BOARD OF STUDIES

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Goods & Services Tax

Input Tax Credit

CA Sushil Kr Goyal

What does GST mean

2

What does GST Mean ……

3

Taxation on

Value Addition…

Tax on Value Addition

4

A= Manufacturer

(Rs)

S P 1000GST 120Total 1120Payment=80 ITC

40 Cash

Rate of GST 12%

B= Wholesaler

(Rs)

Cost 1120 (Tax120)SP 1500GST 180Payment=120 ITC

60 Cash

C= Retailer

(Rs)

Cost 1680 (Tax180)

SP 2000GST 240Payment= 180 ITC

60 Cash

D= Consumer

(Rs)

Cost 2000GST 240 Total cost=2240

Tax on Value Addition

5

Under the system, every body will pay tax on value addition

All person in chain is liable to pay tax through cash or credit in the chain

Tax in the form of credit get passed to the next person in chain

Consumer is ultimately bearing the full tax liability

Input Tax Credit

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Section 16:

• Eligibility and conditions for taking input tax credit.

Section 17:

• Apportionment of credit and blocked credits

Section 18:

• Availability of credit in special circumstances

Section 19:

• Credit of inputs and capital goods sent for job work

Section 20:

• Manner of distribution of credit by ISD

Section 21:

• Manner of recovery of excess credit distributed

Input Tax means

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Input tax means the Central tax (CGST), State tax (SGST), Integrated tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services or both made to a registered person.

It also includes tax paid on reverse charge basis and integrated goods and services tax charged on import of goods.

It does not include tax paid under composition levy.

WEST BENGALOUT OF INDIA REST OF INDIA

FACTORY

GODOWN

CUSTOMERVENDOR

CUSTOMER

WAREHOUSE

VENDOR

EXPORT

IMPORTIGST IGST

CUSTOM DUTY

NO GST IGST

NO

GST

Levy of CGST+SGST / IGST

Input Credit Adjustment

9

Input

Tax

CGST

CGSTIGST

12

CGST1Input

Tax

CGST

Input

Tax

SGST

SGSTIGST

12

SGST1Input

Tax

SGST

Input

Tax

IGST

IGSTCGST

12

SGST

3

IGST

IGSTCGST

Input

Tax

IGST

SGST

Definitions:

10

“Capital Goods” means. - 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.[Sec

2(19)]

“Input” means any goods other than capital goods used or intended to be used

by a supplier in the course or furtherance of business.[Sec 2(59)]

“Input Service” means any service used or intended to be used by a supplier

in the course or furtherance of business .[Sec 2(60)]

Comparative review:

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Aspect Credit under present system Input tax credit under GST

Definition of “capital goods”

Defined in Cenvat Credit Rules

Comparatively wider definition.

Definition of “inputs” Defined in Cenvat credit Rules

which has inclusion and exclusion limb.

Exhaustive definition and does

not contain inclusion or exclusion limb.

Definition of “inputs services”

Defined in Cenvat credit Rules

which has inclusion and exclusion limb.

Exhaustive definition and does

not contain inclusion or exclusion limb.

Electronic credit ledger No such concept Electronic credit ledger

required to be maintained for

crediting and utilising input tax credit

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Input Tax Credit

Conditions for obtaining ITC

13

Eligibility and

Condition

must be used “by him”

Possession of documents

contain all the prescribed particulars

upload the details of such documents

received goods or services

last installment of goods

payment to the supplier within

180 days

No depreciation

Not pursuant to an order

Sept month / Annual Return

Documents

14

Documents to be relied upon for availment of input tax credit:

Invoice issued under

section 31

Debit note

issued under

section 34

Bill of entry

Invoice for

reverse charge

Document issued by

ISD

15

Apportionment or Block Credit

Apportionment of Credit

16

17

Apportionment of Credit

18

Apportionment of Credit

The value of exempt supply 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,

sale of building. (subject to clause (b) of paragraph 5 of Schedule II)

19

Apportionment of Credit

100,000

Amount

10,000

10,000

5,000

20

Apportionment of Credit

75,000

Amount

50,000

25,000

21

Apportionment of Credit

25,00,000

Amount

1,00,00,000

67,500

1,250

17,500

6,250

22

Apportionment of Credit

Note 1:

T1, T2, T3 and T4 shall be determined as above and declared in

Form GSTR-2

Note 2:

No turnover in a period take earlier period figure

Note 3:

Aggregate value excluding taxes

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Apportionment of Credit Banking and Finance

Procedure of availing Input tax credit for banking company or financial

institution

It will avail of, every month, an amount calculated as above

It will avail of, every month, an amount equal to fifty per cent of the

eligible input tax credit on inputs, capital goods and input services in that

month and the rest shall lapse.

The option once exercised shall not be withdrawn during the remaining

part of the financial year.

Restriction of 50% will not apply on supply from other unit having same

PAN

24

Apportionment or Block Credit

Blocked Credit

motor vehicles and other conveyance

Supply of goods and or services provided in relation to food and beverages, membership of a club, rent a cab, insurance etc,

works contract services and Goods or services

goods or services or both received by a non-resident taxable expect imported by him

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Blocked Credit

goods and/or services on which tax has been paid under section 10 i.e composition levy

goods and/or services used for private or personal consumption.

Goods lost or stolen, destroyed, written off or disposed by way of gift or sample

proceeding of demand and recovery and seizer of goods in transit

26

27

Matching Concept

Ratna Steels Portal Super Cars Ltd Portal

Ratna Steels GSTR-1

Ratna SteelsOutward Supplies

Register

Super Cars Ltd Ratna steels Rev Automobiles

Books of Super Cars Ltd for JulyInward Supplies Register Outward Supplies Register No Qt

y

Amt GST

Tot.

225 2,25,000 40,500

No Qt

y

Amt GST

Tot.

215 2,36,500 42,570

No Qt

y

Amt GST

Tot.

225 2,25,000 40,500

6 100 1,00,000 18,000

6 100 1,00,000 18,000

7 50 50,000 9,000

7 50 50,000 9,000

8 25 25,000 4,500

8 25 25,000 4,500

10 50 50,000 9,000

10 50 50,000 9,000

1 80 88,000 15,840

4 45 49,500 8,910

2 60 66,000 11,880

3 30 33,000 5,940

Aug

10Super Cars Ltd GSTR-1

1 80 88,000 15,840

4 45 49,500 8,910

2 60 66,000 11,880

3 30 33,000 5,940

Aug

11

6 100 1,00,000 18,000

6 1,00,000 18,000

Aug

15

Ratna Steels GSTR-1A

6 1,00,000 18,000

In.No Amt GST

6 1,00,000 18,000

Aug

16

Aug

21

6 100 1,00,000 18,000

PaymentPayment

Aug

20

28

Matching Concept

TAX

GST ReturnSeller

Buyer gets input credit if seller pays GST

Seller pays tax to the government Buyer gets input credit

Availing ITC in GST Regime

29

30

Special Circumstances

Newly registered person

31

The person was liable to take registration and he has applied for registration

within 30 days from the date on which he became liable to registration, then

input tax credit of inputs held in stock and inputs contained in semi finished

or finished goods held in stock on the day immediately preceding the date on

which he became liable to pay tax can be taken.

Newly registered person

32

Illustration:

ABC Ltd. (a manufacturer company of Rajasthan state) has crossed the proposed

threshold limit of turnover of Rs.20 lacs on 20/11/2016 and has obtained

registration on 04/12/2016 (i.e. within the limit of 30 days). Hence the company is

eligible for ITC on inputs held in stock as on 19/11/2016 (i.e. immediately

preceding date of attracting the provision to pay the tax).

Voluntary registration

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The person who obtains voluntary registration is entitled to take the input

tax credit of input tax on inputs in stock, inputs in semi- finished goods and

finished goods in stock, held on the day immediately preceding the date of

registration.

ITC Entitlement on voluntary registration

34

Illustration:

ABC Ltd. (a manufacturer company of Rajasthan state) is not liable to getregistration under GST as it hasn't crossed the proposed threshold limit of Rs.20lacs and but voluntary obtained registration 20/11/2016. Hence the company iseligible for ITC on inputs held in stock as on 19/11/2016.

Crosses the compounding threshold

35

He can avail ITC in respect of inputs held in stock and inputs contained in

semi-finished or finished goods held in stock and on capital goods (reduced

by prescribed percentage points i.e. 5% per quarter of an year or part

thereof from the invoice date received by the taxable person) on the day

immediately preceding the date from which he ceases to be eligible for

composition scheme.

Crosses the compounding threshold

36

Illustration:

Mr. A, a registered person was paying tax under composition scheme up to 30th July,2017. However, w.e.f 31st July, 2017, Mr. A becomes liable to pay tax under regularscheme. Is he eligible for ITC?

Mr. A is eligible for input tax credit on inputs held in stock and inputs contained insemi-finished or finished goods held in stock and capital goods (reduced by suchpercentage points as may be prescribed i.e. 5% per quarter per of a year or partthereof from the date of invoice received by taxable person) as on 30th July, 2017.

Exempted Goods became taxable

37

He can avail ITC in respect of inputs held in stock and inputs contained in

semi-finished or finished goods held in stock and on capital goods (reduced by

prescribed percentage points i.e. 5% per quarter of an year or part thereof from the

invoice date received by the taxable person) on the day immediately preceding the

date from such supply become taxable…

Sale of capital goods

38

In case of supply of capital goods or plant and machinery on which input tax credit has been taken,

the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery

reduced by the percentage points as may be specified in this behalf ( i.e. 5% per quarter in an year or part thereof from the date of invoice as received by the taxable person) or

the tax on the transaction value of such capital goods, whichever is higher.

39

Provided that where refractory bricks, moulds, and dies, jigs and

fixtures are supplied as scrap, the taxable person may pay tax on

the transaction value of such goods determined u/s 15 ( i.e value

of taxable supply)

Sale of capital goods

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Job Worker

Job work

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Job work means undertaking any treatment or process by a person on

goods belonging to another registered taxable person. The person

who is treating or processing the goods belonging to other person is

called ‘job worker’ and the person to whom the goods belongs is

called ‘principal’.

Job work

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The “principal” shall, subject to such conditions and

restrictions as may be prescribed, be allowed input tax

credit on inputs sent to a job-worker for job-work.

43

The "principal" shall be entitled to take credit of input tax on

inputs/capital goods even if the inputs are directly sent to a job

worker for job-work without their being first brought to his place of

business subject to certain conditions

Job work

Conditions

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The principal shall be given input credit on goods sent for Job Work

provided such goods are received back by the principal within 1 year of

their being sent out.

Received Back means :

after completion of job-work or otherwise or

are not supplied from the place of business of the job worker

Conditions

45

For transfer of inputs to the job-worker under the cover of a challan

including where they are sent directly (to maintain paper trail of

transaction)

Challan is to contain all details as required in respect of an invoice in

Rule 8 (of Invoice Rules).

Reference may be made to Chapter VII relating to Tax Invoice, credit &

debit notes for the particulars to be included in the document & for

detailed description.

Conditions

46

All challans issued in respect of inputs sent to job-worker and those

received back are to be reported in GSTR-1

In case of non-receipt of the inputs within the time prescribed, the

challan issued will be deemed to be invoice for the implied supply of

inputs

Conditions

47

The period of 1 year shall be reckoned from the date the job worker

receives such inputs.

The credit of inputs can be taken even if inputs are sent directly to job-

worker’s premises without bringing it to principal’s place of business.

If the inputs are not received back within 1 year, it shall be deemed that

such inputs have been supplied by principal to the job worker on the

day when the said inputs were sent out.

Conditions

48

The principal shall be given input credit on capital goods sent for Job

Work provided such capital goods are received back by the principal

within 3 year of their being sent out.

Conditions

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If Goods are not received within specified time limit

it would be deemed that such inputs or capital goods had been supplied bythe principal to the job worker on the day when the said inputs or capitalgoods were sent out by the principal or

on the date of receipt by the job worker where the inputs or capital goodswere sent directly to the place of business of job worker

Thus the principal would be liable to pay tax accordingly.

Thank You

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skgoyal@icai.orgMobile 9830088400