Available Input Tax Credit Under GST Act

Under GST the text Claim and avail are two different concepts..

We, every-body under stand that the prime concept of input tax credit arise under Goods and Service Tax arise from Section 41 by the golden sentence ‘entitled to take eligible input put credit’.

While analyse for the sentence entitled to take eligible input tax credit, we have to refer sub section (1) of Section 41 and sub section (1) of the Section 16 of the Central Goods and Service Tax Act, both the section begins as follows:

“ Every registered person shall subject to conditions and restrictions as may be prescribed”

So, any registered person who interested to take the input tax credit on the GST common portal, he must know what are the conditions and what are the restriction were prescribed under the CGST Act.

ENTITLED TO TAKE ELIGIBLE INPUT TAX CREDIT CONDITIONS PRESCRIBED :

For example under sub-Section (2) of Section clause (a) , (b), (c) and (d) were conditions prescribed for a registered who can entitled to take the input tax credit.

(a) He is in possession of Tax Invoice or Debit note issued by a supplier registered under this (CGST Act) or such other tax paying documents as may be prescribed.

(b) He has received the goods or Services or both

(c) In respect of any tax invoice, to take the input tax credit, being the tax charged particularly on the tax invoice, the seller has been actually furnished details in the tax period return and against the output tax liability, the tax has been paid to the government either by cash payment or through utilisation of input tax admissible .

(d) He has furnished the return under Section 39, say form GSTR 3-B.

(e) Second Proviso of clause ( d) of sub section (2) of Section 16 condition prescribed that against his inward supply received, (other than in the case of reverse charge transactions on which tax payable by him) if any registered person entitled to take the eligible input tax credit, he shall make payment for entire total tax invoice amount to the supplier within a period of 180 days from the date of the tax invoice.. In case if he fails to pay to the supplier, depends up on the payment made for the particular tax invoice, proportionate an amount equal to the input tax availed by the recipient shall add to his output tax liability in the upcoming tax period return. Subject to addition condition that whenever the recipient made payment against the due for the particular tax invoice, he shall be entitled to reclaimed and avail the credit of input tax credit thereof.

As soon as the registered person take his eligible input tax credit in his return the credit will be available in the Electronic Credit Ledger, His claim is provisionally accepted , subject to matching, mis-matching elements with the supplier report in his form GSTR-1.

CHECK WHETHER YOU ARE ENTITLED TO TAKE ELIGIBLE INPUT TAX CREDIT OR NOT- only specified class of person can avail certain specified input tax credit amount- restrictions prescribed. others are not eligible to entitled to take the credit in the return.

Whereas the Goods and Service Tax Act prescribed certain restrictions to take input tax credit by the recipient registered person, which can find by the clause “ Available credit” and “shall Not Available the credit “.

CONDITION AND RESTRICTION TO AVAIL CREDIT TO BE CONSIDERED TO DETERMINE WHETHER SUCH INPUT TAX CREDIT IS ELIGIBLE OR NOT AND ENTITLED TO TAKE CREDIT IN THE RETURN:

Even a registered person having tax invoice on the supply received, actually received the goods or services or both, the supplier also reported details in his return under Section 39, payments were made within the period specified, however under certain stage the recipient could not take the input tax credit in the return, because the CGST prescribed conditions and restriction for certain input tax credit to certain specified person that he could not avail, hence under such circumstances the recipient is not eligible to take such input tax credit in the return. For example Section 17 of CGST prescribed certain conditions and restrictions for such availment of input credit.

Section 17

(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

(Rule 42 and 43)

(4) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. Of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:

Provided further that the restriction of fifty per cent. Shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

(a) motor vehicles and other conveyances except when they are used––

(i) for making the following taxable supplies, namely:—

(A) further supply of such vehicles or conveyances ; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

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

(iii) rent-a-cab, life insurance and health insurance except where––

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession;

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation.––For the purposes of clauses (c) and (d), the expression

“construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10;

(f) goods or services or both received by a non-resident taxable person except on goods imported by him;

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

(i)any tax paid in accordance with the provisions of sections 74, 129 and 130.

All the input tax taken in the return were available in the Electronic Credit Ledger and such claimed input tax credit amounts are credited to his Electronic Credit Ledger on provisional basis, finally accepted subject to matching with supplier details furnished in his return. But under CGST Act, to avail certain specified input tax credit amount, for certain specified person, for specified purpose, conditions and restriction were prescribed, means others are not entitled to take input tax credit in his returns.