Confusion on definition 2(62) ” Input Tax”

After 1 month on 01/07/2021 ” GST Act , 2017″ will celebrate its 4th anniversary, but after being most complicated and confused taxation system still dependent on plethora of department rulings due to lack of technical and theoretical intricacies.

Among all of the complication, the Input Tax Credit on supply of goods & services to recipient by supplier is most common among them.

After detailed analysis of definition 2(62) ” Input tax” i.e.

“INPUT TAX” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes

(a) the integrated goods and services tax charged on import of goods

(b) the tax payable under the provisions of sub sections 3 and 4 of section 9

(c) the tax payable under the provisions of sub sections 3 and 4 of section 5 of the Integrated Goods and Services Tax Act

(d) the tax payable under the provisions of sub sections 3 and 4 of section 9 of the respective State Goods and Services Tax Act or

(e) the tax payable under the provisions of sub sections 3 and 4 of section 7 of the Union Territory Goods and Services Tax Act,  but does not include the tax paid under the composition levy

From the above definition, It is clearly seems that in order to fulfill condition & restriction for entitlement of ITC under sec 16(1), definition of “Input Tax” play very important role. It is clearly set out that registered person shall eligible to take ITC of tax charged on invoice by the supplier of goods & services to him.

Suppose Mr. A (Supplier) supply goods for value of Rs. 5,00,000/- charging 12% rate of tax of Rs. 60,000/- to Mr. Y (Recipient) than the tax charged by the supplier in the invoice is only ITC eligible to Mr. Y (recipient).

But If Mr. Y (Recipient) who is taking services which are covered under Reverse Charge Mechanism , than as per above definition ” Tax Payable” under 2(62)b, 2(62)c, 2(62)d, 2(62)e shall be treated as Input Tax. Suppose, Mr. Y (Recipient) is paying royalty of Rs. 100000/- to contractor/govt. than Mr. Y is liable to pay tax @ 18% under RCM  of Rs. 18000/- to govt. but Mr. Y paid tax @ 5% on royalty amount i.e 5000/- . Now, the question the arise,

Whether  Mr. Y get ITC  on the amount actually paid by him i.e 5000/- or the amount of tax payable i.e 18000/– ????????

However, definition of “Input tax” clearly talks about ” Tax Payable” under sec 9(3) and sec 9(4) under GST Act, 2017 shall be considered as input tax.

From the above detailed analysis Mr. Y shall get ITC of Rs. 18000/-