Availability of Input Tax Credit in Special Circumstances under GST

As per Section 18 of CGST Act, there are possibilities and conditions for the availability of input tax credit in special circumstances as below:

(a) Availability of Input tax credit in case of Compulsory Registration

When a person becomes liable to registration and he has applied for registration within 30 days from the date he becomes liable to registration, he can avail input tax credit of –

1. Inputs held in stock

2. Inputs contained in semi-finished and finished goods held in stock

on the day immediately preceding the date from which he becomes liable to pay tax.

Example: ABC, a company, crosses the turnover limit of Rs.20 Lacs for registration on 01/06/2018 and applies for registration on 20/06/2018 and is granted registration on 01/07/2018 – It can take input tax credit of inputs held in stock/semi-finished/finished goods held in stock as on 31/05/2018.

(b) Availability of Input tax credit in case of Voluntary Registration

When a person takes voluntary registration under sub-section (3) of section 25 of CGST Act, he is eligible to take input tax credit of –

1. Inputs held in stock

2. Inputs contained in semi-finished and finished goods held in stock

on the day immediately preceding the date of grant of registration.

Example: XYZ applies for registration on 15/06/2018 and is granted registration on 01/07/2018, it can take input tax credit of inputs held in stock/semi-finished/finished goods held in stock as on 30/06/2018.

(c) Availability of Input tax credit in case of Composition Scheme ceases

The registered person who pays tax under composition scheme as per section 10, ceases to pay tax under this section, he can take input tax credit in respect of –

1. Inputs held in stock

2. Inputs contained in semi-finished and finished goods held in stock

3. Capital goods

on the day immediately preceding the date from which he becomes liable to pay tax as regular tax payer under section 9.

Example: EFG, a composition tax payer ceases to pay tax under section 10 on 01/04/2018, it can take input tax credit of inputs held in stock/semi-finished/finished goods held in stock and input tax credit on capital goods available as on 31/03/2018.

(d) Availability of Input tax credit in case of exempted supply becomes taxable supply

Where any goods or services or both supplied by a registered person become taxable supply, such person can take input tax credit in respect of –

1. Inputs held in stock – related to such exempt supply

2. Inputs contained in semi-finished and finished goods held in stock – related to such exempt supply

3. Capital goods – used exclusively for effecting exempt supply

on the day immediately preceding the date from which such supply becomes taxable.

Specific Conditions:

1. Input tax credit is available for the above said cases only in respect of goods and not in respect of services

2. Input tax credit on the tax invoices older than one year from the date of tax invoice are not eligible

3. Input tax credit in respect of capital goods is available only after reducing the tax paid on such capital goods by 5% per quarter from the date of the invoice

4. The registered person shall make a declaration in Form GST ITC-01 containing the details of stock or inputs or capital goods within 30 days from the date of becoming eligible to avail input tax credit

5. The declaration in Form GST ITC-01 should be duly certified by either a practising chartered accountant or a cost accountant if the aggregate value of the claim exceeds Rs.2 Lacs

6. The input tax credit claim should be verified with the corresponding details furnished by the corresponding suppliers in GSTR 1/GSTR 4

Availability of Input tax credit in case of change in the constitution

A registered person can transfer the remaining balance of input tax credit available in his electronic credit ledger, where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities to such sold, merged, demerged, amalgamated, leased or transferred business.

Reversal of Input tax credit in special circumstances

1. Where any registered person who is availing input tax credit and later opts for composition scheme under section 10 or where the goods or services or both supplied by him become wholly exempt supply, he shall pay an amount equal to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods reduced by 5% per quarter from the date of invoice, on the day immediately preceding the date of exercising of such option, by way of debit in his electronic credit ledger or electronic cash ledger. Any remaining credit, after payment, in the electronic ledger will lapse.

2. Where the capital goods or plant and machinery is supplied, the registered person has to pay an amount equal to input tax credit taken on such capital goods or plant and machinery, reduced by 5% per quarter from the date of invoice or the tax on the transaction value determined under section 15, whichever is higher. The taxable person may pay tax on the transaction value of refractory bricks, moulds, dies, jigs and fixtures when supplied as scrap.