows: |
|
|
|
CGST |
10,000 |
|
|
SGST |
10,000 |
|
|
IGST |
80,000 |
Following additional information is
provided:
a) Rate of GST in respect of all inward
and outward supplies except item (2) above is 18%, i.e. CGST 9%, SGST 9% and
IGST 18%.
b) All figures mentioned above are
exclusive of GST.
c)
All the conditions for availing the ITC have been
fulfilled except specifically given and M/s VMA are not eligible for any
threshold exemptions.
Compute the minimum net GST payable
in cash by M/s VMA for the month of April, 2022.
Click here for Solution: 10 in PDF
No comments:
Post a Comment