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Referencer For Quick Revision: Final Course Paper-8: Indirect Tax Laws
Referencer For Quick Revision: Final Course Paper-8: Indirect Tax Laws
Revision
Final Course Paper-8: Indirect
Tax Laws
A compendium of subject-wise capsules published in the
monthly journal “The Chartered Accountant Student”
Board of Studies
(Academic)
ICAI
INDEX
Page No. Edition of Students’ Journal Topic
1-8 March 2021 Input Tax Credit
INDIRECT TAX LAWS
CA FINAL - PAPER 8 - INDIRECT TAX LAWS
It has always been the endeavour of Board of Studies to provide quality academic inputs to the students of Chartered
Accountancy Course. Keeping in mind this objective, BoS has come up with a crisp and concise capsule on Part I: Goods
and Services Tax (GST) of Paper 8: Indirect Tax Laws of Final Course (Old as well as New), to facilitate students in quick
revision before examination. The Capsule makes use of diagrams, tables, flow charts etc. to facilitate recap of significant
substantive aspect of GST law namely Input Tax Credit. The capsule on GST is based on the GST law as amended by the
significant notifications/circulars issued till October 31, 2020 and is thus, relevant for students appearing in May, 2021
examination. Students may note that this capsule is a tool for quick revision and thus, should not be taken as a substitute
for the detailed study of the subject. Students are advised to refer to the November 2020 Edition of Final Course Study
Material for comprehensive study and revision.
BUSINESS
CAPITAL GOODS INPUTS INPUT SERVICES
includes Any activity incidental/
ancillary to it means means means
Any trade/commerce,
manufacture, profession, Any activity of same goods other
vocation etc. even if there goods value of which is
nature even if no volume/ capitalized in the books of than capital services
is no monetary benefit continuity/frequency account of person claiming ITC goods
accepted in course/
Services as holder furtherance of trade,
of an office profession/vocation
CGST IGST IGST IGST
totalisator or a licence to
Activities of a race club book maker or activities
including by way of NON-RESIDENT TAXABLE PERSON
of a licensed book maker
in such club Principal
means
Any activity by Government includes
Government /local both Central and State
authority as public any person supplying goods Agent
Governments as
authorities and/or services occasionally
In any other
having NO fixed place of
business/residence in India capacity
EXEMPT
SUPPLY INWARD SUPPLY
means
means includes
receipt of goods and/or services by
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INDIRECT TAX LAWS
C. Apportionment of common credit in case of inputs and input services
Total IT on I + IS
T1 T2 T3 C1
C2 T4
D1 D2 C3
Ineligible ITC
Total eligible ITC
To be reversed = T4 + C3
• C3 will be computed separately for ITC of CGST, SGST/ UTGST • Exempt supplies include reverse charge supplies & transactions
and IGST. in securities.
• ∑ (D1 + D2) will be computed for the whole financial year, by taking • Exempt supplies exclude (i) activities specified in Schedule III
except sale of land and sale of building when entire consideration
exempted turnover and aggregate turnover for the whole financial
is received post completion certificate/first occupation,
year. If this amount is more than the amount already reversed whichever is earlier, (ii) services of accepting deposits, extending
every month, the differential amount will be reversed in any of loans/advances where the consideration is interest/discount and
the month till September of succeeding year along with interest @ the same are provided by persons other than banking company/
18% from 1st April of succeeding year till the date of payment. financial institution including NBFC, and (iii) outbound
• If this amount is less than the amount reversed every month, the (overseas) transportation of goods by a vessel.
• Aggregate value of exempt supplies and total turnover exclude
additional amount paid has to be claimed back as credit in the
central excise duty, state excise duty, central sales tax and VAT.
return of any month till September of the succeeding year. • Value of exempt supply in respect of land and building is the stamp
duty value and for security is 1% of the sale value of such security.
Tc
Te
• Tm is to be computed during the useful life of capital goods which is five years from the date of invoice.
• Tie and Te are to be computed separately for ITC of CGST, SGST/ UTGST and IGST and declared in GSTR-3B
• Exempt supplies include reverse charge supplies & transactions in securities.
• Exempt supplies exclude (i) activities specified in Schedule III except sale of land and sale of building when entire consideration is received
post completion certificate/first occupation, whichever is earlier, (ii) services of accepting deposits, extending loans/advances where the
consideration is interest/discount and the same are provided by persons other than banking company/financial institution including
NBFC, and (iii) outbound (overseas) transportation of goods by a vessel.
• Aggregate value of exempt supplies and total turnover exclude central excise duty, state excise duty, central sales tax and VAT.
• Value of exempt supply in respect of land and building is the stamp duty value and for security is 1% of the sale value of such security.
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INDIRECT TAX LAWS
When used for When used for- (i) When ineligible (i) When used (i) Where a particular
making taxable (i) making further MV, Ves or AC are for making an category of such
supplies of- taxable supply of used for eligible outward taxable inward supplies is used
(i) such MV such Ves or AC purposes supply of the same for making an outward
(ii) When received category (sub- taxable supply of the
(ii) trptn of (ii) passenger contracting) or as same category - [Sub-
passengers trptn service by manufacturer
of ineligible MV, an element of a contracting] or as an
(iii) imparting (iii) imparting Ves or AC taxable composite element of a taxable
training on training on or mixed supply. composite or mixed
driving such navigating/flying (iii) When supply
received by a GI (ii) When provided
ineligible MV such Ves/AC by an employer (ii) When provided
service provider
(iv) trptn of goods in respect of such to its employees by an employer to its
ineligible MV, Ves under statutory employees under a
or AC insured by it obligation statutory obligation
EXCEPTIONS EXCEPTIONS
Credit available on
such exceptions
(A) WCS for P & M (A) Construction of P & M
(B) WCS availed by a works contractor for (B) Construction of immovable property
further supply of WCS [Sub-contracting] for others
(C) Where value of WCS is not capitalized (C) Value of construction is not capitalised
Inward supplies charged Goods lost/ stolen/ destroyed/ Inward supplies used for
to composition levy written off or disposed of by personal consumption
way of gift or free samples
On the day immediately On the day immediately On the day immediately On the day immediately
preceding the date from which preceding the date from which preceding the date from preceding the date of
he becomes liable to pay tax such supply becomes taxable which he becomes liable to registration
under regular scheme pay tax
ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice by the supplier.
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INDIRECT TAX LAWS
Conditions for availing above credit:
(i) Filing of electronic declaration giving details of inputs held in stock/contained in semi-finished goods and finished goods held in stock
and capital goods on the days immediately preceding the day on which credit becomes eligible.
(ii) Declaration has to be filed within 30 days from becoming eligible to avail credit.
(iii) Details in (i) above to be certified by a CA/ Cost Accountant if aggregate claim of CGST, SGST/ IGST credit is more than R2,00,000.
value of entire assets (including assets on which ITC has business irrespective of whether ITC has been availed
not been taken) of the new units as per the demerger thereon or not.
scheme.
Details of change in constitution are to be furnished on The resgistered person should furnish the prescribed
common portal along with request to transfer unutilised details on the common portal within a period of 30 days
ITC. CA/Cost Accountant certificate is to be submitted from obtaining such separate registrations.
certifying that change in constitution has been done with
specific provision for transfer of liabilities. Upon acceptance of such details by the newly registered
Upon acceptance of such details by the transferee on person (transferee) on the common portal, the
the common portal, the unutilized ITC is credited to his unutilised ITC is credited to his electronic credit ledger.
Electronic Credit Ledger.
ISD is basically an office meant to receive tax invoices towards receipt of input services and distribute
the credit of taxes paid on such input services to supplier units (having the same PAN) proportionately
An ISD is required
to obtain a separate • ITC of input services is distributed only amongst those recipients to
registration even though whom the input services are attributable.
it may be separately
registered. The threshold • ITC is distributed amongst the operational units only and in the ratio
limit of registration is not of turnover in a State/UT of the recipient during the relevant period
applicable to ISD. to the aggregate of turnover of all recipients during the relevant
period to whom input service being distributed is attributable.
• Relevant period is previous FY or last quarter prior to the month of
distribution for which turnover of all recipients is available.
• ISD should issue an ISD invoice for distributing • Distributed ITC should not exceed the credit available for distribution.
ITC. It should be clearly indicated in such invoice
that it is issued only for distribution of ITC.
• The ISD needs to issue a ISD credit note, for
reduction in credit if the distributed credit gets
reduced for any reason.
• ITC available for distribution in a month is to be
excess
distributed in the same month. s distributed
If the ISD ha ent, th e excess
• Details of distribution of credit and all ISD invoices re ci pi
credit to any the
issued should be furnished by ISD in monthly vered from
will be reco as if it w as
GSTR-6 within 13 days after the end of the month. interest
recipient with
tax not paid.
ITC of IGST
= NIL
ITC of
ITC of
SGST/
CGST SGST/ UTGST CGST
UTGST