CA. Nayan Jain, Nyn (Associate member of Team GST Cornor)
ITC in GST is like the oxygen to human body. Everything revolves around how the credit would get distributed and who would be the person actual bearing the liability to in which treasure box this collection will ultimately fall into Central/State government. In this article we try to make attempt to consolidate/summarize all provisions related to Input Tax Credit under GST at one place.
In this article, unless otherwise specifically mentioned, all the sections &provisions mentioned here means the respective sections and provisions of CGST Act and rules made there under.
DEFINITIONS RELEVANT TO UNDERSTANDING INPUT TAX CREDIT CONCEPT:-
GOODS means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land.
SERVICE means anything other than goods, money and securities but includes activities relating to the use of money or its conversion for which a separate consideration is charged.
CAPITAL GOODS means goods the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.
CENTRAL TAX means CGST levied under the Central Goods & Service Tax Act, 2017.
INTEGRATED TAX means IGST levied under the Integrated Goods and Services Tax Act, 2017.
UNION TERRITORY TAX means UTGST levied under the Union Territory Goods & Service tax Act, 2017.
STATE TAX means SGST levied under any State Goods & Service Tax Act, 2017.
INPUT means any goods other than capital goods used or intended to be used in the course or furtherance of business.
INPUT SERVICE means any service used or intended to be used in the course or furtherance of business.
INPUT TAX means the CGST, SGST, IGST or UGST charged on any supply of goods or services or both made and includes IGST on Imports & tax payable under reverse charge provisions. However, Input Tax does not include the tax paid under the composition levy.
INPUT TAX CREDIT means the credit of input tax.
OUTPUT TAX means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis.
TAXABLE SUPPLY means a supply of goods or services or both which is leviable to tax under this Act;
NON TAXABLE SUPPLY means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act
EXEMPT SUPPLY means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11 or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;
ZERO RATED SUPPLY means any of the following supplies of goods or services or both, namely:–
– Export of goods or services or both; or
– Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
ELIGIBILITY & CONDITIONS FOR TAKING INPUT TAX CREDIT
General Provision
Every registered person shall 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.
All conditions should be fulfilled to avail the Input Tax Credit:-
1. Possession of following documents as the case may be:-
– Tax Invoice
– Debit Note
– Bill of Entry
– Invoice issued by recipient in case of supply received from non registered person (reverse charge mechanism)
– Document issued by Input Service Distributor
2. He has received the goods or services or both.
3. Tax charged in respect of such supply has been actually paid to the government by the supplier.
4. Furnish the return under Section 39 by the recipient.
Points to be considered:-
– Input tax credit can be availed only if all the applicable particulars prescribed under the Invoice Rule are contained in the above documents and information as contained in the said documents are furnished in Form GSTR-2 (Inward Supply Return)
– Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.
– No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order. (Where demand has been raised on account of any fraud, wilful misstatement or suppression of facts)
– In case of goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of last lot or instalment.
– No Input Tax Credit in case of advance payment on the basis of receipt voucher as the goods or services is not received.
SIMPLIFIED TABLE FOR UTILIZATION OF INPUT TAX CREDIT
| Credit of | Allowed for payment of (In Serial Order of Numbering) | |||
| IGST | CGST | SGST | UGST | |
| IGST | Yes (1) | Yes (2) | Yes (3) | Yes (4) |
| CGST | Yes (2) | Yes (1) | – | – |
| SGST | Yes (2) | – | Yes (1) | – |
| UGST | Yes (2) | – | – | Yes (1) |
TIME LIMIT TO CLAIM INPUT TAX CREDIT
Input tax credit cannot be claimed in respect of any invoice or debit note after:-
| the due date of furnishing of the return for the month of September following the end of financial year to which such credit relates | Whichever is earlier |
| the due date of furnishing of the relevant annual return |
REVERSAL OF INPUT TAX CREDIT IN CASE OF NON PAYMENT OF CONSIDERATION OF SUPPLY
– Where a recipient fails to pay to the supplier, the amount towards the value of supply along with the tax payable thereon within a period of 180 days from the date of issue of invoice.
– Furnish the detail of such supply and amount of input tax credit availed in Form GSTR-2 (Inward Supply Return) for the month immediately following the period of 180 days from the date of issue of invoice.
– An amount equal to the input tax credit availed along with interest thereon shall be added to output tax liability of the recipient.
– Interest shall be calculated at the prescribed rate from the date of availing credit till the amount added to output tax liability is paid.
– Recipient shall be entitled to avail the credit on payment made by him towards the value of supply along with the tax payable thereon.
Note:- This provision is not applicable in case of tax paid under reverse charge mechanism.
CLAIM OF CREDIT BY BANKING COMPANY OR A FINANCIAL INSTITUTION
Banking companies or a financial institution including a non-banking financial company are generally engaged in supplying services by way of accepting deposits, extending loans or advances. These companies provides a lot of taxable & tax exempt supplies and it shall be very tedious to maintain details of taxable & exempt services every month, so the government have provided them an option to:-
– either comply with the provisions of ITC reversal on proper calculations,
or
– avail only 50% of the eligible input tax credit* on inputs, capital goods and input services and the rest shall lapse [Section 17(4)]
* Eligible Input Tax Credit
Total Input Tax Credit
Less: ITC on inputs that are used for non-business purposes.
Less: ITC inadmissible on supplies i.e Blocked Credit
= Eligible ITC (Only 50% of this ITC shall be admissible)
Note:-
1. The option once exercised shall not be withdrawn during the remaining part of the financial year.
2. The restriction of 50% shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.
BLOCKED INPUT TAX CREDIT
The input tax credit shall not be available in respect of the following:-
| Sr. No. | ITC not available for | Exceptions |
| 1. | Tax paid on purchase of motor vehicles and other conveyances | – Further supply of such vehicles or conveyances
– Transportation of passengers – Imparting training on driving, flying, navigating such vehicles or conveyances – Transportation of goods |
| 2. | Tax paid on food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery | Used for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply |
| 3. | Tax paid on membership of a club, health and fitness centre | NO Exception |
| 4. | Tax paid on availing services of rent-a-cab, life insurance and health Insurance | Where
(A) 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; or (B) used for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; |
| 5. | Tax paid on providing travel benefits extended to employees on vacation such as leave or home travel concession | NO Exception |
| 6. | Tax paid on works contract services for construction (including reconstruction, renovation, additions or alterations or repairs, to the extent of capitalisation) of an immovable property (other than plant and machinery)
“Plant and Machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes– (i)Land, building or any other civil structures; (ii) Telecommunication towers; and (iii) Pipelines laid outside the factory premises. [Explanation to section. 17]
|
Where it is an input service for further supply of works contract service. |
| 7. | Tax paid on goods or services for construction (including reconstruction, renovation, additions or alterations or repairs, to the extent of capitalisation) of an immovable property (other than plant or machinery) on his own account even if such goods or services are used in the course or furtherance of business.
“Plant and Machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes– (i)Land, building or any other civil structures; (ii) Telecommunication towers; and (iii) Pipelines laid outside the factory premises. [Explanation to section. 17] |
NO Exception |
| 8. | Tax paid under composition scheme | NO Exception |
| 9. | Tax paid on goods or services or both received by a non-resident taxable person | Goods imported by him. |
| 10. | Tax paid on goods or services or both used for personal consumption | NO Exception |
| 11. | Tax paid on goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples | NO Exception |
| 12. | Tax paid u/s 74 i.e. tax paid upon Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or Suppression of facts.
[Rule 1(3)] |
NO Exception |
| 13. | Tax paid u/s 129 i.e. tax paid upon Detention, seizure and release of goods and Conveyances in transit | NO Exception |
| 14. | Tax paid u/s 130 i.e. tax paid upon Confiscation of goods or Conveyances and levy of penalty. | NO Exception |
APPORTIONMENT OF CREDIT
I. Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of input tax credit shall be restricted to so much of the input tax as is attributable to the purposes of his business
II. Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
Manner of Reversal of Input Tax Credit in respect of Inputs or Inputs Services
The amount of ITC in respect of Inputs or Inputs Service as related to purpose other than business and the amount of ITC as related to supplies other than Taxable / zero-rated supplies shall be reversed are as follows:-
Step:-1
Input Tax Credited to electronic credit ledger:-
C1 = T – (T1 + T2 + T3)
Input Tax Credited used for common purpose:-
C2 = C1 – T4
Common ITC attributable towards exempt supplies:-
D1 = (C2 × F) ÷ E
Common ITC attributable towards non-business supplies:-
D2 = C2 × 5%
Common ITC attributed to the purposes of business and for effecting taxable supplies including zero rated supplies:-
C3 = C2 – (D1 + D2)
Note:- The amount ‘C3’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax;
| Symbol | Meaning |
| T | Total input tax on ALL inputs |
| T1 | ITC on inputs used exclusively for non-business supplies. (TOTALLY DISALLOWED) |
| T2 | ITC on inputs used exclusively for exempt supplies. (TOTALLY DISALLOWED) |
| T3 | ITC inadmissible u/s 17(5). (TOTALLY DISALLOWED) |
| T4 | ITC on inputs used exclusively for taxable supplies including zero rated supplies (TOTALLY ALLOWED) |
| C1 | ITC credited to the electronic credit ledger |
| C2 | ITC on inputs used for common purpose |
| C3 | Eligible ITC attributed to the purposes of business and for effecting taxable supplies including zero rated supplies |
| D1 | Common ITC attributable towards exempt supplies. |
| D2 | Common ITC attributable towards non-business supplies. |
| E | Exempt turnover of the that tax period |
| F | Total turnover of the that tax period |
Note:-
– Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated;
– The aggregate value of exempt supplies and total turnover shall exclude the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule.
Step:-2
– The amount equal to ‘D1’ and ‘D2’ shall be added to the output tax liability of the registered person.
– This procedure has to be followed every month i.e. on monthly basis, thereafter ‘D1’ and ‘D2’ shall be calculated finally for the financial year before the due date for filing the return for the month of September following the end of the financial year to which such credit relates.
First Scenario:–
Annually (D1+D2) > ∑ Monthly (D1+D2)
Such excess along with interest thereon shall be added to the output tax liability of the registered person for a month not later than the month of September following the end of the financial year to which such credit relates.
The said person shall be liable to pay interest on the said excess amount at the rate specified for the period starting from first day of April of the succeeding financial year till the date of payment
Second Scenario:-
Annually (D1+D2) > ∑ Monthly (D1+D2)
Such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates
Manner of Reversal of Input Tax Credit in respect of Capital Goods
The input tax credit in respect of capital goods, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner:-
I. Capital goods used or intended to be used exclusively for non-business purposes or for effecting exempt supplies
– The amount of Input tax shall be indicated in FORM GSTR-2 and shall not be credited to his electronic ledger.
II. Capital goods used or intended to be used exclusively for effecting taxable supplies including zero rated supplies
– The amount of Input tax shall be indicated in FORM GSTR-2 and shall be credited to his electronic ledger.
III. Capital goods which are not covered under Point (I) & Point (II)
– The amount of Input tax shall be credited to the electronic ledger and the useful life of such goods shall be taken as 5 Year, denoted as A
Note:- When Capital Goods covered under point (i) & point (ii) covered under this point (iii) subsequently then denoted as A1 & A2 respectively
A1/A2 = Input Tax (Original as per invoice) Less 5% per qtr (or part thereof) for already used life.
Step:-1
– Total Input Tax Credit in respect of capital goods covered under point (iii) :-
Tc = A+A1+A2
– Input tax credit attributable to a tax period on common capital goods during their residual life:-
Tm = Tc/60
– The amount of input tax credit, at the beginning of a tax period, on all common capital goods whose residual life remains during the tax period, be denoted as ‘Tr’ and shall be the aggregate of ‘Tm’ for all such capital goods
Tr = Tm(1) + Tm(2)
– Amount of common credit attributable towards exempted supplies:-
Te = (Tr*F)/E
Note:- The amount Te shall be computed separately for central tax, State tax, Union territory tax and integrated tax.
Step:-2
– The amount Te along with applicable interest shall, during every tax period of the residual life of the concerned capital goods, be added to the output tax liability of the person making such claim of credit.
– This procedure has to be followed every month i.e. on monthly basis
| Symbol | Meaning |
| E | Exempt turnover of the that tax period |
| F | Total turnover of the that tax period |
Note
– Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated;
– The aggregate value of exempt supplies and total turnover shall exclude the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule.
AVAILABILITY OF CREDIT IN SPECIAL CIRCUMSTANCES
I. REGISTRATION WITHIN 30 DAYS FROM THE DATE OF LIABLE OF REGISTRATION
– A person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock (Not on Capital Goods)
– On the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.
II. VOLUNTARILY REGISTRATION
– A person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock (Not on Capital Goods)
– On the day immediately preceding the date of grant of registration.
III. PERSON OPTED FOR COMPOSITION SCHEME SWITCHES TO NORMAL
– A person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods.
– On the day immediately preceding the date from which he becomes liable to pay tax u/s 9
IV. EXEMPT SUPPLY OF GOODS OR SERVICES BECOMES TAXABLE
– A person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock related to exempt supply and on capital goods exclusively used for such exempt supply.
– On the day immediately preceding the date from which supply become taxable.
POINTS TO BE CONSIDERED FOR ABOVE I, II, III & IV POINTS:-
– Input tax credit cannot be availed in respect of any supply of goods or services or both to him after the expiry of 1 Year from the date of issue of tax invoice relating to such supply
RULES TO BE CONSIDERED FOR ABOVE I, II, III & IV POINTS:-
– The ITC on capital goods shall be claimed after reducing the tax paid on such capital good by 5% per quarter of year or part thereof from the date of invoice or such other documents.
– The registered person shall make a declaration in FORM GST ITC-01 to the effect that he is eligible to avail of ITC.
– The declaration shall specify the details relating to the input lying in the stocks, inputs contained in semi-finished or finished goods lying in stocks or as the case may be capital goods.
– The declaration shall be duly certified by a practicing chartered accountant or cost accountant if aggregate value of claim on account of central tax, state tax, integrated tax & union territory tax exceeds Rs.2.00 lakhs.
V. CHANGE IN THE CONSTITUTION OF REGISTERED PERSON
– On account of Sale, Merger, Demerger, Amalgamation, Lease or Transfer of the business with specific provision for Transfer of Liability.
– Registered person shall be allowed to transfer the Input Tax Credit which remains unutilized in his electronic credit ledger to transferee business.
Rules
– Transferor shall furnish the details of Sale, Merger, Demerger, Amalgamation, Lease or Transfer of the business in Form GST ITC-02 along with a request to transfer the unutilized ITC to the transferee.
– Transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that transfer of business has been done with a specific provision for transfer of liabilities.
– Transferee shall accept the detail so furnished by the transferor then un-utilized credit specified in FORM GST ITC-02 credited to his electronic credit ledger.
VI. PERSON SWITCHING TO COMPOSITION SCHEME FROM NORMAL OR TAXABLE SUPPLY BECOMES WHOLLY EXEMPT
– He shall pay an amount by way of debit in electronic credit ledger or electronic cash ledger an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock.
– On capital goods as reduced by such percentage as may be prescribed.
– On the day immediately preceding the date of exercising such option (composition scheme) or the date of such exemption (Taxable supply become wholly exempt)
– Any balance lying after payment of such amount shall be lapse.
REVERSAL OF INPUT TAX CREDIT
– For inputs lying in stock, and inputs contained in semi-finished and finished goods lying in stock
The ITC shall be calculated proportionately on the basis of corresponding invoices on which credit has been availed by the registered taxable person on such inputs
– For capital goods lying in stock
The input tax credit involved in the remaining residual life in months shall be computed on pro-rata basis taking the residual life as five years;
Illustration
1. Capital goods have been in use for 4 years, 6 month and 15 days.
2. The residual remaining life in months= 5 months ignoring a part of the month
3. Input tax credit taken on such capital goods=Ç
4. Input tax credit attributable to remaining residual life=C multiplied by 5/60
– The amount determined above shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03
– The amount shall be determined separately for input tax credit of IGST and CGST.
– Where the tax invoices related to the inputs lying in stock are not available, the registered person shall estimate the amount based on the prevailing market price of goods on the effective date of occurrence of any of the events i.e opt for composition scheme & taxable supply becomes wholly exempt as the case may be.
VII. SUPPLY OF GOODS OR PLANT & MACHINERY ON WHICH ITC HAS BEEN TAKEN
– Pay an amount equal to the
| Input tax credit taken on the said capital goods or plant and machinery reduced by such percentage | Whichever is higher |
| Tax on the transaction value of such capital goods or plant and machinery determined u/s 15 |
– In case of refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, pay tax on the transaction value of such goods determined under section 15.
VII. REVERSAL OF INPUT TAX CREDIT IN CASE OF CANCELLATION OF REGISTRATION (SECTION 29)
– He shall pay by way of debit in electronic credit ledger or electronic cash ledger an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock* or the output tax payable on such goods whichever is higher.
* The ITC shall be calculated proportionately on the basis of corresponding invoices on which credit has been availed by the registered taxable person on such inputs
– On capital goods as reduced by such percentage as may be prescribed** or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
** The input tax credit involved in the remaining residual life in months shall be computed on pro-rata basis, taking the residual life as five years;
Illustration
1. Capital goods have been in use for 4 years, 6 month and 15 days.
2. The residual remaining life in months= 5 months ignoring a part of the month
3. Input tax credit taken on such capital goods=Ç
4. Input tax credit attributable to remaining residual life=C multiplied by 5/60
– The amount determined above shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GSTR-10
– The amount shall be determined separately for input tax credit of IGST and CGST.
– Where the tax invoices related to the inputs lying in stock are not available, the registered person shall estimate the amount based on the prevailing market price of goods on the date of cancellation of registration.
TAKING INPUT TAX CREDIT IN RESPECT OF INPUTS AND CAPITAL GOODS SENT FOR JOB WORK
| INPUTS | CAPITAL GOODS |
| 1. The 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 being first brought to his place of business | 1. The principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job work without being first brought to his place of business. |
| 2. Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the job worker within 1 Year of being sent out | 2. Where the capital goods sent for job work are not received back by the principal within 3 Year of being sent out |
| 3. 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 and the tax shall be pay as per provisions of the act | 3. It shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out and the tax shall be pay as per provisions of the act |
| Note:- Above provisions shall not apply to moulds and dies, jigs and fixtures or tools sent out to a job worker for job work. | |
Conditions & Restrictions
– The inputs or capital goods shall be sent to the job worker under the cover of a challan issued by the principal including where the inputs or capital goods are sent directly to job-worker.
– The details of challan in respect of goods dispatched to a job worker or received from a job worker during a tax period shall be included in FORM GSTR-1 furnished for that period.
– If the inputs or capital goods are not returned to the principal within the time 1 Year or 3 Year as the case may be, the challan issued shall be deemed to be an invoice for the purposes of this Act.
MANNER OF DISTRIBUTION OF CREDIT BY INPUT SERVICE DISTRIBUTOR
INPUT SERVICE DISTRIBUTOR means an office of the supplier of goods or services or both which receives tax invoice issued under Section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of tax paid on the said services to a supplier of taxable goods or services or both having the same PAN as that of the said office.
Terminology in respect of ISD concept
1. Relevant period shall be
– if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
– if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed;
2. Recipient of credit means the supplier of goods or services or both having the same PAN as that of the ISD
3. Turnover in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act means the value of turnover reduced by the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.
POINTS TO BE REMEMBER
– The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient.
– The credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable.
– The credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients.
– The credit can be distributed to the recipients of credit against a document.
– The amount of the credit distributed shall not exceed the amount of credit available for distribution.
– The input tax credit available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR-6
– The Input Service Distributor shall separately distribute the amount in-eligible as input tax credit (blocked credit) and the amount eligible as input tax credit.
– The input tax credit on account of central tax, State tax, Union territory tax and integrated tax shall be distributed separately.
– Registered person can apply for multiple ISD i.e different offices like marketing division; security division etc. may apply for separate ISD.
MANNER OF DISTRIBUTION
– The input tax credit that is required to be distributed to one of the recipients ‘R1’, whether registered or not from amongst the total of all the recipients to whom input tax credit is attributable, including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any reason, shall be the amount, “C1”, to be calculated by applying the following formula:-
C1 = (t1 ÷ T) × C
C = “C” is the amount of credit to be distributed
t1 = “t1” is the turnover of person R1 during the relevant period
T = “T” is the aggregate of the turnover of all recipients during the relevant period
DISTRIBUTION
| Input Tax Credit on account of | Recipient located in
same state of ISD |
Recipient located in
other than state of ISD |
| Integrated Tax | IGST | IGST |
| Central Tax | CGST | CGST |
| State Tax | CGST | CGST |
Points to be considered:-
– The Input Service Distributor shall issue an ISD invoice clearly indicating in such invoice that it is issued only for distribution of input tax credit.
– The Input Service Distributor shall issue an ISD credit note for reduction of credit in case the input tax credit already distributed gets reduced for any reason.
– Any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor shall be distributed in above manner and such credit shall be distributed in the month in which the debit note has been included in the return in FORM GSTR-6.
– Any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor shall be apportioned to each recipient in the same ratio in which input tax credit contained in the original invoice was distributed the amount so apportioned shall be
– Reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR-6; and
– added to the output tax liability of the recipient and where the amount so apportioned is in the negative by virtue of the amount of credit to be distributed is less than the amount to be adjusted.
– The Input Service Distributor shall on the basis of the ISD credit note issue an ISD Invoice to the recipient entitled to such credit and include the ISD credit note and the ISD Invoice in the return in FORM GSTR-6 for the month in which such credit note and invoice was issued.
– Where the Input Service Distributor distributes the credit in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipients along with interest, and the provisions of section 73 or section 74, as the case may be shall apply for determination of amount to be recovered.
Explanation.- For the purposes of this Chapter,-
(1) “Capital goods” shall include “plant and machinery” as defined in the Explanation to section 17;
(2) For determining the value of an exempt supply as referred to in sub-section (3) of section 17:-
(a) The value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and
(b) The value of security shall be taken as one per cent. of the sale value of such security
Seventh Schedule List-I (Union List)
Entry no. 84
Duties of excise on tobacco and other goods manufactured or produced in India except—
(a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph ( b) of this entry.
Entry no. 92A
Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
Seventh Schedule List-II (State List)
Entry no. 51
Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:-
(a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics, but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
Entry no. 54
Taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List I.
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