Input Tax Credit Under GST CA Rajesh Saluja LUNAWAT & Co. CA - - PowerPoint PPT Presentation

CA Rajesh Saluja LUNAWAT & Co.

Input Tax Credit Under GST

CA Rajesh Saluja LUNAWAT & Co.

In Inpu put t ta tax cr x cred edit it

Section – 16 – Eligibility and conditions for taking input tax credit Section – 17 – Apportionment of credits and blocked credits Section – 18 – Availability of credit in special circumstances Section – 19 – Recovery of Input Tax Credit and Interest thereon Section – 20 – Taking ITC in respect of inputs sent for job-work Section – 21 – Manner of distribution of credit by Input Service Distributor Section – 22 – Manner of recovery of credit distributed in excess Section – 36 – Claim of ITC and provisional acceptance thereof Section – 37 – Matching, reversal and reclaim of ITC Section – 167 to 178, 186 to 197 – Transitional Provisions

CA Rajesh Saluja LUNAWAT & Co.

In Inpu put t ta tax cr x cred edit it

Section – 2(56) - “input tax credit” means credit of ‘input tax’ as defined in sub-section (55) Section – 2(55) - "input tax" in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub-section (3) of section 8, but does not include the tax paid under section 9 Section – 8(3) – Reverse Charge Section – 9 – Composition levy

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 16

Section – 16(1) Every registered taxable person shall…….be entitled to take credit of input tax charged on any supply of goods or services….which are used or intended to be used in the course

• r furtherance of his business and the said amount shall be

credited to the electronic credit ledger of such person. Provided…..ITC in respect of pipelines and telecommunication towers fixed to earth…..shall not exceed 1/3rd of the total ITC, for three years starting from the year in which said goods are received.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 16

Section – 16(2) To avail ITC, a RTP must satisfy the following: (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying document(s) as may be prescribed; (b) he has received the goods and/or services; (c) the tax charged in respect of such supply has been actually paid to the account of the appropriate Government; and (d) he has furnished the return under section 34.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 16

Section – 16(2) PROVIDED that where the goods against an invoice are received in lots or instalments, the registered taxable person shall be entitled to take credit upon receipt of the last lot or instalment PROVIDED – Where a recipient of services fails to pay to the supplier within 3 months of issue of invoice, the amount availed by recipient as ITC, shall be added to his output tax liability plus interest thereon.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 17

Taxable Supply Exempt Supply Allowable ITC Disallow ed ITC

Section – 17 – ITC in the following cases to be allowed to the extent attributable to business purpose: 1. Where goods and/or services are used partly for the purpose of any business and partly for other purposes. 2. Where goods and / or services are used partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies

Supply of Goods and/or Services Input Tax Credit

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 17

Section – 17(4) – ITC shall not be available in respect of the following: (a) motor vehicles and other conveyances except when they are used (i) for making the following taxable supplies, namely (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 17

Section – 17(4) – ITC shall not be available in respect of the following: (b) supply of goods and services, namely, (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where these are used as input services by a RTP providing the same services. (ii) membership of a club, health and fitness centre, (iii) rent-a-cab, life insurance, health insurance except where the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 17

Section – 17(4) – ITC shall not be available in respect of the following: (c) 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; (d) goods or services received by a taxable person for construction of an immovable property on his own account,

• ther than plant and machinery, even when used in course or

furtherance of business; (e) goods and/or services on which tax has been paid under section 9; (f) goods and/or services used for personal consumption; (g) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax x cr cred edit t – Se Sect ction

• n 17

Section – 17(4) – ITC shall not be available in respect of the following: (h) any tax paid in terms of sections 67, 89 or 90 Section 67 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts Section 89 – Detention, seizure and release of goods and conveyances in transit Section 90 – Detention, seizure and release of goods and conveyances in transit

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 18(1) 1) to (5)

Input Tax on: Compulsory/Voluntary Registration Person Ceases to pay tax under composition scheme Exempt supply of G&S becomes taxable Raw Material Section 18(1) -subject to such conditions and restrictions as may be Prescribed, and in case

• f compulsory registration, if applied for

registration within 30 days of being liable Section 18(5) - No Credit available after one year from date of invoice Semi Finished Goods Finished Goods Input Services received prior to registration Not Available Capital goods purchased prior to registration Not Available

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 18(6) 6)

Sale

Lease Merger Demerger amalgamation

Transfer of business

Change in Constitution ITC Allowed

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 18(7) 7)

• Where a RTP under regular scheme switched over to composition

scheme, or

• Where goods and/or services provided by a RTP become

absolutely exempt U/s 11, He shall be liable to pay tax on the stock and capital goods held by him on the date immediately preceding the day of switchover

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 19

Recovery of Input Tax Credit and Interest thereon

Where credit has been taken wrongly, the same shall be recovered from the registered taxable person in accordance with the provisions of this Act.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 20

Taking input tax credit in respect of inputs sent for job work 1. “principal” shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without their being first brought to his place of business 2. Where the inputs sent for job-work are not received back by the “principal”, within a period of one year of their being sent

• ut, it shall be deemed that such inputs had been supplied by

the principal to the job-worker on the day when the said inputs were sent out. 3. The “principal” shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job-worker for job-work. 4. Where the capital goods sent for job-work are not received back by the “principal” within a period of three years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the jobworker on the day when the said capital goods were sent out.

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 21

Input Service Distributor Input Service Distributor Recipient Recipient Different States Same State IGST/CGST/SGST SGST/CGST CGST – CGST or IGST IGST – IGST or CGST SGST & IGST – SGST CGST & IGST - CGST SGST – SGST or IGST

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 21

The Input Service Distributor may distribute the credit subject to the following conditions: (a) The credit can be distributed against a prescribed document issued to each of the recipients of the credit; (b) the amount of the credit distributed shall not exceed the amount

• f credit available for distribution;

(c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient; (d) the credit of tax paid on input services attributable to more than

• ne recipient shall be pro rata on the basis of the turnover in a State of

such recipient;

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 22

Manner of recovery of credit distributed in excess Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 21 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipient(s) along with interest, and the provisions of section 66 or 67, as the case may be, shall apply mutatis mutandis for effecting such recovery

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 36

Claim of input tax credit and provisional acceptance thereof (1) Every registered taxable person shall, subject to such conditions and restrictions be entitled to take credit of input tax, as self assessed in his return and such amount shall be credited, on a provisional basis, to his electronic credit ledger (2) The credit referred to in sub-section (1) shall be utilised only for payment of self assessed output tax liability as per the return referred to in sub-section (1).

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 37

Matching, reversal and reclaim of input tax credit The details of every inward supply furnished by a registered taxable person shall be matched with:

• a. the corresponding details of outward supply furnished by the

corresponding taxable person

• b. with the additional duty of customs paid in respect of goods

imported by him, and

• c. for duplication of claims of input tax credit.

Where there is a mismatch on account of:

• a. Input Tax claimed by recipient is in excess
• b. Outward supply is not declared by the supplier

The discrepancy shall be communicated to both such persons in the manner as may be prescribed. If the discrepancy is not rectified by the supplier in the return of the month in which discrepancy was communicated. Then in the succeeding month the same shall be added to the

• utput tax liability of the recipient, along with interest thereon

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 37

Matching, reversal and reclaim of input tax credit The amount claimed as input tax credit that is found to be in excess

• n account of duplication of claims shall be added to the output

tax liability of the recipient in his return for the month in which the duplication is communicated. The recipient shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5) if the supplier declares the details of the invoice and/or debit note in his valid return within the time specified in sub-section (9) of section 34. In the above case, the interest earlier paid, would be refunded, by crediting the amount in his electronic cash ledger

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Section ion 38

Matching, reversal and reclaim of reduction in output tax liability The details of every credit note relating to outward supply for a tax period shall be matched with (a) with the corresponding reduction in the claim for input tax credit by the corresponding taxable person (b) for duplication of claims for reduction in output tax liability

• a. Where the reduction of output tax liability in respect of outward

supplies exceeds the corresponding reduction in the claim for input tax credit

• b. Corresponding credit note is not declared by the supplier

The discrepancy shall be communicated to both such persons in the manner as may be prescribed. If the discrepancy is not rectified by the supplier in the return of the month in which discrepancy was communicated. Then in the succeeding month the same shall be added to the

• utput tax liability of the recipient, along with interest thereon.

CA Rajesh Saluja LUNAWAT & Co. 24

CA Rajesh Saluja LUNAWAT & Co.

Inp nput t tax credit dit – Trans nsitional itional Provisi visions

• ns

Matching, reversal and reclaim of reduction in output tax liability The details of every credit note relating to outward supply for a tax period shall be matched with (a) with the corresponding reduction in the claim for input tax credit by the corresponding taxable person (b) for duplication of claims for reduction in output tax liability

• a. Where the reduction of output tax liability in respect of outward

supplies exceeds the corresponding reduction in the claim for input tax credit

• b. Corresponding credit note is not declared by the supplier

The discrepancy shall be communicated to both such persons in the manner as may be prescribed. If the discrepancy is not rectified by the supplier in the return of the month in which discrepancy was communicated. Then in the succeeding month the same shall be added to the

• utput tax liability of the recipient, along with interest thereon.

CA Rajesh Saluja LUNAWAT & Co.

Amount of CENVAT Credit carried forward to be allowed to registered taxable person under GST other than a person opting to pay tax under composition levy

• RTP shall be entitled to take credit of the amount of eligible CENVAT

credit carried forward in return filed, not later than 90 days from the said date, under earlier law for the period ending immediately prior to appointed day

Section 167 Provided that the taxable person shall not be allowed to take credit unless the said amount is admissible as credit under this Act. 26

CA Rajesh Saluja LUNAWAT & Co.

Amount of un-availed* CENVAT Credit of Capital goods to be allowed to registered taxable person under GST other than person opting to pay tax under composition levy

• RTP shall be entitled to take credit of the Un-availed CENVAT

credit not carried forward in return filed under earlier law for the period ending immediately prior to appointed day

*Un-availed amount of CENVAT credit in respect of Capital goods = Aggregate amount of CENVAT Credit (-) Credit already availed in respect of capital goods in earlier return

Section 168 Provided that the taxable person shall not be allowed to take credit unless the said amount is admissible as credit under this Act. 27

CA Rajesh Saluja LUNAWAT & Co. Section 169

A registered taxable person (RTP)

• Who was not liable to be registered under the earlier law or
• Who was engaged in the manufacture of exempted goods or provision of an exempted

services or

• Providing exempted works contract service and availing benefit of abatement under

notification 26/2012 dated 20.06.2012

• First stage dealer (FSD) or second stage dealer(SSD) or registered importer

shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions: a. Such inputs and / or goods are used or intended to be used for making taxable supplies under this Act. b. Said taxable person passes on the benefit of such credit by way of reduced price to the recipient c. RTP is eligible for input tax credit on such inputs under this Act. d. RTP is in possession of invoice and/or other prescribed documents evidencing payment

• f duty under the earlier law in respect of such inputs* and

e. Such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. f. Supplier of services is not eligible for any abatement under the Act.

28

CA Rajesh Saluja LUNAWAT & Co. Section 169 “Provided that where a taxable person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then such taxable person shall, subject to such conditions, limitations and safeguards as may be prescribed, be allowed to take credit at the rate and in the manner prescribed.” 29 Note: This provision has been inserted keeping in mind traders dealing in excisable goods but not registered as first stage dealer (FSD), second stage dealer (SSD) or importer.

CA Rajesh Saluja LUNAWAT & Co. Section 170

A registered taxable person (RTP) Who was engaged in the manufacture of non-exempted as well as exempted goods under the Central Excise Act, 1944 or Who was engaged in the provision of non-exempted as well as exempted services under Chapter V of Finance Act, 1994 shall be entitled to take, in his electronic credit ledger-

• Amount of Cenvat credit carried forward in a return furnished under the

earlier law by him in terms of section 167.

• Amount of Cenvat credit of eligible duties in respect of inputs held in stock

and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to exempted goods or services, in terms of section 169

30

CA Rajesh Saluja LUNAWAT & Co. Section 171

Under CGST Law A registered taxable person (RTP)

• shall be entitled to take, in his electronic credit ledger,
• credit of eligible duties and taxes, in respect of inputs or input services
• received on or after the appointed day but the duty or tax in respect of which

has been paid before the appointed day,

• subject to the condition that the invoice or any other duty/tax paying

document of the same was recorded in the books of accounts of such person

• within a period of thirty days from the appointed day

The said registered taxable person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under sub-section (1).

31

CA Rajesh Saluja LUNAWAT & Co. Section 171

Under SGST Law A registered taxable person (RTP)

• shall be entitled to take, in his electronic credit ledger,
• credit of Value Added Tax [and entry tax], in respect of inputs
• received on or after the appointed day but the duty or tax in respect of which

has been paid before the appointed day,

• subject to the condition that the invoice or any other duty/tax paying

document of the same was recorded in the books of accounts of such person

• within a period of thirty days from the appointed day

The said registered taxable person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under sub-section (1).

32

CA Rajesh Saluja LUNAWAT & Co. Section 172 read with section 18(3)

A registered taxable person (RTP)

• who was either paying tax at a fixed rate or
• paying a fixed amount in lieu of the tax payable under the earlier law

shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed date subject to the following conditions:

• a. Such inputs and / or goods are used or intended to be used for making

taxable supplies under this Act.

• b. RTP is not paying tax under Section 9(i.e. composition levy)
• c. RTP is eligible for input tax credit on inputs under this Act.
• d. RTP is in possession of invoice and/or other prescribed documents

evidencing payment of duty under the earlier law in respect of such inputs and

• e. Such invoices and /or other prescribed documents were issued not earlier

than twelve months immediately preceding the appointed day.

33

CA Rajesh Saluja LUNAWAT & Co. Section 190 34 Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoice(s) relating to such services is received on or after the appointed day.

CA Rajesh Saluja LUNAWAT & Co. Section 173 35 Goods had been exempt under the earlier law at the time of removal thereof and such goods had been removed not earlier than 6 months prior to the appointed day (i.e. from 1.01.2017 to 30.06.2017) If such goods are returned within a period of 6 months from the appointed day (01.07.2017 to 31.12.2017) and such goods are identifiable to the satisfaction of proper

• fficer

No tax shall be payable If such goods are returned after a period of 6 months from the appointed day (i.e. 01.01.2018 onwards) and such goods are liable to tax under GST Tax shall be payable by the person returning the goods

CA Rajesh Saluja LUNAWAT & Co. Section 174 36 Tax has been paid on goods under the earlier law at the time of removal thereof and such goods had been removed not earlier than 6 months prior to the appointed day (i.e. from 1.01.2017 to 30.06.2017) If such goods are returned

• n or after the appointed

day by a Registered Taxable Person It shall be deemed to be a supply If such goods are returned

• n or after the appointed

day by a person other than a Registered Taxable Person The RTP shall be eligible for refund under earlier law

CA Rajesh Saluja LUNAWAT & Co. Any inputs received in a factory had been removed as such or removed after being

partially processed to a job worker for further processing, testing, repair, reconditioning or any

• ther purpose in accordance with the provisions of earlier law prior to the appointed day (i.e. on or

before 01.07.2017) and such inputs, after completion of the job work, are returned to the said factory on or after the appointed day (on or after 01.07.2017) If such inputs are returned within the period of 6 months (upto 30.12.2017) which may be extended for a further period not exceeding two months on sufficient cause No tax shall be payable If such inputs are not returned within a period of 6 months or the extended period The input tax credit shall be liable to be recovered from principal in terms of Sec 184

Section 175

Manufacturer and jobworker to declare the details of stock and input credit thereof

CA Rajesh Saluja LUNAWAT & Co. Any semi-finished goods had been removed from the factory to any other premises for carrying out certain manufacturing processes in accordance with the provisions of earlier law prior to the appointed day (i.e. on or before 30.06.2017) and such goods after undergoing manufacturing processes (herein after referred to as "the said goods") are returned to the said factory on or after the appointed day (on or after 01.07.2017)

If such inputs are returned within the period of 6 months (upto 31.12.2017) which may be extended for a further period not exceeding two months on sufficient cause No tax shall be payable If such inputs are not returned within a period of 6 months or the extended period The input tax credit shall be liable to be recovered from principal in terms of Sec 184

Section 176

Manufacturer and jobworker to declare the details of stock and input credit thereof

CA Rajesh Saluja LUNAWAT & Co.

Any excisable goods manufactured in a factory had been removed without payment of duty for carrying out tests or any other process (not amounting to manufacture), to any other premises, whether registered or not, in accordance with the provisions of earlier law prior to the appointed day and such goods, after undergoing tests or any other process (herein after referred to as the "said goods") are returned to the said factory on or after the appointed day If such inputs are returned within the period of 6 months (upto 31.12.2017) which may be extended for a further period not exceeding two months on sufficient cause No tax shall be payable If such inputs are not returned within a period of 6 months or the extended period The input tax credit shall be liable to be recovered from principal in terms of Sec 184

Section 177

CA Rajesh Saluja LUNAWAT & Co.

Goods had been sent on approval basis under the earlier law, not earlier than 6 months prior to the appointed day (i.e. from 1.01.2017 to 30.06.2017) and such goods had been rejected or not approved by the buyer and returned to the seller on or after the appointed date If such goods are returned within the period of 6 months (upto 31.12.2017) which may be extended for a further period not exceeding two months on sufficient cause No tax shall be payable If such goods are returned after a period

• f 6 months (i.e.

31.12.2017 onwards) or the extended period and liable to tax under GST Tax shall be payable by the person returning the goods

Section 195

If such goods are not returned within a period of 6 months or the extended period Tax shall be payable by the person who has sent the goods

CA Rajesh Saluja LUNAWAT & Co.

CA Rajesh Saluja LUNAWAT & Co.