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Input Tax Working As per Goods & Service Tax Act India 2017
What is input or input service?
- INPUT means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.
- INPUT SERVICE means any service used or intended to be used by a supplier in the course or furtherance of business
Input Tax Credit
Input tax credit means central tax, state tax, integrated tax or union territory tax charged on any supply of goods or services or both made to him.
Output Tax to be paid by supplier = Rs.450 less tax paid on inputs (Rs100 + Rs120 + Rs80)
Input tax credit = Rs.300
Section 16 of CGST Act 2017:
Conditions to Claim Input Tax Credit
Every registered person shall, subject to such conditions and restrictions as may be prescribed and in manner specified in section 49A, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
A registered person can claim Input credit tax only if:
- He is in possession of tax invoice or debit note issued by a supplier, or such other tax paying document as may be prescribed.
- He has received goods or services or both.
- Payment of tax by the input supplier for his supply actually has been paid to the Government.
- He has furnished the return under section 39.
- Goods against one invoice received in multiple lots/ installments
In such a case, the registered person can take credit upon receipt of the last lot or installment:
Section 49A of CGST Act 2017
Manner of Sett off Input credit Adjustment:
Rule 43: How to take credit of capital goods
Common credit related to capital goods
ABC Limited purchase the following capital goods in the month of august 2018 &exempt turnover is Rs.50 lakhs whereas taxable turnover of the month is Rs.170 lakhs.
Calculate eligible ITC for the month of august 2018.
|Capital goods||Purchase date||Tax amount||Purpose|
|1.Capital good X||12.08.2018||Rs.18,00,000||Used in making fully taxable goods|
|2.Capital good Y||15.08.2018||Rs.28,00,000||Used in making fully exempt goods|
|3.Capital good Z||20.08.2018||Rs.66,00,000||Used in making both goods (exempt and taxable)|
Common ITC = Rs.66,00,000
TC = Rs66lakh
TM = Rs66lakh/60 months = Rs1.10 lakh
TR = Rs1.10 lakhs
Ineligible credit = (Rs1.10 lakh* Rs50 lakh) / 220 lakh = Rs.25,000
Total credit = 18 lakh +66 lakh – 25000 = 8,375,000
Rule 36(4) on Provisional ITC in Form GSTR-3B
- A taxpayer can claim provisional input tax credit at the time of filing GSTR-3B only to the extent of 10% of the eligible credit available in GSTR-2A.
- The amount of eligible credit is arrived upon those invoices or debit note, the detail of which have been uploaded by supplier in the GSTR2A only.
- The new percentage apply from 1st Jan 2020 onwards only.
- The ITC claim was earlier restricted to 20% for the period from 9th Oct 2019 till 31st Dec 2019.
How to claim the input tax credit in GSTR-3B before and after implementation of the Rule.
|Eligible ITC available in Purchase register
|Eligible ITC available in GSTR-2A
|ITC that can be claimed as Provisional credit
|D = B+C
|Total ITC that can be claimed in
|E = A-D
|ITC not allowed in GSTR-3B
Payment of Invoice within specified time
- For all supplies other than reverse charge supplies, the invoice amount (including GST) must be paid by the recipient to the supplier within 180 days from the date of issue of invoice.
If it is not so paid, then input tax credit will be reversed.
Procedure after Non- Payment within Specified time
- The input credit that was availed shall be added to his (recipient’s) output tax liability, along with interest (from the date of availing credit on such supplies till the date when the amount added to the output tax liability).
- After reversal, once payment is made by him of the invoice amount to the supplier, then can claim input credit again in the return of month when paid.
Time Limit for taking input tax credit
Must take input credit on or before, the earlier of following two dates-
- Due date of furnishing GSTR-3b for September of next FY, as compared with the FY to which the invoice pertains or
- Actual date of furnishing of the relevant annual return,
Exception – This time limit shall not apply to a claim for re-availing of any credit, earlier reversed due to non-payment of consideration.
No Input Credit of Tax in demand relating to Fraud:
- If any tax has been paid against an order of confirmed demand on account of any fraud/ wilful misstatement / suppression of facts, then input credit cannot be taken of such amount.
Section 17(5) of GST Act 2017
Blocked Credit / Ineligible Input Tax Credit:
- Input tax credit shall not be available in respect of some goods/services.
Following are the List of items on which GST input is not allowed-
- Motor Vehicles & Other Conveyances
- Used for further supply of that vehicle/conveyance.
- Used for supplying Transportation of Passenger services.
- Used for giving training of driving such vehicle/conveyance.
- For transportation of goods
2. Food & Beverages/Outdoor Catering/Beauty Treatment/Health Services/Cosmetic & plastic Surgery.
(Except when same type of input is used for same type of taxable outward supply, or even as a part of a taxable mixed/ composite supply)
3. Club Membership/Health & Fitness Centre Membership
4. Rent-a-cab, Life/Health Insurance
(Govt. notifies that obligatory for employer to provide to employee.)
5. Travel benefits to employees on vacation, like leave/home travel concession
6. Construction Related:
- Works contract service for construction of immovable property.
(Except where used for further supply of works contract service only)
- Goods/services/Both for construction of immovable property.
(Except Plant & Machinery) on own account, including when for business purpose
Construction includes re-construction/renovation/additions/alterations/repairs- which are capitalised to the said immovable property.
It means apparatus, equipment, and machinery fixed to earth by foundation or structural support used for making an outward supply of goods /services/both& includes such foundation/ structural support, but excludes:
- Land / building/civil structure
- Telecommunication towers
7. Composition Supplies received
8. Supplies received by Non-Resident taxable person.
(Except goods imported by him)
9. Supplies which used for personal consumption.
10. Goods lost/ stolen /destroyed /written-off/gifted/given as free samples.
11. Any tax paid in accordance with the provision of section 74,129, and 130
SECTION 34: CREDIT AND DEBIT NOTE
Credit Note -: It means a document issued by a registered person under sub section (1) of section 34 of CGST ACT 2017.
Debit Note -: It means a document issued by a registered Person under sub section (3) of section 34 of CGST ACT 2017
NEED FOR ISSUANCE OF CREDIT NOTE
- When supplier has incorrectly declared taxable value in invoice more than actual value
- When supplier has incorrectly declared higher tax rate than actual rate
- When supplier has supplied less quantity than what has been declared in the tax invoice
- When there is sales return.
NEED FOR ISSUANCE OF DEBIT NOTE
- When supplier has incorrectly declared taxable value in invoice less than actual value
- When supplier has incorrectly declared lower tax rate than actual rate.
- When supplier has supplied more quantity than what has been declared in the tax invoice.
DEBIT NOTE SHALL INCLUDE A SUPPLEMENTARY INVOICE
IMPACT OF CREDIT NOTE- IT WILL REDUCE THE TAX LIABILITY OF SUPPLIER
IMPACT OF DEBIT NOTE- IT WILL ENHANCE THE TAX LIABILTY OF SUPPLIER.
IT IS MANDATORY TO FURNISH DETAILS OF CREDIT/DEBIT NOTE IN THE RETURN OF THE MONTH DURING WHICH SUCH DEBIT / CREDIT NOTE HAS BEEN ISSUED.
FOR CREDIT NOTE ONLY: Supplier has to furnish details of credit note in the return for the month during which such credit note has been issued but not later than:
- September following the end of relevant financial year
- Date of furnishing relevant annual return
(Whichever is earlier)
You may contact the author and the team at firstname.lastname@example.org or call/whatsapp at 9953247264 to discuss anything related to this writeup and assistance needed.