H4 -GST @ GVC

25th February 2021, Thursday

Spark for the Day

“……Someone is sitting in the shade today because someone planted a

tree a long time ago…..” Waren Buffet

Today’s Topics:

1. Input Tax Credit – Conditions- Requirements for availing ITC

Input Tax

Input tax means the Central Tax (CGST), State Tax (SGST)/Union

Territory Tax (UTGST) charged on supply of goods or services or both

including capital goods made to a registered person. It also includes tax

paid on reverse charge basis and integrated tax charged on import of goods.

It does not include tax paid under composition levy.

Input Tax Credit

Input tax credit means the credit of input tax on the supplies of goods or

services or both received by a registered person. Tax paid on capital goods

also permitted to be availed in one installment, which are used in the course

of business, subject to certain conditions and restrictions. Input tax credit is

the tax credit is credit earned by a registered person on purchase of goods

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or receives. He can deduct input tax credit from the output tax payable

and pay the balance amount.

Input tax credit is available on taxable supplies and zero rated supplies.

However, input tax credit is not available for exempt supplies and non-

taxable supply.

Requirements for availing Input Tax Credit

1. The goods and services must be used by the buyer in the course or

furtherance of his business.

2. The dealer in possession of Output Invoice/supplementary invoice/Debit

or Credit Note and other related documents is a must.

3. The supplier has actually paid the tax charged in respect of the supply to

the government.

4. Supplier of goods and/or services must upload the details of such

documents in the common portal i.e., GSTN.

5. Returns should be filed for availing ITC

6. Input Tax Credit cannot be used for payment interest, penalty, fees or

any other amount payable under the Act, other than GST.

7. Input Tax Credit cannot be availed after the due date of filing the return

for September month of the next financial year or on furnishing the Annual

Return, whichever is earlier.

8. No ITC will be allowed if depreciation has been claimed on tax

component of a capital good.

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9. When goods are received in installments Input Tax Credit can be claimed

when the last lot is received.

10. The recipient shall be entitled to avail of the credit of input tax on

payment made by him of the amount towards the value of supply along

with tax payable thereon within 180 days from the date of issue of invoice.

Examples

1. Inward supply of goods- GST amount Rs. 2, 00,000- One invoice on

which GST payable was Rs.1000 was missing. Determine Input Tax Credit.

Ans. ITC cannot be taken on missing invoice. Therefore, ITC = 2, 00,000-

10,000 = Rs. 1,90,000.

2. Inward supply of goods- GST amount Rs. 1, 00,000- Inputs are received

in two installments. First installment received in October 2020.

Determine Input Tax Credit.

Ans. Input Tax Credit can be availed on last installment. Therefore ITC in

October 2020 – Nil.

3. Inward supply of capital goods- GST amount Rs. 1,00,000- ABC Ltd

has capitalized the capital goods at full invoice value inclusive of GST as it

will avail depreciation on the full invoice value.

Ans. Here, ABC Ltd will claim depreciation on GST component. Therefore,

Input Tax Credit = Nil.

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Reconciliation of Input Tax Credit

Input Tax Credit claimed by the person has to match with the details

specified by his supplier in his GST return. In case of any mismatch, the

supplier and the recipient would be communicated discrepancies.

Persons not allowed to avail Input Tax Credit

1. Persons who are not registered in GST and

2. Persons who are registered under composition scheme

Reversal of Input Tax Credit

Following are the situations of reversal of input tax credit.

1. Non-payment of invoices in 180 days

2. Credit note issued to Input Service Distributor – This is for ISD. If a

credit note was issued by the seller to the HO then the ITC subsequently

reduced w will be reversed.

3. Inputs partly for business purpose and partly for exempted supplies or

for personal use – ITC used in the portion of input goods/services used for

the personal purpose must be reversed proportionately.

4. Capital goods partly for business and partly for exempted supplies or for

personal use- ITC used in the portion of input goods/services used for the

personal purpose must be reversed proportionately.

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Ineligible ITC

Input tax credit is not available in the following cases.

1. Motor vehicles and other conveyances (Exceptions –for further supply of

such vehicles or conveyances, transportation of passengers, imparting

training on driving, flying and transportation of goods)

2. Goods or services provided in relation to food and beverages, outdoor

catering, beauty treatment, health services, cosmetic and plastic surgery.

3. Membership of a club, health and fitness center.

4. Rent a car, life insurance and health insurance

5. Travel benefits extended to employees on vacation such as leave or home

travel concession.

6. Works contract services when supplied for construction of immovable

property (other than plant and machinery), except where it is an input

service for further supply of works contract service.

7. Goods or services on which tax has been paid under composition scheme.

8. Goods or services used for private or personal consumption.

9. Goods lost, stolen, destroyed, written off, gifted,, or free samples.

Review Questions:

1. What is the tax treatment of composite supply and mixed supply?

2. What is cascading effect?

3. What is anti-profiteering?

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Thank You…. Have a Nice Day

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