After many delay GST was introduced in 2017 in India to make structure of Indirect Tax simple and make some ease in doing business. The main principal of GST is availment of ITC (input tax credit) paid on inward supplies which can be further used in payment of tax on Outward supplies. It sounds very good and simple that a businessman can claim ITC paid on purchases and use it in payment of tax payable on his outward supplies but it’s not as simple as such, because availment of ITC is not such a simple task in GST.
As law are brake even before they are made in India, same is the case with ITC to counter this govt. is continuously changing law regarding ITC which deviate it from the very principal of GST to make indirect tax simple. Many restriction are imposed on recipient for availment of ITC which are beyond his control like timely filling of GSTR 1 by supplier so that invoice can reflect in his GSTR 2B, timely payment of tax to the govt. by supplier. There can also be genuine hardship from the end of supplier in timely filling GSTR 1 return at the end.
From ITC as per Books to ITC as per 120% of 2A, 110% of 2A, 105% of 2A, 100% of 2A and now as per 2B reconciliation of ITC became such a tedious task. It is important that utmost efforts are to be taken to ensure that ITC balance as per books and GST returns is matching. It is recommended that reconciliation of ITC as per books and GSTR-2B should be done monthly basis, to keep track of ITC mismatch.
From January, 2022 input tax credit (ITC) available only upto what is reflected in GSTR-2B. There are also instances where Import invoices are not transmitted from ICEGATE portal to GST portal and due to this ITC on Import is not reflect in 2B of that period. For this you can use “search BOE” functionality available on GST portal under “service >> User service >> Search BOE”.
Here is the flow chart what to add (+) and what to less (-) from GSTR-2B to arrive at “ITC to be claimed” in GSTR-3B.
| Particular | Amount |
| ITC showing in GSTR 2B | xxxx |
| Less: ITC on supply of goods or services or both which are not used or intended to be used in the course or furtherance of his business. | xxxx |
| Less: ITC on supply of goods or services or both received in next month.
(Example : Invoice date 30-01-2022 and also appearing in GSTR-2B of Jan-22 , however goods are received from company 5th Feb 2022 , this ITC is to be claimed in GSTR-3B of Feb 2022) |
xxxx |
| Less: ITC on supply of goods or services or both whose tax invoice or debit note is not available with tax payer. | xxxx |
| Less: ITC on supply of goods or services or both used in effecting exempt supplies. | xxxx |
| Less : Ineligible ITC u/s 17(5)
(Such a motor car, food, health insurance, gift, capital expense relating to immovable property etc). |
xxxx |
| Less : ITC claimed in earlier period from GSTR-2B.
(Example : Invoice dated 10-12-2021 ITC taken in GSTR-3B of Dec-21, however supplier disclosed same ITC recently and appearing in GSTR-2B of Jan-22) |
xxxx |
| Add: Pending ITC from GSTR-2B form
(Example : invoice date 10-11-20 21 supplier filled his GST-R1 & GSTR-3B within due date, However buyer has not taken ITC in Nov / Dec yet, same can be now taken in Jan 2022) |
|
| Add : ITC on import to be Taken based on bill of entries from GSTR-2B.
(Example : In Jan 2022, 3 bill of entries are filled by company, However in GSTR-2B of Jan only 1 bill of entries is reflecting, company can claim ITC of remaining 2 bill of entries too in Jan 2022, even though it is not reflecting in GSTR-2B) |
xxxx |
| ITC to be claimed in 3B | xxxx |
Some additional points to be kept in mind while claiming ITC:
1. As per section 16(2)(aa) of CGST Act,2017 Recipient can claim ITC of only those invoices which has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37.
2. As per section 16(2)(c) Recipient can claim ITC of only those invoices on which tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.
3. Where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment.
4. Where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest @ 24 % p.a.
5. Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed.
6. A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
7. 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.
8. 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.
9. Recipient can’t claim ITC ineligible u/s 17(5) of CGST Act in any case.
10. A person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.
11. A person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration.
12. Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9 Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.
13. Where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.
14. A registered person shall not be entitled to take input tax credit under sub-section (1) 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.
15. Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.
Author Bio
“15. Where there is A CHANGE IN THE CONSTITUTION of a registered person ON ACCOUNT OF sale, merger, demerger, amalgamation, lease or transfer of the business ITH THE SPECIFIC PROVISIONS FOR TRANSFER OF LIABILITIES, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business IN SUCH MANNER AS MAY BE PRESCRIBED .”
FONT <.. Posers (Instant personal Reaction- for consideration/deliberation by GST law experts ):
1. IN some of the enumerated changes in the constitution, is it not a mandatory requirement that besides all the assets, also all the liabilities should be transferred and become vested in the entity that amalgamates, merges with another , and seizes to exist co-terminus with the change ?!
2. What is going to be far reaching effect/consequences of the proposed amendments in BUDGET 2022, if were enacted as proposed, in so far as those relate to /likely to adversely impact the consequence of such changes !?!
3. 'manner to be prescribed' –
UN-less /-til such time so is prescribed, the intended change in the law could not obviously be given effect; more so, retrospectively. – AGREE or ?