GST-Input Tax Credit under Revised model GST Law

Definitions

> Input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business

> “Capital goods” means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used 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” in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub-section (3) of section 8, but does not include the tax paid under section 9

> “Input tax credit” means credit of ‘input tax’ as defined in sub-section(55)

> “Input Service Distributor” means an office of the supplier of goods and / or services which receives tax invoices issued under section 28 towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN as that of the office referred to above.

> “job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly.

TRANSITIONAL PROVISIONS

Amount of Cenvat Credit carried forward in a return to be allowed as input tax credit (Sec 167)

> Person eligible for carried forward of cenvat Credit : Every registered taxable person, other than person opting to pay tax under composition scheme.

> Time limit for furnishing return under earlier law

      – In case of VAT and Entry tax: within 90 days

      – In other cases: Time limit mentioned in earlier laws

> Eligible Credit : Input Credit which are unutilised relating to period ending with the day immediately preceding the appointed day (i.e. Credit unutilised as on 31.03.2017)

> Credit as is attributable to any claim under sec 3, 5(3), 6 & 6A of CST Act 1956 and in the manner and prescribed under rule 12 of CST (Registration and turnover) rules 1957.

        -If it is substantiated : Refund shall be allowed under earlier law

        -If it is not substantiated : It shall not be eligible for credit.

> The said amount of credit must be admissible as input tax under GST Act.

Unavailed cenvat credit on capital goods, not carried forward in a return to be allowed (Sec 168)

 > Person eligible for cenvat Credit of capital goods : Every registered taxable person, other than person opting to pay tax under composition scheme.

> Eligible Credit : Unavailed Credit of capital goods, which are not carried forward in the return for the period ending with the day immediately preceding the appointed day (i.e. Credit unutilised as on 31.03.2017)

> Cenvat credit must be admissible under both the laws (Earlier as well as GST act)

> The Expression “Unavailed cenvat credit” means the amount that remains after subtracting the amount of cenvat credit already availed in respect of capital goods from the aggregate amount of total cenvat credit

> Capital Goods means goods as defined under sec 2(a) of CENVAT credit rules, 2004

Credit of eligible duties and taxes in respect of inputs held in stock to be allowed in certain situations (Sec 169)

> Person eligible under this section: Person not liable to be registered under earlier law or engaged in manufacture of exempted goods or provision of exempted service or was providing works contract and availing benefit u/n 26/2012- service tax or first stage or second stage dealer or registered importer.

     – In case of SGST : person not liable to be registered  or sale of exempted goods under earlier law

> Eligible credit of duties/taxes of input held in stock/semi-finished/finished stock as on appointed day. (In case of SGST: VAT/Entry Tax)

> Conditions for availing benefit under sec 169

  – Such input used or intended to be used in taxable supplies

  – Benefit must be pass on by way of reducing price of goods/service

  – Person eligible for input tax credit on such input under this act

  – Person must be in possession of documents evidencing payment of tax

  – Supplier of service not eligible for any abatement

  – Invoice documents were issued not earlier than 12 month from appointed day

  – In case of SGST: In addition of above conditions mentioned, the said input must be admissible under earlier law

Credit of eligible duties and taxes in respect of input held in stock to be allowed in certain situations (Sec 170)

> A registered taxable person engaged in manufacture of non-exempted as well as exempted goods under central excise act 1944 or provision of non-exempted as well as exempted service under chapter V of finance act 1994.

> The amount of cenvat credit carried forward in a return under sec 167.

> The amount of cenvat credit of eligible duties in respect of input held in stock/semi-finished goods/finished goods, relating to exempted goods or service, in terms of sec 169.

Credit of eligible duties and taxes in respect of input or input service during transit (Sec 171)

> If a person has paid duties or tax before the appointed day and input or input service received after the appointed day (i.e. 31.03.2017), then such person shall be entitled for credit of eligible duties or tax in respect of input or input service received after appointed day.

> Condition: Invoice or other duty paying document must be recorded in books of account within 30 days from the date of appointed day.

> The said registered taxable person shall furnish a statement in such manner as may be prescribed

CHAPTER-V

Eligibility and Condition for taking Input Tax Credit (Sec 16)

> Every registered taxable person shall, subject to conditions as prescribed and provision of sec 44, be entitled to take credit of input tax charged on any supply of goods/services which are used or intended to used in course or furtherance of his business if

following conditions are satisfied.

      – Possession of tax invoice

      – Received goods and/or services

      – Tax charged actually been paid to Govt.

      – Furnished monthly return u/s 34.

> In case of service: if recipient fails to pay to supplier within 3 months from the date of invoice, amount equal to ITC availed by recipient shall be added to his output tax liability along with interest thereon.

> In case of Pipelines and Telecommunication tower fixed to earth by foundation or structural support including foundation and structural support, credit of input tax can be claimed as follows:

        – Not exceeding 1/3 of total input credit in 1st year

        – Not exceeding 2/3 of total input credit in 2nd year

          including credit availed in 1st year.

        – Balance credit in subsequent financial year

> Last date for availing cenvat credit: date on which monthly return for the month of September following the end of year (i.e. 20th oct, 20..) or furnishing relevant annual return (i.e. 31st dec, 20..), whichever is earlier.

Input Tax Credit shall not be available in following cases (Sec 17)

> Motor Vehicles and other conveyance

     In some cases credit shall be allowed: If it is used for making the taxable supplies; Namely

     -Further supply of such vehicle or conveyance

     -Transportation of passenger and/or goods

     -Imparting training on driving, flying etc such

      vehicles or conveyance.

> Supply of goods and services, Namely,

(i) food and beverages, outdoor catering, beauty   treatment, health service, cosmetic and plastic surgery except if such Inward supply are used for making outward taxable supplies of same category of goods and services.

(ii) Membership of a club, health and fitness centre;

(iii) Rent-a-cab, life insurance, health insurance except where the govt notifies services which is obligatory for an employer to provide to its employee;

 (iv) Travel benefit extended to employee on vacation such as leave or home travel concession.

> Works contract service when supplied for construction of immovable property, other than plant & machinery, except where it is an input service for further supply of works contract service

> Goods or service received by a taxable person for construction of an immovable property on his account, other than plant & machinery, even when used in course or furtherance of business.

The word “construction” includes re-construction, renovation, additions, or alterations or repairs, to the extent of capitalization to the said immovable property.
–“Plant & Machinery” means apparatus, equipment, machinery, pipelines, telecommunication tower fixed to earth by foundation or structural support that are used for making outward supply and includes such foundation and structural support but excludes land, building or any other civil structures.

> Goods and/or service on which tax is paid under sec 9 (Composition Scheme)

> Goods and/or service used for personal consumption

> Goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample.

 > Any tax paid in sec 67, 89 & 90 (Demand & Recovery/Search Seizure)

Cenvat Credit Utilization

Input Tax Credit	Tax Credit Utilization Preference
	1	2	3
IGST	IGST	CGST	SGST
CGST	CGST	IGST	X
SGST	SGST	IGST	X

No set-off possible for CGST to SGST & Vice-versa

Taking Input tax credit in respect of inputs sent for job work (Sec 20)

> The “Principal” shall be allowed input tax credit on input/capital goods sent to a job-worker for job-work subject to such conditions and restrictions as may be prescribed.

> The “Principal” shall be entitled to take credit of input/capital goods tax on inputs even if the inputs directly sent to a job-worker without their being first brought to his place of business.

> If input/capital goods (other than moulds and dies, jigs and fixture, or tools) sent for job work are not received back by principal or are not supplied from the place of business of job worker within 1 year: It shall be deemed that such input had been supplied by the principal to the job worker on the day when the said inputs were sent out. If input/capital goods sent directly to job worker, period of 1 year shall be counted from the date of receipts of inputs by the job worker.

> Nothing contained in this section shall apply to moulds and dies, jigs and fixtures, tools sent out to a job-worker for job work.

Availability of credit in special circumstances (Sec 18)

>  A person applied for registration within 30 days from the date he become liable and granted such registration: Entitled for input tax credit in respect of input/ Semi-finished/finished goods held in stock on day immediately preceding the date for which he become liable to pay.

>  Any person takes registration voluntarily: Entitled for input tax credit in respect of input/ Semi-finished/finished goods held in stock on day immediately preceding the date of grant of registration.

>  Any person cease to pay tax under composition scheme: Entitled for input tax credit in respect of input/ Semi-finished/finished goods held in stock and CAPITAL GOODS on day immediately preceding the date he become liable to pay tax under sec 8.

> If exempted supply by a registered taxable become a taxable supply: Entitled for input tax credit in respect of input/ Semi-finished/finished goods held in stock relatable to such exempted supply and CAPITAL GOODS exclusively used for such exempt supply on day immediately preceding the date when such supply become taxable.

> In all cases of sec 18, Input credit shall be eligible for last 1 year from the date of invoice.

> Recovery of input tax credit and interest thereon (sec 19) : If credit has been taken wrongly then same shall be recovered in accordance with the provision of this act.

MISCELLENOUS

> Explanation for the purpose of Sec 16(2)(b), The expression “Goods received” includes goods delivered by supplier to recipient of any other person on the direction of supplier, befoe or during movement of goods, either by way of transfer of documents of title of goods or otherwise.

> If a person used good or service partly for business purpose and partly for other purpose, Cenvat credit shall be restricted to so much of the input tax as is attributable to the purpose of his business.

> If a person used good or service partly for taxable supplies including zero-rated supplies and partly for effecting exempt supplies, Cenvat credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

> In case of banking company or financial institutions including NBFC, engaged in supply of service by way of accepting deposit, extending loans or advances shall have option to avail 50% of total input tax in that month if they are engaged in taxable or exempted supplies of services.

> If a registered taxable person who has availed of ITC switches over into composition scheme or goods or service supplied by him become absolutely exempt under sec 11, then he shall be required to debit his electronic credit or cash ledger equivalent to the credit of input tax in respect of input held in stock/semi-finished/ finished goods/ and capital goods on the day immediately preceding the date of such switch over or date of exemption.

> In case of supply of capital goods or plant and machinery on which credit has already availed, the he shall pay an amount equal to ITC availed on such goods as reduced by % as may be specified or the tax on transaction value, whichever is higher.

      -In case of supply of refractory bricks, moulds and dies, jigs and fixture as scrap then he shall pay the tax on transaction value.