Every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business provided following conditions are satisfied
-he is in possession of a tax invoice
-he has received the goods or services or both.
Explanation: Generally, when we purchase any goods or receive any service related to our business, we take ITC as we are in possession of Invoice and we used the goods/service in our business.
Rule 37 of CGST Rules:
This rule implies that when a registered person who has availed ITC could not pay the invoice amount to the supplier within the time period of 180 days then it led to the reversal of ITC and if a part of invoice is paid then ITC will be reversed on proportionate basis.
1. ITC reversed can be re availed on payment of Invoice.(Third proviso to Sec. 16(2)
2. ITC reversal here means, an amount equal to ITC availed shall be added to the output tax liability along with interest there on. (Second proviso to Sec. 16(2)
3. interest @ 18% shall be paid starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability. (sub-section (1) of section 50)
4. The said rule is not applicable in case of ITC claimed under RCM. (Second proviso to Sec. 16(2)
XYZ Pvt Ltd has a turnover of Rs.1.00 cr during the Fy 2018-19. purchased goods/received services as under.
|S.No||Date of Purchases||Particulars||Date of Payment|
|1.||01.04.2018||Goods worth (1000000+180000)||01.05.2018|
|2.||20.05.2018||Goods worth (2000000+360000)||20.06.2019|
|3.||21.07.2018||Goods worth (2500000+450000)||05.07.2018|
|4.||20.08.2018||Freight paid Rs.500000and RCM paid 25000||Unpaid|
|5.||21.08.2018||Goods worth (3000000+540000)||01.03.2019|
Calculate Tax liability for the year 2018-19 to be filed under GSTR9?
Calculation of Output Tax
|1.||Outward Supply Rs.1.00 cr||1800000||Output liability|
|2.||Goods purchased on 20.05.2018||360000||ITC must have been taken in the return for the month May and need to be reversed while filing return for the month Nov|
|3.||Goods purchased on 21.08.2018(3000000+540000)||540000||ITC must have been taken in the return for the month August and need to be reversed while filing return for the month Feb|
|Out Put liability||2700000|
Calculation of ITC
|1.||Goods purchased on 01.04.2018(1000000+180000)||180000||Paid within 180 days|
|2.||Goods purchased on 20.05.2018(2000000+360000)||360000||First credit has been taken and then reversed.|
|3.||Goods purchased on 21.07.2018 (2500000+450000)||450000||Paid in advance|
|4.||Freight paid Rs.500000 and RCM paid 25000||25000||Though unpaid but input can be availed as Rule 37 NA to input availed under RCM.|
|5.||Goods purchased on 21.08.2018(3000000+540000)||540000||First credit has been taken and then reversed.|
|6.||Invoice dated 21.08.2018 paid after 180 days||540000||Credit taken|
Tax Payable: 605000
1. Goods purchased on 20.05.2018 and ITC availed Rs. 360000
but reversed after 180days
360000 * 18% *180/365 = 31956
2. Goods purchased on 21.08.2018 and ITC availed Rs. 540000
but reversed after 180 days
540000 * 18% *180/365 = 47934