Understanding Input Tax Credit (ITC) Rules and Guidelines

1 Input Tax Credit (ITC) CA MUKUND CHOUHAN Mumbai & Surat mukundchouhan@gmail.com

2 INPUT Tax Credit (ITC) Continue . ITC is allowed on any Supply of Goods / Service and both. Intended to be used in the course or furtherance of his business. Documents of ITC [Rule 1(1) of draft Rule of ITC] Invoice issued by Supplier Debit Note issue by Supplier Bill of entry ( in case of import ) Invoice prepared for RCM Supply Invoice prepared for Supply by Un-registered Person. Document issued by ISD If Goods received in lots / installment then ITC shall be entitled on receipt of Last lot / installment. mukundchouhan@gmail.com

3 INPUT Tax Credit (ITC) Continue . Recipient of Supplier of goods / services / both have to pay amount of invoice along with tax within 180 day from the date of issue of invoice [Sec. 16(2)] No provision of part payment. ITC reversed and amount added to the output Tax liability Interest have to pay Receipt of supply of Goods / Service entitled to take ITC on payment made by him after 180 days. But no Credit is available of interest paid by him. mukundchouhan@gmail.com

4 INPUT Tax Credit (ITC) Continue . The amount of Tax ( CGST / SGST / IGST ) should be deducted from value of Capital Goods, while Calculating depreciation for the I.T. Act. [Sec. 16(3)] ITC for any invoice / Debit Note of Financial Year can be availed upto the return filed for the month of September or furnishing of Annual Return, Whichever is earlierfollowing the end of F.Y. [Sec. 16(4)] mukundchouhan@gmail.com

5 Apportionment of ITC between Taxable and Exempt Supply If the goods or Services used partlyfor purpose of Business and partly for other purpose. Then amount of ITC is allowed to take Credit, so much which is attributable to the purpose of business Eligible amount of ITC will be calculated according to Draft Rule 7 of input Tax Credit. ITC attributable to Zero-rated Supply is eligible Export Deemed export to SEZ units / Developer mukundchouhan@gmail.com

6 Negative List ITC on Motor Vehicle and other Conveyances not allowed. But ITC on Motor Vehicle is allowed to :- Traders of vehicle for further supply or Person engaged in Transportation of Passenger or Imparting Training For transportation of goods. Goods defined under Sec. 2(52) of CGST Act. mukundchouhan@gmail.com

7 Negative List Continue . ITC is not allowed for following supply of goods/Service and both Food and beverages, Outdoor Catering, Beauty treatment, Health Service, Cosmetic and plastic Surgery Except where inward Supply used for making an outward supply of same Category As an element of taxable composite or mixed supply. Membership of club , health and Fitness Center. Rent-a-Cab, Life Insurance and Health Insurance Except Govt. notifies the services are obligatory under any Law. Except where inward supply used for making an outward supply of same Category. mukundchouhan@gmail.com

8 Negative List Continue . Travel benefits extended to employees on vacation. Works contract Services when supplied for construction of immovable property Other than plant & machinery Except where it is an input Services for further supply or works contract service. Example: sub-contractfor works contract. Works contract has defined U/s 2(119) of CGST Act. Goods and Services received for construction of immovable property. Example-Cement steel received for construction of Factory Building etc. Other than Plant & Machinery Example-Angel, channel, MS sheet, etc for in-house fabrication of machinery. mukundchouhan@gmail.com

Negative List 9 Goods or Services or both used for personal consumption Goods lost, stolen, destroyed, written off or disposed off by way of gift and free sample Plant & Machinery means apparatus, equipment, and machinery fixed to earth by foundation or structured support. mukundchouhan@gmail.com

Credit in Special Circumstances 10 Person, who became liable to registration, must apply within 30 days Registration may be granted to him later on, What if registration finally not granted ? Shall be entitled to take Credit of input Tax in respect of input, WIP and Finished goods held in Stock A person takes registration voluntarily . Person ceasesto pay tax under composition scheme. When exempt supply of Goods and Services or both by a registered person becomes taxable supply. mukundchouhan@gmail.com

Credit in Special Circumstances Continue . 11 A registered person shall not be entitled to take credit after the expiry of one year from the date of issue of invoice. ITC of registered person will be transferred to new entity, if change in constitution due to sale, merger, demerger, amalgamation , Lease or transfer of business. In Case of supply of Capital Goods or Plant & Machinery, the registered person shall pay on amount equal to proportionate credit taken or the tax liability on Transaction value, which ever is higher. Supply of refractory bricks, module, dies, jigs, and, and fixtures are supplied as scrap, liable to tax on Transaction value. mukundchouhan@gmail.com

Credit in Special Circumstances 12 Condition:- 5% ITC will be allowed for every quarter of use of capital Goods. Registered person shall submit a declaration within 30 days in Form GST ITC-01 on the common portal Declaration is need to be filed for actual credit on the basis of invoice of input, WIP, and Finished Goods lying in Stock. Declaration need to be certified by chartered / Cost Accountant, if the amount of credit exceed 2 Lakhs. mukundchouhan@gmail.com

ITC on input and Capital Goods send to Job Worker 13 Principal manufacture shall be allowed to take credit on inputs send to Job Worker. Principal manufacturer entitle to take ITC, if input directly send to job Worker. Input after being processed, should be returned to Principal manufacturer within one year. After taking Credit of Capital Goods, Principal manufacturer can send to Job Worker. Principal Manufacturer can directly send Capital Goods to Job Worker and avail Credit without brought to his place of business. mukundchouhan@gmail.com

14 ITC on input and capital Goods send to Job worker Continue . Where the input and capital goods are not brought backby Principal within a period of one years or three years respectly, then it will be considered supply by Principal to Job Worker, when the said input or Capital Goods were Sent out. mukundchouhan@gmail.com

Distribution of ITC by Input service Distributor 15 ISD shall distribute the Credit of CGST as CGST or IGST and IGST as IGST or CGST ISD will issue as invoice Amount of Credit distributed shall not exceed the amount of credit availed. Credit on input Service attributable to a particular recipient, shall be transfer to that recipient. Credit of tax, attributable to more than one recipient, than it should be distributed as pro-rate basis of turnover in a State. mukundchouhan@gmail.com

Thank You Thank You CA. MUKUND CHOUHAN mukundchouhan@gmail.com 9377744546