GST – Input Tax Credit – when allowed and when not allowed – simplified

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ITC Not allowed / to be reversed ITC allowed / credit to be taken
1) Motor Vehicle & Other Conveyances Motor Vehicles & Other Conveyances:

– For further supply (Trading);

– Transport of passengers; (RTC Bus)

– Transport of Goods; (VRL, NAVATA)

– Driving education/Training (Maruthi Driving School)

2) Food & Beverages,

Outdoor Catering,

Beauty Treatment,

Health Services,

Cosmetic & Plastic Surgery

If the goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available.

Example:

Mr. D purchases cosmetic creams to supply it to a customer, then credit of ITC paid on purchases will be allowed.

3) Membership of

– Club

– Health Centre

– Fitness Centre

4) Rent – a -Cab

Life Insurance

Health Insurance

1. Government makes it obligatory for employers to provide it to its employees

2. Goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available

Example: Mr. D takes the service of rent-a-cab to supply to Mr. M, a customer, then credit of ITC paid on purchases will be allowed.

5) Travel benefits to Employees (Ex: LTA)
6) Works Contract services, when supplied for construction of an Immovable Property. 1. Works Contract Services, when supplied for construction of P&M

2. One works contract service is input for another works contract;

7) Goods and/or services for construction of an immovable property, whether to be used:

– for personal use (or)

– business use

8) Goods / Services on which Composition Tax is paid;

9) When the Regd. Person opts to composition scheme (CS), then he needs to debit e-credit ledger for,

– inputs held in stock;

– inputs held in semi-finished stock

– inputs held finished goods stock;

– on capital goods (after proportionate reduction)

on the day immediately preceding the date on which opts for CS.

When the Regd. Person ceases to composition scheme (CS) & becomes a taxable person, then he is eligible for taking credit:

– inputs held in stock

– inputs held in semi-finished / finished goods held in stock;

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– on capital goods (after proportionate reduction)

on the day immediately preceding the date of cease in CS.

Condition: inputs/ capital goods invoice < 12 months;

10) Goods/ Services – received by a Non-resident taxable person Goods/ Services – Imported by a Non-resident taxable person
11) Goods/ Services are used for

– Personal Consumption;

12) Goods:

– Lost

– Stolen

– Destroyed

– Written off

– Disposed of by Gift/ Free sample

13) any tax paid due to

– non-payment of tax;

– short tax payment of tax;

– excessive refund;

14) ITC utilized or availed by the reason of

– fraud (or)

– will-full misstatements (or)

– suppression of facts (or)

15) confiscation and seizure of goods.

16) Input Credit not taken < Time limited.
17) When depreciation is claimed on the tax component of the Capital Goods (or) Plant & Machinery under IT Act.
18) Not applied for GST Registration, within 30 days from the date which he becomes liable to for registration 1. When applied for GST Registration, within 30 days from the date which he becomes liable to for registration under GST can take credit of-

– inputs held in stock;

– inputs held in semi-finished / finished goods held in stock;

– on capital goods (after proportionate reduction);

on the day immediately preceding the date, becomes taxable.

Condition: inputs/ capital goods invoice < 12 months.

19) On the exempted goods / services;

20) When taxable goods/services become non-taxable, need to debit, e-credit ledge, for the:

– inputs held in stock;

– inputs held in semi-finished / finished goods held in stock;

– on capital goods (after proportionate reduction);

on the day immediately preceding the date, becomes exempted.

When exempted goods/ services becomes taxable,

he is eligible for taking credit:

– inputs held in stock

– inputs held in semi-finished / finished goods held in stock;

– on capital goods (after proportionate reduction)

on the day immediately preceding the date, becomes taxable.

Condition: inputs/ capital goods invoice < 12 months;

– When goods are sent to Job work and they are returned

– < 1 year, in case of inputs, or

– < 3 years, in case of Capital Goods;

When the goods are received:

– in instalments (or)

– in lots;

credit to be taken, on receipt of final instalment/ lot.

21) When Recipient fails to pay to supplier for the value of goods/services < 180 days from date of invoice, recipient to

– reverse the input credit taken; and

– pay interest thereon;

Later on, if recipient pays to supplier, the value of goods/ services, then

– take credit of, input already reversed; and

– take credit of, interest paid thereon.

General Conditions for taking credit:

– possess Tax Invoice / another document, as prescribed;

– received the goods / services;

– tax charged by Supplier, has been paid to Govt.

– Supplier has furnished the Tax return;

Author Bio

Name: VIjay
Qualification: CA in Job / Business
Company: IME
Location: hyderabad, Andhra Pradesh, IN
Member Since: 28 Jun 2017 | Total Posts: 3

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Tags : goods and services tax (3423) GST (3012)

4 responses to “GST: Input Tax Credit- when allowed and when not allowed- simplified”

  1. sudhir Saxena says:

    We are providing education exempted services and we can not claim ITC on goods and services. At the time of disposing off the different capital goods as scrap is there any GST liability on that sale? please clarify.

  2. Netaji Dhundale says:

    Sir,

    Your artical is very good but as per my knowledge above point is not cover any Rule. Can you provide the same.

    Thanking you.

    • Rajesh says:

      21) When Recipient fails to pay to supplier for the value of goods/services < 180 days from date of invoice, recipient to
      – reverse the input credit taken; and
      – pay interest thereon;

      how credit is possible of interest paid due to fails to pay to supplier for the value of goods/services < 180 days from date of invoice,

  3. mayur says:

    Nice Article

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