INPUT TAX CREDIT

CHAPTER V*THE CENTRAL/STATE GOODS & SERVICE TAX 2016

- SAYEE PREM. K

*Revised Model GST LAW

GSTSingle Tax RegimeTo Digitize Indirect Tax system

Eliminate Cascading Effect (Tax on Tax)

It is Destination / Consumption Based Taxation

Supply of Goods/Services

ITC

IGST

CGSTSGST

COMPONENTS OF ITC

HOW TO CLAIM ITC?

Registered taxable person shall claim

Input Tax Credit available in

Electronic Credit Ledger

ITC is available on Inputs, Capital Goods and Services that are used or intended to be used in the business

CLAIM ITC

Year 1 – 1/3rd of ITC

Year 2 – 1/3rd of ITCYear 3 – 1/3rd of ITC

PIPELINES & TELECOM TOWER #

*Thus for Capital goods other than the above ITC on Capital Goods utilized in ONE instalment.

# Telecommunication Tower fixed to earth by foundation or structural support including foundation and structural support

Tax Invoice or Debit Note issued by a “Registered Supplier”

Received the Goods #

Tax Paid or ITC Utilized in E-Ledger A/C

Filed return U/S 34

CONDITIONS TO CLAIM ITC:

#Received the Goods means

Goods are delivered by the supplier

To a recipient or

If recipient before or during moment of goods

Directs to deliver to Agent or otherwise either by way of transfer of documents of title to goods or otherwise

Goods/ Services are received in various lot/instalments?

What if?

ITC is available only on receipt of the final lot or instalment.

Recipient of ServiceSupplier of Service

ISSUES INVOICE

INVOICE

MAKES PAYMENT ON VALUE OF INVOICE

If,

3 MONTHS

INVOICE DATE

Payment on such supply of service

Exceeds

Recipient of Service

ITC + Interest

ITC availed by

BECOMES LIABILITY

LIABLE TO PAY

Validity of invoices to Claim ITC

INVOICE

F.Y.2017-18

Return Filed U/S 34Sep 2018

Annual Return

Whichever is Earlier

ITC Not Allowed

Cost of Capital Goods Rs.5,00,000

ITC on CG @ 5% Rs. 25,000

Asset Value Income Tax Rs.5,25,000

Depreciation @ 10% Rs. 52,500

Depreciation on Capital Goods in INCOME TAX

Case AConsumption of Inputs, Capital

Goods

Business PurposesOther Purposes

ITC AVAILABLE ONLY ON CONSUMPTION OF INPUTS,CG FOR BUSINESS PURPOSES

Case BConsumption of Inputs,

Capital Goods

Taxable SupplyExempted Supply

Includes ZERO RATED SUPPLYIncludes Supply charged on Reverse Charge Basis

ITC AVAILABLE ONLY ON CONSUMPTION OF INPUTS,CG FOR TAXABLE SUPPLY

Supplying Services by way of

Accepting Deposits

Extending Loans & Advances

CASE-B Consumption of Inputs, Capital Goods

Taxable SupplyExempted Supply

AVAIL 50% of *ELIGIBLE ITC EVERY

MONTH

Banks/Financial Institutions including NBFCs

OR

*ELIGIBLE ITC: ITC ON INPUTS, CG and SERVICES IN A MONTH

INELIGIBLE ITC1) TAX PAID U/S 9 (Composition Levy)2) Personal Consumption3) Goods

o LOST, o STOLEN, o DESTROYED,o Written Offo Disposed of by way of Gift or Free Samples

4) Any Tax Paid U/S 67, 89 or 905) Works Contract Services when supplied for construction

of Immovable Property (except P&M), where it is an input for further supply of Works Contract Services.

INELIGIBLE ITC Cont.,

i.e., ITC is ALLOWED If Motor Vehicles are used in above Taxable Supplies

Transportation of Goods

Further Supply of such Vehicle

or Conveyances

Transport of Passengers

Imparting on Driving, Flying,

Navigating such vehicles

or conveyances

6) ITC ineligible on Motor Vehicles and Other Conveyances Except

INELIGIBLE ITC Cont.,7) a) ITC is ineligible on Supply of Goods & Services on

Food & Beverages Outdoor Catering Beauty Treatment Health Services Cosmetic & Plastic Surgery

Inward Supply of

FOODOutward

Supply of FOOD

ITC is ELIGIBLE

“ITC is eligible on above if inputs used are for making outputs of same category”

INELIGIBLE ITC Cont.,7) b) ITC is ineligible on Supply of Goods & Services on

Membership ofi. A Clubii. Health & Fitness Centre

7) c) ITC is ineligible on Supply of Goods & Services on

Rent-A-Cab Life Insurance Health Insurance

In 7.c) ITC is eligible, if Govt. notifies the services which are obligatory for an employer to provide

to its employees

8) Goods or Services received by Taxable Person for CONSTRUCTION of an Immovable

Property(except PLANT & MACHINERY)

Even when used in course or furtherance of business

on his own account

Re-construction Renovation Additions Alterations Repairs

Includes Apparatus, Equipment, Machinery, Pipelines, Telecom Tower

Excludes Land, Building or any other Civil

Structures

INELIGIBLE ITC Cont.,

PLANT & MACHINERYCONSTRUCTION

SCENARIO 1BECOMES LIABLE TO REGISTER

APPLIES FOR REGISTRATION

HE IS GRANTED SUCH REGISTRATION

LIABLE TO PAY TAX

He is eligible to claim ITC on

The Inputs held as Stock, The Inputs contained in Semi Finished/ Finished Goods in Stock

W.E.F 1ST JULY 2017HELD AS ON 30TH JUNE 2017

MR. X

SCENARIO 2APPLIES FOR REGISTRATION

HE IS GRANTED SUCH REGISTRATION

REGISTRATION IS GRANTED

He is eligible to claim ITC on

The Inputs held as Stock, The Inputs contained in Semi Finished/ Finished Goods in Stock

W.E.F 1ST JULY 2017HELD AS ON 30TH JUNE 2017

U/S 23 (3) (VOLUNTARY REGISTRATION)

MR. X

SCENARIO 3CEASES TO PAY

HE WILL BECOME LIABLE TO PAY TAX

LIABLE TO PAY TAX

He is eligible to claim ITC on

The Inputs held as Stock, The Inputs contained in Semi Finished/Finished Goods in Stock

W.E.F 1ST JULY 2017 HELD AS ON 30TH JUNE 2017

U/S 9 (COMPOSITION LEVY)

U/S 8 (CGST/SGST LEVY & COLLECTION)

Capital Goods (Reduced by % points)

MR. X

SCENARIO 4DEALING IN EXEMPTED GOODS

BECOMES TAXABLES GOODS

He is eligible to claim ITC on The Inputs held as Stock,

The Inputs contained in Semi Finished,Finished Goods in Stock (Relatable to such Exempt Supply)

W.E.F 1ST JULY 2017 HELD AS ON 30TH JUNE 2017

TURNS TO TAXABLE GOODS

Capital Goods (Used for Such Exempt Supply)(&)(Reduced by % points)

MR. X

CRITERIA

ITC – Not Allowed

If Tax Invoices dated OLDER than 1Year

In above 4 Scenarios

SCENARIO 5

TRANSFER OF THE BUSINESSWith a specific provision for transfer of Liabilities

RTP- A RTP- BUNUTILIZED ITC RTP-B Shall Transfer unutilized ITC to RTP-A

In Course of, SALE MERGER / DEMERGER AMALAGAMATION

LEASE

SCENARIO 6

The Inputs held as Stock,

The Inputs contained in Semi Finished/

Finished Goods in Stock

W.E.F 1ST JULY 2017

HELD AS ON 30TH JUNE 2017

WISHES TO OPT & PAY TAX U/S 9 (COMPOSITION SCHEME)

Capital Goods (Reduced by % points)

Mr. X is a REGISTERED TAXABLE PERSON

All Goods/ Services becomes EXEMPT U/S 11At this juncture,

=ITC

SCENARIO 7Disposes Capital Goods or Plant & MachineryMr. X had utilized ITC on such Goods earlier

RTP-Mr. X

o Refractory Bricks,

=ITC on Capital Goods(reduced by the % points)

The Tax on the Transaction Value U/S 15 (1)

OR

Whichever is highero Moulds & Dies,o Jigs & Fixtures

are supplied as scrap Mr. X may pay Tax on the Transaction Value U/S 15 (1)

Note: If

ITC ON INPUTS SENT FOR JOB WORK

Inputs/Capital Goods

Principal U/S 55

Principal’s “Place of Business”

JOB WORKER

Directly

TIME LIMITS: INPUTS SENT FOR JOB WORK

3 Years

The Time Limits of 1 year or 3 year shall not be applied in case of Moulds, Dies, Jigs and fixture, or Tools sent out to job worker for job work.

Inputs

Capital Goods

1 Year

DATE OF DEEMED SUPPLY

Inputs/ Capital Goods

DirectlyDate for deemed supply: Job Worker receives Inputs/ Capital

GoodsPrincipal's "Place of Business"Date for deemed supply:

Inputs/ Capital Goods sent out from Place of Business

Principal referred u/s 55 shall take ITC on Inputs/ Capital Goods sent to Job Worker provided within Time Limits the job worker supplies back to Principal’s Place of business else it is deemed as Supply of Input/ Capital goods in the hands of Principal. Date for such Deemed Supply is as below

Input Service Distributor - ISD

Definition U/S 2(54): ISD means an office of the supplier of goods and / or services which receives tax invoices issued u/s 28 towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN as that of the office referred to above

ISD Issues Document

Document contains Amount of ITC

RECIPIENT OF CREDIT

-CGST

CGST

CGST IGST

Location: Different states/ Interstate

DISTRIBUTION OF ITC BY ISD U/S 21

IGST

IGST CGST

SGST

SGST

-SGSTIGST

-CGST

-CGST

CGST

CGST

IGST

Location: Same state / IntrastateDISTRIBUTION OF ITC BY ISD U/S 21 CONT.,

SGST IGST

SGST -SGST

&

&

CONDITIONS TO DISTRIBUTE ITC BY ISDPrescribed Document containing Prescribed DetailsAmount of credited distributed SHALL NOT EXCEED Amount of credit available for distribution Recipient should be Operational in that period

CONDITIONS TO DISTRIBUTE ITC BY ISD CONT.,

CONDITIONS TO DISTRIBUTE ITC BY ISD CONT.,

Relevant Period means

F.Y.2017-18 F.Y.2018-19

October 2018 II Quarter F.Y.2018-19

F.Y.2017-18F.Y.2018-19

NO Turnover

Credit Distributed Year

Credit Distributed Month

RELEVANT PERIOD

RELEVANT PERIOD

Credit Distributed Year

CASE 1: Recipient of Credit having Turnover during F.Y.2017-18

CASE 2: Recipient of Credit NOT having Turnover during F.Y.2017-18

Recovery & Manner of Recovery

ITC Wrongly ClaimedRecovered from Registered Taxable PersonAs per Provisions of the Act

If ISD fails to comply provisions U/S 21 (Distribution of ITC by ISD) Distributes EXCESS credit to one or more recipients of credit, Same shall be recovered from such recipient Along with Interest And Provisions of Demand or Recovery U/S 66 or 67 respectively shall apply

Thank You