© Economic Laws Practice 2017© Economic Laws Practice 2017
Agenda
I. Input tax credit framework under the GST regime
II. Transitional provisions concerning Input tax credit
III. Documentation
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ITC framework under the GST
regime
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Sr. No. Concept Section under the CGST Act
Draft Rule
1 Scope and conditions for availment of ITC 16(1), (2) 1, 2
2 Non-eligibility of credit to the extent of depreciation claimed under IT Act
16(3)
3 Time limit for availment of credit 16(4)
4 Availment and reversal of credit for goods and services used for taxable as well as exempted supplies
17(1), (2), (3) 7, 8
5 Special provisions for banking and financial services sector 17(4) 3
6 Blocked credits 17(5)
7 Availment of credit in special circumstances (such as upon obtaining registration, composition, etc.)
18(1), (2), (4), (5) 5, 9
8 Credit upon change in constitution of business 18(3) 6
9 Supply of CG and P&M on which credit is availed 18(6)
10 Credit in respect of goods sent for job work 19 10
11 Distribution of credit by ISD and conditions for the same 20, 21 4
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Input Tax Credit and Input Tax
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Tax paid on Reverse Charge basis on specified category of supplies under
CGST
IGST
SGST
UTGST
Tax paid on Reverse Charge basis w.r.t supplies made by unregistered supplier
CGST
IGST
SGST
UTGST
2 (63) Input Tax means CGST, SGST, IGST or UTGST charged on any supply and includes -
IGST charged on imports
2(62) Input Tax Credit means the credit of Input Tax
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Input
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Rule 2(k) of CENVAT Rules Section 2(59) of the CGST Act
All goods used in the factory…, for providing output service…, except:(A) light diesel oil, high speed diesel oil and motor
spirit, commonly known as petrol…(B) Any goods used for construction… … building or
laying of foundation or making of structures for support of capital goods……
… …
Any goods except capital goods used or intended to be used by a supplier in the course or furtherance of business
Analysis•The concept of use within factory abolished• Wider nexus to cover any thing used in the course or furtherance of business•The definition not only covers goods ‘used’ but also goods ‘intended to be used’•Goods used for warranty, generation of electricity for captive use may continue to be Inputs despite omission of specific inclusion clause for the same•Disputes on ‘in relation to manufacture’ will be a story of the past once GST is ushered in(Maruti Suzuki Limited vs. CCE [2009 (24) ELT 641 (SC)])• Some of the exclusions omitted from definition still persist due to blocked credits listed under Section 17(5)
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Input Service
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Rule 2(l) of CENVAT Rules Section 2(60) of the CGST Act
Any service,-(i) used by a provider of taxable service for providing an output service; or(ii) used by a manufacturer, directly or indirectly, in or in relation to the manufacture… and clearance of final products upto the place of removalAnd includes… …But excludes… …
Any service used or intended to be used by a supplier in the course or furtherance of business.
Analysis• Widened scope due to inclusion of all services used in the course or furtherance of business• The concept of use of services ‘up to the place of removal’ abolished• No specific inclusion clause under the GST reducing possibility of litigation as regards inclusive vs. exhaustive scope of services, interpretation of inclusive part, etc. faced under current regime (Coca cola India Pvt. Ltd. Vs. CCE [2009 (15) STR 657 (Bom)])• Although various exclusions omitted, the credit restrictions persist due to blocked credits as per Section 17(5)
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Capital Goods
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Rule2 (a) of CENVAT Rules Section 2(19) of the CGST Act
All goods falling under Chapter 82, 84, 85… … used(1) In the factory of manufacture… …(1A) Outside the factory for generation
of electricity for captive use (2) For providing output service… …
Goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business
Analysis• Tariff classification based definition dropped• Parity between books of accounts and treatment under the CGST Act• The concept of receiving Capital goods ‘in the factory’ no more applies•Intention at the time of receipt of capital goods {Spenta international ltd. Vs. CCE, Thane [2007 (216) E.L.T. 133 (Tri. - LB)]}•Rule 6 (4) of CENVAT Credit Rules, 2004• The condition of receipt of goods still continues [Section 16(2)]•The concept of bifurcation of goods credit into Inputs and Capital goods continues
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Eligibil i ty and conditions for
taking input tax credit
S. 16(1) 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.
Analysis
•Registration a pre-requisite for availment of credit(Imagination Technologies India P. Ltd. Vs. Commr. of C. Ex., Pune-III [2011 (023) STR 0661 Tri.-Bom], Well Known Polyesters Ltd. Vs. Commissioner of C. Ex., Vapi [2012 (025) STR 0411 Tri.-Ahmd.])• Uniform criteria for availment of credit on Inputs, Input services and Capital goods• Credit availment through electronic credit ledger
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Conditions for Availing Credit [S. 16(2)]
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Possession of Tax Invoice or Debit Note or other documents
(such as BOE, document issued by ISD, etc. as per Rule 1)
Receipt of goods or services or both
Tax has been actually paid to the Government
Return has been furnished
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Important to examine
Taxable supplies only
Definitions under GST
Inputs, input services and
capital goods?
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Conditions – payment by supplier
Credit eligible only after payment of tax by supplier
Practical difficulties
Validity of granting credit only after payment by other person upheld by theBombay High Court in Mahalaxmi Cotton Ginning Pressing and Oil Industries vs.State of Maharashtra [2012 (051) VST 0001 BOM] Similar view adopted by various High Courts
Against the long established concepts under the CENVAT and erstwhile MODVATregime that credit is an inherent right and is indefeasible Collector of Central Excise vs. Dai Ichi Karkaria Ltd. [1999 (112) ELT 353 (SC)] Eicher Motors Ltd. vs. Union of India [1999 (106) ELT 3(SC)]
Latin maxim - Nemo punitur pro alieno delicto (no one is punished for the crime ofanother)
Onerous condition can be read down Bhavya Apparels Pvt. Ltd. vs. Union of India [2007 (SC3) GJX 0858 SC]
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Conditions – receipt of goods or
services both
Explanation I to Section 12(1) and 13(1) of the CGST Act
Supply deemed to have been made to the extent it is covered by invoice or payment
Receipt of goods or services vs. Supply deemed to have been made
While time of supply arises upon receipt of advance, credit eligibility crystallisedonly upon receipt of goods or services
While liability to pay tax arises in April 2017, whether credit will be eligible inApril or in June
Will it result into credit mismatch?
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Example
Date of booking order 25 April 2017
Date of payment / receipt of advance/ date of invoice 27 April 2017
Date of dispatch of goods 29 April 2017
Date of receipt of goods 1 June 2017
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Other provisions
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Goods received in lots – credit eligible upon receipt of last lot
Credit not eligible for amount claimed as depreciation under S. 32 of IT Act
Credit to be reversed with interest if value + tax of goods / services not paid within 180 days (transactions liable for reversal to be specified in next monthly FORM GSTR -2 immediately following 180 days) – re-availment of credit after payment
Credit of a particular FY can be availed by 20 October of next FY or filing of annual return, whichever is earlier
Analysis
• Concept of reversal of credit for non-payment of consideration and tax extended to goods• Interest liability at the time of reversal• Disputes in respect of retention money, amounts not paid due to commercial disputes• Whether part credit permitted on part payment? Whether there will be a mismatch issue?
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APPORTIONMENT OF CREDIT
AND BLOCKED CREDITS
Section 17 read with Rule 7, 8
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Blocked credits [S. 17(5)]
Various exclusions to the definition of Input, Input service and Capitalgoods as per the CENVAT Rules introduced as blocked credits
List of blocked credits (discussed in detail in ensuing slides)
Sr. No. Particulars
1 Motor vehicles and conveyances except where used for supply of specified services
2 Services such as beauty treatment, club membership, rent-a-cab
3 Works contract services used for provision of services other than the said service
4 Goods and services used for construction of an immovable property on own account
5 Supplies on which tax is paid under composition scheme
6 Goods and services received by non-resident person except imports
7 Goods lost, stolen, destroyed, free samples
8 Goods and services used for personal consumption
9 Tax paid as per S. 74, 129, 130
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Motor vehicles and conveyances[S. 17(5)(a)]
Credit restriction in respect of motor vehicles continue
Credit not eligible on“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;”
The restriction under the existing definition of Capital goods reframed
Credit on motor vehicles eligible when used for transportation of goods,whether or not designed for such purpose - Restriction in current regime
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Specified services (club
membership, insurance, etc.) [S. 17(5)(b)]
Sr. No.
Services not eligible for credit Exception where credit eligible
1 Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery
Where used 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 supply
2 Membership of a club, health and fitness centre
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3 Rent-a-cab, life insurance and health insurance
(A) Services notified by the Government to be obligatory for an employer to provide to its employees under any law
(B) Where used 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 supply
4 Travel benefits extended to employees on vacation such as leave or home travel concession
-
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Works contract services [S. 17(5)(c)]
Similar to current Service tax regime, credit of works contractservices eligible only where it is input service for further supply ofsaid service
Impact
Persons eligible for credit Persons not eligible for credit
Developer engaged in sale of underconstruction properties
Developers operating under lease model
Civil contractors Business procuring such services
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Goods and services used for
construction... [S. 17(5)(d)]
Credit not eligible on :
“Goods or services or both received by a taxable person for construction ofan immovable property (other than plant or machinery) on his ownaccount including when such goods or services or both are used in thecourse or furtherance of business”
Credit restriction attracted where construction undertaken ‘on his ownaccount’
Developers, contractors, etc. undertaking construction for others eligiblefor credit – credit of various construction related goods such as cement,steel, etc. used before receipt of OC not eligible under the current regimenow eligible Need to see valuation provisions and corresponding credit restrictions
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...Goods and services used for
construction [S. 17(5)(d)]
Specific exclusions from scope of P&M Land, building or any other civil structures Telecommunication towers
Bharti Airtel Ltd. Vs .CCE [2014 (35) STR 865 (Bom.)] Pipelines laid outside the factory premises
Extension of pipelines outside the factory CCE vs. Pepsico India Holdings Limited [2001 (130) ELT 193 (Tri.-
Chennai)]
Plant and machinery excluded from scope of such credit restriction– probably to cover plant and machineries attached / embedded toearth The definition of ‘Goods’ covers only movable property within its scope ‘Capital goods’ defined to mean goods capitalised in books of accounts Observations of the LB in Vandana Global Limited vs. CCE [2010 (253) ELT 440
(Tri.- LB) – Capital goods have to be goods first Disputes may continue
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Others [S. 17(5)(e) to 17(5)( i)]
Goods or services or both on which tax has been paid under thecomposition scheme
Goods or services or both received by a non-resident taxableperson except on goods imported by him
Goods or services or both used for personal consumption
Goods lost, stolen, destroyed, written off or disposed of by way ofgift or free samples
Any tax paid in accordance with the provisions of sections 74, 129and 130 Tax short / not paid or erroneously refunded due to fraud, etc.
Amount paid for release of goods and conveyances in transit which aredetained
Fine paid in lieu of confiscation
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Apportionment of Credits
Goods or
Services or
both
• Partly business and partly for
other purpose
• Partly for taxable supplies
(incl. Zero rated supplies) and
partly for exempt supplies
• Only as is attributable to the
purpose of business [S. 17(1)]
• Only as is attributable to the
said taxable supplies (incl. zero
rated supplies) [S. 17(2)]
Purpose Credit available
Value of exempt supplies shall be as may be prescribed and shall include supplies on which recipient is liable to pay tax on Reverse Charge Mechanism,
transaction in securities, sale of land, sale of building post CC.
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Reversal of ITC on Inputs and Input
services . . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 o f I T C
R u l e s ]
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Particulars Amount
Total Input Tax on Inputs and Input services T
Less: Input Tax on Input and Input services intended to be used
exclusively for purpose other than business(T1)
Less: Input Tax on Input and Input Services intended to be used
exclusively for effecting exempt supplies(T2)
Less: Input Tax on Inputs on which credit is not available u/s 17(5) (T3)
Input Tax Credit credited to the Electronic Credit Ledger C1
Less: Input Tax attributable to inputs and input services used exclusively
or in relation to business( Incl. zero rated supplies)(T4)
Common Credit C2
Step 1: Ascertain the common credit in respect of Inputs and Input services used for taxable as well as exempt supplies:
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. . .Reversal of ITC on Inputs and
Input services. . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 o f
I T C R u l e s ]
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Step 2: Amount of ITC attributable to exempted supplies (D1) shall be calculated as follows:
D1 = (E/F)*C2
Where,
E is the aggregate of exempt supplies i.e. all supplies other than taxable and zero rated supplies during the tax period, andF is the total turnover of the registered person during the tax period
Value of exempt supplies include:(i) Supplies on which tax payable on reverse charge basis(ii) Value of land and building as adopted for the purpose of payment of Stamp
duty(iii) 1% of the sale of security as the value of securities
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. . . Reversal of ITC on Inputs and
Input services. . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 o f
I T C R u l e s ]
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T1, T2, T3 and T4 shall be determined and declared by the registered person at the invoice level in FORM GSTR - 2D1 and D2 to be added to the output tax liabilityC3 to be computed separately for CGST, SGST, IGST and UTGST
Step 3: If common Inputs and Input services are used partly for business and partly for non-business purpose, then compute the amount of credit attributable to non-business purpose (D2) as under:
D2 = C2* 5%
Step 4: ITC attributable to business purpose and taxable supplies to be computed as under:
(C3) = C2 – (D1 + D2)
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. . . Reversal of ITC on Inputs and
Input services. . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 o f
I T C R u l e s ]
Year end adjustments
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Compute final ITC for the FY
before filing the return for the
month of September
following the FY
D1 +D2 > ∑(D1+D2)Add excess to Output Tax Liability + Interest
(Sept)
D1 +D2 < ∑(D1+D2)Claim excess as credit
(Sept)
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Reversal of ITC on Capital
Goods. . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 8 o f I T C R u l e s ]
Unlike the current CENVAT Rules, the GST regime stipulates reversalof credit for Capital goods partly used for non-business purpose /exempt supplies
Exempted turnover for computation of reversal
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Includes Excludes
(i) Supplies on which tax payable on reverse charge basis
(ii) Value of land and building as adopted for the purpose of payment of Stamp duty
(iii) 1% of the sale of security as the value of securities
(i) Excise duty levied under Entry 84 of List I
(ii) State Excise duty levied under Entry 51 of List II
(iii) Sales tax levied under Entry 54 of List II
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…Reversal of ITC on Capital
Goods. . . [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 8 o f I T C R u l e s ]
Sr. No. Particulars Amount
1 Credit on CG used or intended to be used exclusively for non-business purposes or exclusively exempt supplies [a]
Not eligible
2 Credit on CG used or intended to be used exclusively for effecting taxable supplies including zero rated supplies [b] (Also to be indicated in FORM GSTR – 2)
Fully eligible
3 Total credit on CG less: (a+b) [A] credited to electronic credit ledger
Where CG covered in [a] or [b] is subsequently covered here, derive value of A by reducing ITC at the rate of 5% for every quarter or part thereof
Tc
4 Amount of common CG credit attributable to a tax period Tm= Tc / 60
5 ITC at a beginning of tax period for all CG whose residual life remains in the tax period
Tr= ∑ (Tm) for such goods
6 Common credit attributed towards exempted supplies (computed separately for CGST, SGST, IGST, UTGST)
E = aggregate value of exempted supplies (computed as discussed above)F = total turnover during the tax period
Te= (E/F)*Tr
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Te payable with applicable interest – no clarity over ‘applicable interest’ reference
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Special provisions for banking and FS
sector [S. 17(4)]
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Supply made
A Bank (Mumbai) A Bank (Bangalore)
SIMILAR PAN
Banking companies or a financial institution including an NBFC shall exercise one of the following options during a financial year:
Option A:
Avail credit and undertake reversal as per general provisions
Option B:
Avail 50% of eligible ITC for Inputs, Input services and CG used for business
purpose (excluding blocked ITC)*
*Restriction of 50% shall not apply on following transactions between registered persons
FORM GSTR 2
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AVAILMENT OF CREDIT IN
SPECIAL CIRCUMSTANCES
Section 18 read with Rule 5, 6, 9
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Availment of credit in special
circumstances... [S. 18(1) and (2) r .w Rule 5 of ITC
Rules]
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Event enabling availing of Credit
Not liable for registration + Has
been granted registration (Voluntary
registration)
Pays Tax under Composition Levy
under GST;
Subsequently, opts to pay tax u/s 9
Person is liable for registration under GST + Has applied
for registration within 30 days +
Has been granted registration
Exempt supplies made by a
registered person becomes Taxable
Entitled to claim credit on:• Inputs held in stock• Inputs contained in semi-finished goods• Finished goods in stock
Entitled to claim credit on:• Inputs held in stock• Inputs contained in semi-finished goods• Finished goods in stock• Capital goods ( - 5% per quarter from
date of invoice)
Credit eligible only within 1 year from date of invoice
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…Availment of credit in special
circumstances... [S. 18(1) and (2) r .w Rule 5 of ITC
Rules]
Conditions for availment of such credits
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Sr. No. Condition
1 Filing of electronic declaration in Form GST ITC-01 within 30 days from becoming eligible to avail credit
2 Declaration to specify details of Inputs in stock / Capital goods on the day immediately preceding the day on which credit becomes eligible
3 Details as per 2 above to be certified by a CA or Cost Accountant if aggregate claim of CGST, SGST, IGST credit exceeds Rs. 2 lacs
4 Credit availed pursuant to opting out of composition or goods supplies becoming taxable eligible subject to matching of credits with details furnished by the supplier in FORM GSTR – 1 or FORM GSTR – 4 as the case may be
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... Availment of credit in special
circumstances – issues [S. 18(2)]
Time limit for availment of credit in special circumstances
Does the general time limit as per S. 16(4) also applies to a personavailing credit under S. 18(1)?
Curtailment of credit eligibility
For example, a person obtaining registration in the month of Oct. 2018, wouldbe eligible to avail credit only for invoices pertaining to April to Sept. 2018
Credit pertaining to Oct. 2017 To March 2018 not eligible despite within 1year limitation period
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Specific provisions of S. 18(2) General provisions of S. 16(4)
No credit eligible after expiry of 1 year from the date of invoice
Credit not eligible after due date of furnishing return for Sept. following the FY to which the invoice pertains
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Reversal of credit in certain
circumstances... [S. 18(4), (6) r .w Rule 9 of ITC Rules]
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Sr. No. Scenario Credit reversal
1 A registered person who has availed ITC opts to pay tax under composition
Pay amount equal to:(i) Credit on Inputs held in stock(ii) Credit of Inputs contained in semi-finished / finished goods
stock(iii) Credit on Capital goods ( - 5% per quarter)The balance of ITC after such reversal /payment shall lapse [S. 18(4)]
2 Where supplies of a registered person become fully exempt
3 Where registration is cancelled
Pay amount equal to :(i) Credit on Inputs held in stock(ii) Credit of Inputs contained in semi-finished / finished good stock(iii) Credit on Capital goods or P&M (- 5% per quarter)Or output tax payable on such goods, whichever is higher [S. 29(5)]
4 Supply of CG or P&M on which ITC has been taken (except specified goods)
Pay amount equal to higher of the following:(i) Credit on Capital goods or P&M (- 5% per quarter)(ii) Transaction value [S. 18(6)]
5 Supply of refractory bricks, moulds, dies jigs, fixtures
Pay amount equal to tax on transaction value [Proviso to S. 18(6)]
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Reversal of credit in certain
circumstances... [S. 18 r .w Rule 9 of ITC Rules]
Manner of computing credit to be reversed:
Compliances Details of amount of credit reversal to be furnished in Form GST ITC-03 where
reversal is under S. 18/ Form GSTR 10 where reversal is under S. 29(5)
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Scenario Credit reversal
Credit of Inputs (i) Credit calculated proportionately on the basis of corresponding invoices on which credit had been availed
(ii) Where tax invoices are not available, estimate the credit reversal based on estimate of market price of goods on the date on which reversal liability has arisen
CG Input tax credit involved in the remaining residual life in months to be computed on pro-rata basisExample: If CG are used for 4 years, reversal to be made would be [credit*4/5]; viz., at the rate of 5% per quarter
(i) Credit reversal / payment even if goods were exempt when purchased but taxable when registration cancelled, composition opted, etc.
(ii) Separate credit reversal for CGST, IGST , SGST, UTGST
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Credit upon change in constitution of
business [S. 18(3) r .w Rule 6 of ITC Rules]
ITC permitted to be transferred upon change in constitution of a personon account of sale, merger, amalgamation, lease or transfer of businesswith transfer of liabilities
In case of demerger, ITC to be apportioned in the ratio of value of assetsof new unit as per the demerger scheme
The inputs and capital goods transferred shall be duly accounted for bythe transferee in his books of accounts
Procedure
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Furnish details of change in constitution in FORM GSTR ITC-02 along with request to transfer ITC
Submit a copy of certificate issued by CA or Cost Accountant certifying that the change in constitution has
been done with the specific provisions for transfer of liabilities
Transferee shall accept the details so furnished by the transferor on the Common
Portal
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Credit distributed as [S. 19 r .w. Rule 4 of ITC
Rules]
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ISDSame PAN
RecipientSame PAN
State A State A
IGST
CGST
SGST
IGST
CGST
SGST
ISDSame PAN
RecipientSame PAN
State A State B
IGST
CGST
SGST
IGST
IGST
IGST
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Manner of distribution of credit [S. 19 r .w. Rule 4 of ITC Rules]
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Credit in hands of ISD in a month
Pertaining to one recipient
Pertaining to more than one recipients
Pertaining to all recipients
Distribute to the respective recipient
Distribution on pro-rata basis on turnover of such units in a
State or UT to aggregate turnover of all recipients to
whom such credit is attributable and which are
operational during the current year
Distribution on pro-rata basis on turnover of such unit in a
State or UT to aggregate turnover of all recipients and which are operational during
the current year
• Turnover of previous FY to be considered, turnover of previous quarter to be considered in case some or all recipients do not have turnover in previous FY
• Turnover of a registered person engaged in supply of taxable and exempt goods include turnover as reduced by the amount of duty or tax levied under Entry 84 of List 1 / 51 and 54 of List II
• All details related to distribution of credit by ISD shall be included in FORM GSTR - 6
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ISD invoice
Credit to be distributed under cover of ISD invoice containing thefollowing details [Rule 7 of Draft Invoice Rules]
Details of ISD invoices to be furnished in monthly ISD return FormGSTR 6
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Sr. No. Particulars
1 Name, address and GSTIN of the ISD
2 Consecutive serial number
3 Date of issue
4 Name, address and GSTIN of the recipient
5 Amount of credit distributed
6 Signature or digital signature of the ISD
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Other conditions for distribution
Credit distributed ≤ Credit available (S. 20(2)(b)
Adjustments for excess/short credit distribution
Credit of CGST, IGST, SGST and UTGST to be distributed separately[Rule 4(1)(c) of ITC Rules]
Excess credit distributed to be recovered with interest and penalty
(S. 21)
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TRANSITIONAL PROVISIONS
FOR ITC
Section 140 of the CGST Act read with Rule 1 of the DraftTransition Rules
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Specific definitions under CGST
Act
‘Capital goods’, ‘First stage dealer’, ‘Second stage dealer’,‘manufacture’ to have meaning as per CEA, 1944 [Explanation inChapter ‘Transitional Provisions’]
Eligible duties and taxes[S. 140(10)]
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Eligible duties Eligible tax
Basic Excise Duty Service tax as per Section 66B of the Finance Act
CVD
SAD
Special Excise Duty, Additional Duty of Excise (GSI), etc.
Carry forward of Cess???
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Provisions for carry forward of
credit
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Sr. No. Scenario
1 Credit carried forward in return
2 Credit of Input Tax for goods or services for which corresponding invoice is in possession
3 Credit not availed in return and invoice not in possession
4 Other special provisions
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General procedure for all credit claims [Rule
1(1) of Transitional Provision Rules]
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Submit application electronically in Form
GST TRAN-1
Specify the amount of duty / tax of which credit
is entitled under transitional provisions
Submit the application within 60 days from the
appointed day
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Carry forward of credit as per
returns [S. 140(1)Rule 1 of Transitional Provision Rules]
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Sr. No.
Particulars Central taxes State taxes
1 Duties and taxes eligible for credit
Eligible duties and taxes VAT and Entry tax(other than those relating to Inter-State sales)
2 Amount eligible for carry forward
Credit carried forward in the return immediately preceding appointed day
3 Conditions (i) Amount is also admissible as credit under the CGST Act
(ii) All returns for previous 6 months filed
(iii) Credit does not relate to notified goods cleared under exemption
(i) Amount is also admissible as credit under the SGST Act
(ii) All returns for previous 6 months filed
4 Credit in respect of procurements from EOU, EHTP
As per Rule 3(7) of the CENVAT Rules(Excise duty equivalent to CVD+SAD)
NA
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Balance credit on CG [S. 140(2) r .w. Rule 1 of
Transit ional Provision Rules]
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Sr. No.
Particulars Central taxes State taxes
1 Duties and taxes eligible for credit
Unavailed CENVAT credit on Capital goods (amount remaining after subtracting credit already availed on such goods)
Unavailed ITC on capital goods (amount remaining after subtracting credit already availed on such goods)
2 Person eligible for credit
Any registered person not paying tax under composition
3 Conditions (i) Amount is also admissible as credit under the CGST Act
(ii) Amount admissible as credit under the existing central tax laws
(i) Amount is also admissible as credit under the SGST Act
(ii) Amount admissible as credit under the VAT Act
4 Procedure Specify the following details in GST TRAN-1(i) Amount of duty / tax to the extent of which credit on such goods is availed /
utilised till the appointed day(ii) Amount of duty / tax yet to the extent of which credit is yet to be availed /
utilised till the appointed day
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Credit to specified persons [S. 140(3) r .w
Rule 2 of Transitional Provisions]
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Sr. No.
Particulars Central taxes State taxes
1 Duties and taxes eligible for credit
Eligible duties / VAT, Entry tax on Inputs held in stock or contained in semi-finished / finished goods stock
2 Person eligible for credit
A registered person who is:(i) Not liable for registration under the
existing law(ii) Engaged in exempted goods / services(iii) Providing works contract services with
abatement benefit(iv) First stage / second stage dealer,
depot, importer
A registered person who is:(i) Not liable for registration under
the existing law(ii) Engaged in sale of exempted or tax
free goods, which are liable to tax under SGST Act
(iii) Entitled to credit of input tax at the time of sale of goods
3 Conditions (i) Goods used / intended to be used for making taxable supplies under the GST (ii) Amount admissible as credit under the CGST / SGST Act(iii) Person possesses invoice / other documents for credit availment(iv) Documents not issued earlier than 12 months before the appointed day(v) Supplier of service not eligible for abatement under the CGST Act (CGST)
4 Procedure Separately specify details of such stock held on the appointed day in Form GST TRAN-1
© Economic Laws Practice 2017
Credit to persons paying tax at fixed
rate [S. 140(6) r .w. Rule 2 of Transitional Provisions]
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Sr. No.
Particulars Central taxes State taxes
1 Duties and taxes eligible for credit
Eligible duties Inputs held in stock or contained in semi-finished / finished goods stock
VAT on Inputs held in stock or contained in semi-finished / finished goods stock(No Entry tax credit eligible here)
2 Person eligible for credit
A registered person who was paying tax at a fixed rate / paying fixed amount in lieu of tax under the existing law and not paying tax under composition scheme under the GST
3 Conditions (i) Goods used / intended to be used for making taxable supplies under the GST
(ii) Amount admissible as credit under the CGST / SGST Act(iii) Person possesses invoice / other documents for credit availment(iv) Documents not issued earlier than 12 months before the appointed
day
4 Procedure Separately specify details of such stock held on the appointed day in Form GST TRAN-1
© Economic Laws Practice 2017
Person engaged in taxable / exempted
supplies [S. 140(4) r .w. Rule 2 of Transitional Provisions
Rules]
Provisions applicable to persons engaged in Manufacture of taxable goods (dutiable) as well as exempted goods
Provision of taxable services as well as exempted services
Sale of taxable goods as well as exempted / tax free goods
Eligible credit
Specify details of such credits in GST TRAN-1
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Credit carried forward in return
AND
Credit of eligible duties / VAT, Entry tax on inputs held in stock, in semi-finished / finished goods stock (as per previous slide)
© Economic Laws Practice 2017
Goods / services received after
appointed day [S. 140(5)]
Registered person eligible to take credit of eligible duties andtaxes, VAT, Entry tax on Inputs / Input services received after theappointed day on which duty / tax as per existing law has been paid
Conditions
Practical difficulty – delayed receipt of invoices
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Sr. No. Condition
1 Invoice / other duty paying document recorded in books within 30 days from appointed day (can be extended by Commissioner on showing sufficient cause)
2 Statement containing following details furnished with Form GST TRAN-1:(i) Name of the supplier, sr. no. of invoice, date of issue of invoice by supplier(ii) Description, quantity and value of goods / services(iii) Amount of relevant duty / tax charged by the supplier in invoice(iv) Date on which receipt of goods / services entered in books
No similar provision for Capital goods receipt
© Economic Laws Practice 2017
Claim of credit stock (without
documents) [Proviso to S. 140(3) r .w. Rule 3 of Transitional
Provisions Rules]
58
Sr. No.
Particulars Central taxes State taxes
1 Duties and taxes eligible for credit
Eligible duties on Inputs for which the eligible person is not in possession of document evidencing duty payment
Tax on Inputs for which the eligible person is not in possession of document evidencing tax payment
2 Person eligible A registered person other than a manufacturer or supplier of service (who was not registered under the existing law)
3 Quantum of eligible credit
40% of Central / State tax applicable on supply of such goods after appointed day and such amount would be credited after output Central / State tax payable on such supplies paid
4 Time limit Credit eligible for such goods supplied within 6 tax period from the appointed day
3 Conditions (i) Goods not nil rated or wholly exempted under CEA, 1944 (Central tax)Goods not wholly exempted under the State VAT Act (State tax)
(ii) Document for procurement available(iii) Statement indicating supplies of such goods filed in Form GST TRN ___(iv) Stock of such goods is so stored that it can be easily identified(v) Benefit of credit passed on
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Credit in special situations[S. 140(7)]
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Sr. No.
Situation Transitional provisions
1 Services received by ISD pre-GST but invoices received after appointed day
Credit eligible for distribution as credit under the CGST Act
2 Centralised registration under the current law
(i) Credit eligible for CENVAT credit carried forward in returns filed (if original / revised return filed within 3 months, credit eligible provided that credit claimed in such return is reduced form earlier claim)
(ii) Such amount admissible as credit under CGST Act(iii) Such credit can be transferred to other registered
persons having same PAN (covered under existing centralised registration)
3 CENVAT credit on Input services reversed due to non-payment within 3 months
Credit eligible if payment made within 3 months from the appointed day
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Disclaimer: The information provided in this presentation is intended for informational purposes only and does notconstitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of theinformation provided herein. This presentation is not intended to address the circumstances of any particular individual orcorporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary tothe views mentioned herein.