This article is about the Input tax credit under Goods and services acts
As per section 16 of CGST act, a registered persons is eligible to take credit of inputs charged on supply of goods or services or both if input is used for the furtherance of business.
A recipient of goods or services or both can take the credit of input tax only if he is in the possession of valid invoice or debit note issued by the registered supplier under goods and services acts and he has received goods or services or both. These are the two basic conditions for taking a credit of input tax charged on supply of goods or services or both.
As per section 17(2) of CGST act, if a registered person is effecting both taxable/zero rated supplies and exempted supplies both, registered person can take Input tax credit of only those inputs which are used for effecting taxable/zero rated supplies.
Following is the list of supplies for which Input tax credit under GST cannot be utilized and mentioned specifically in section 17(5) and subsections of section 17(5).
1. *1 Motor Vehicles and other conveyances.
2. *2 Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.
3. Membership of Club, health and fitness centre.
4. *3Rent a cab, life insurance and health insurance.
5. Expenses of travel benefit extended to employees on vacation or home travel concession.
6. *4Work contract services when supplied for construction of immovable property(other than plant and machinery)
7. Goods or services or both received by a taxable person for construction of immovable property including if these goods and services or both are used for furtherance of business.
8. Input tax for supplies from Composition dealer.
9. Goods or services or both used by non-resident person except goods imported by him.
10. Goods or services or both used for personal consumption.
11. Goods lost, destroyed, stolen, written off or disposed by way of gift or free samples
12. Any tax paid in accordance with the provisions of sections 74,129 and 130.
As per section 16(2), if a recipient of goods or services or both fails to pay the supplier towards the value of invoice within 180 days from the issue of invoice by the supplies, the amount equal to input tax credit availed by the recipient shall be added back to his output tax liability along with the interest of as may be prescribed.
The rate of interest in eighteen per cent as per section 50(1) of CGST act.
Input tax credit under GST in certain circumstances:
1. If a person who become liable to registration and applied for registration within 30 days and granted registration, he is eligible to take credit of inputs held in stock including semi-finished and finished held in stock immediately preceding the date from which is became liable to pay taxes under provision of this act.
2. As per section 18(4) A person registered as composition under section 10 and became liable to pay tax under section 9 is eligible to take credit of inputs held in stock including semi-finished and finished held in stock immediately preceding the date from which is became liable to pay tax under section 9.
3. A registered person shall not be entitled to take input tax credit in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.
Input tax credit for Goods sent for Job work under GST
1. As per section 19(1) the principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job-worker for job work.
2. As per section 19(4) the principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job-worker for job work.
3. As per rule 45(1) of Central Goods and Services Tax Rules 2017, the inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job worker.
4. As per rule 45(3) the, return should be furnished quarterly containing detail of goods dispatched to or received from a job worker or goods sent for one job to another job work in FORM GST ITC-04, and the last date shall be 25th of succeeding month of said quarter.
5. Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods has been supplied to said job worker on the day when the said goods were sent out and the said supply shall be declared in FORM GSTR -1 and the principal shall be liable to pay the tax along with applicable interest.
Set off of Input tax credit for CGST act, SGST acts and IGST act
1. As per section 49(4) of CGST act, the amount available in credit ledger may be used for payment of CGST and IGST.
2. Section 49(5) of CGST act, specified the manner for utilization for Input Tax credit of available in electronic credit ledger which is be understood with the help following table/matrix
|CGST / UTGST Output Liability||SGST Output Liability||IGST Output Liability|
|CGST/UTGST Credit||SGST Credit||IGST Credit|
|IGST Credit||IGST Credit||SGST AND CGST Credit|
a. CGST/UTGST Credit can be utilized first for the payment of CGST Liability and Then for Paying IGST Liability.
b. SGST Credit can be utilized for first for the payment of SGST liability and then for payment of IGST Liability.
c. IGST Credit can be first for the payment of IGST and then for payment for SGST and CGST Liability.
In short, we cannot utilize the Input Tax credit of SGST for payment of CGST and Input Tax credit of of CGST for payment of SGST and first the Input Tax credit of should be utilized for the payment of taxes of respective acts then for other acts under GST.
*Note 1 – Credit for supply of Motor Vehicle is available if they are used for further supply of such vehicles and conveyances or transportation of passengers or transportation of goods or such vehicles are used imparting training on driving, flying, navigating such vehicles or conveyance.
*Note 2 – In case where inward supply of goods or services or both of a particular category is used by a registered person for making outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply, input tax credit for the same available.
*Note 3 – If any services are obligatory for an employer under any law for time being in force or such inward supplies are used for further outward taxable supply of same category of goods or services or both or as an element of a taxable composite or mixed supply, input tax credit for the same available.
*Note 4 – If Input work contract services are used for further use supply of work contract services, input tax credit for the same is available.