INPUT TAX CREDIT-A FEW TAKEAWAYS

(16.07.2021)

AUTHORED BY PUBLISHED BY

CA. Rajender Arora Team GSTCORNOR®

Email Id:- gstrajender@ca-spark.com Email Id:- team@gstcornor.com

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Input Tax Credit (ITC) is available immediately inputs or input services are received if they
are used or intended to be used in the course or furtherance of business. ITC is a right,
whether vested or constitutional but certainly a right which is subject to primary and
secondary conditions to be complied with as per section 16, 17 and 18 and rules 36 to 45.
There is no requirement to match input with output. In other words, no correlation with
input or input services used with final product made.

Some of the pertinent issues are addressed in the following points regarding input tax credit
under GST.

1. ITC available even if tax invoice does not contain all the required details under Rule 46
but contains at least followings:-
a) Amount of tax charged
b) Description of Goods or services
c) Total value of supply of goods or services
d) GSTIN of the supplier and Recipient
e) Place of supply in case of interstate supply
Therefore, if from a) to e) are mentioned on tax invoice and there may be other omissions,
then also ITC shall be available. This relaxation is a welcome step.

2. When supplier has paid GST on advance received from recipient on account of supply of
services then the recipient is not eligible for ITC of such GST paid. As there is no tax
invoice is issued by the supplier to recipient, although tax is paid but no ITC available.
3. Reversal of ITC where payment is not made to the supplier within 180 days.
i) If partial payment is made then reversal shall be restricted upto amount not paid to
the supplier.
ii) If the recipient later makes payment then earlier reversed ITC shall be re-availed.
iii) Then on this reversal, interest to be paid for the period starting from conclusion of
180 days.
iv) In case supply is made to own branches, it can be said that payment is made within
180 days even when they are netted off against receivables. As these are only book
entries.
4. Issues of Normal loss/ Process loss/ By Product/ Waste/ Transit loss/ Material short
received- Availability of ITC
i) If there is standard loss into manufacturing process i.e. natural loss, ITC is available
on total quantity went into the process. This may also be called process loss. This loss
may not even reflect in the final product.
ii) In case by product or waste, if input goes into, then, full ITC is available and cannot
be denied. This is also applicable in case where waste is not returned to the principal
manufacturer by the job worker.
iii) It is established that transit and storage loss as per industry norms is allowed and
corresponding ITC not to be reversed. However, it cannot be unreasonable and
exorbitant.
iv) If material is short received or abnormal transit loss then, it cannot be said that input
used in relation to manufacture. Therefore, corresponding ITC shall not be allowed.

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 TEAM GSTCORNOR® WISHING RAJENDER ARORA SIR A VERY HAPPY BIRTHDAY.
STAY HAPPY STAY BLESSED.
Disclaimer:
(Note: The view expressed in this article is expressed by Mr. Rajender Arora. Information
compiled above is based on my understanding and review. Any suggestions to improve
above information are welcome with folded hands, with appreciation in advance. All
readers are requested to form their considered views based on their own study before
deciding conclusively in the matter.) Team GSTCORNOR® & Author disclaim all liability in
respect to actions taken or not taken based on any or all the contents of this article to the fullest
extent permitted by law. Do not act or refrain from acting upon this information without seeking
professional legal counsel.
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