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INPUT TAX CREDIT MECHANISM UNDER GST

GST INPUT TAX CREDIT MECHANISM

Input Tax Credit (ITC) means credit of tax already paid on purchases that can be adjusted against tax collected on sales. The balance (if any) is required to be paid to government.

  • First Check whether the credit falls under Eligible credit or Blocked credits.
  • Next check the conditions to be fulfilled to claim the credit & time available to avail the credit.

ELIGIBLE CREDIT
u/s 16 (1) of CGST Act

  • ITC is eligible if goods / services are used or intended to be used in the course or furtherance of business.

BLOCKED CREDIT
u/s 17 (5) of CGST Act

  • Certain goods / servicesare specially listed,wherein ITC on purchase of such goods / servicesare not available (except few cases)

WHAT CONDITIONS YOU HAVE TO FULFIL TO AVAIL CREDIT ON BLOCKED GOODS AND SERVICES?

  • First,check for Conditions to be fulfilled for availing credit u/s 16(2) of CGST Act (4 conditions)
  • Next,check for Time period to claim / avail the ITC u/s 16(4) of CGST Act.
Sl.
No
Description of Blocked
Goods / Service
 Conditions for claiming such credit
1 Motor Vehicle & Other
Conveyance
Further taxable supply of:
a)Such vehicle & conveyance
b)Transportation of passenger
c) Imparting training (for flying, driving,
navigation etc.)Or for Transportation of Goods
2 Food & Beverages, Outdoor
Catering
When inward supply is used for making
outward supply of same category of
goods/services.
3 Beauty Treatment, Cosmetic
& Plastic surgeries
When inward supply is used for making
outward supply of same category of
goods/services
4 Healthcare Services When inward supply is used for making
outward supply of same category of
goods/services
5 . Rent ­a ­cab service a) Obligatory for an employer to provide
such service to its employees under
Govt. notification
b) When inward supply is used for making
outward supply of same category of
goods/services.
6 Life insurance, Health
insurance
a) Obligatory for an employer to provide
such service to its employees under
Govt. notification
b) When inward supply is used for making
outward supply of same category of
goods/services.
7 Works Contract Service (in
relation to immovable property)
When input service is used for making
outward supply of works contract service.

WHAT ARE THE BLOCKED GOODS AND SERVICES NO CONDITIONS ARE REQUIRED FOR CLAIMING CREDIT?

  • Membership of a club, health and fitness centre.
  • Under Construction of Immovable Property (on own account).
  • Local purchases by a Non resident taxable person.
  • Goods/services used for personal consumption.
  • Goods Lost/ Stolen/ Destroyed/Written off.
  • Goods Disposed of by way of gift or free samples.
  • Tax paid under Demand/Seizure/confiscation.
  • Membership of a club, health and fitness centre.

 WHAT CONDITIONS YOU HAVE TO FULFIL FOR TAKING ITC IF YOU ARE A REGISTERED PERSON?

Moreover,these 4 conditions are very important because, in case even if one condition is not fulfilled, Credit cannot be claimed, even though it is an eligible Credit.
� He is in possession of Invoice/Debit note/Other tax paying document.
� He has received the goods or services or both
� The Seller, (who has collected the tax from buyer) must have paid the taxes to the government.
� Both supplier and receiver have furnished GST returns.

TIME PERIOD AVAILABLE FOR AVAILING / CLAIMING OF CREDITS

From here on,time period shall be earlier of:
� 1 year from the invoice date.
� The due date of furnishing of return for the month of September following the FY to which the invoice pertains (i.e. for FY 2017­18, due date shall be 20th October, 2018)
� Furnishing of relevant annual return (i.e. for FY 2017-­18, due date for Annual Return is 31st December, 2018.)

 WHAT POINTS YOU SHOULD KEEP IN MIND?

 How can you claim ITC on Capital Goods?

� 100% in the year of purchase

� ITC shall not be available if the tax paid on capital goods is capitalised in books of Accounts and depreciation has been claimed.

. Can  you claim full ITC  when Inputs are used partly for taxable and partly for exempt supplies ?

� Amount of credit available shall be restricted to input tax attributable to be used for taxable supplies.

� ITC can only be claimed in respect of goods exclusively used for providing taxable supplies.

How can you take ITC on goods sent to Job worker?

�  Goods directly sent to job worker – the goods are deemed to be received by the principal and shall be entitled to take credit.

� Input not received back by the principal within 1 year of being sent to job worker, treated as ‘Deemed Supply’.

� Capital goods not received back by the principal within 3 year of being sent to job worker, treated as ‘Deemed Supply’.

IS ITC is available on purchase of a goods delivery vehicle by a person for transportation of his own Goods from one place to another?

� Credit shall be eligible to a manufacturer/trader but not a Goods Transport Agency (as has been specifically restricted by the tax rate schedule).

 

ABOUT GAGAN KEDIA

All things considered,the blog has been written under the guidance of GST tax expert CA Gagan Kedia.

Firstly Gagan is a commerce graduate, a Chartered Accountant and a Company Secretary by qualification.Moreover he has dedicated over past 1 year of his life in GST research, working closely with various authorities.

Furthermore,Gagan has keen interest in training and has also conducted various training workshops with big corporate houses in the area of Taxation & Accounting.

Additionally,he is also a selected faculty member of the Indirect Tax Committee of ICAI for GST Trainings.

Moreover,he is an active member of the privileged Kolkata Study Group of Indirect Tax Committee of ICAI.This committee deals in – GST Research, Representations to Governments, Publication of Books, etc.

Additionally,he is the Managing Partner of the Firm M/s. MRG KEDIA & Co., looking after Transaction Advisory & Litigations in the field of Service Tax & GST for various clients.

Altogether,you can reach Gagan at cagkedia@gmail.com

 ABOUT ZEROINFY

Furthermore, all recent informations and changes relating to GST  is also available on Zeroinfy.com.

Additionally to know about the basic concepts of GST,click here.

Correspondingly Information relating gst rates on goods and services,click here.

For this reason,you can visit our site zeroinfy.com for more updates….

Zeroinfy.com is India’s Largest Online Platform for Exam Preparation, with over 200+ HD quality video courses, 25+ best Professors.Above all, presently it covers exams like CA, CS, CMA, UPSC CSE, IIT-JEE.

 

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