CMA Ramesh Krishnan
Goods & Service tax (GST), the mile stone tax reform since independence of India is on its way to implementation journey and proposed GST bill is under discussion everywhere. This is very crucial stage to understand the various methodologies proposed in the GST bill.
As we all aware that GST is the value added tax, we can take input tax credits as like present VAT credits in various taxes/levies by the Central & State Governments. Proposed GST given the provision of manner of taking input credit and utilization thereof.
The present scenario of adjusting tax payable under state VAT can be adjusted with state tax input & Central VAT payable with central VAT input (CENVAT), the same scenario will be followed in GST also addition to that the dealer can take the input on the interstate transactions also.
GST refers the Goods & Service tax and it going to comprise the various VAT acts presently in force at state and central levels. Hence the proposed GST has the different kind of taxes whish as follows:
- CGST – Central Goods & Service tax which levied by Centre
- SGST – State Goods & Service tax which levied by State
- IGST – Integrated Goods & Service tax .This is tax which will be attracting on inter-state supply of goods & services. This will be levied and collected by the Central Government. This would be CGST plus SGST
Inputs tax credit methodology: Input credit on CGST can be adjusted against would be available for payment of CGST and the input credit on SGST would be available for the payment of SGST, the cross utilization between CGST & SGST can be adjusted only for the inter-state transactions only.
The IGST which levied on the interstate supply of goods & service, the interstate seller will pay IGST after availing of the credit of IGST, SGST & CGST on their purchases.
The input credit allowed full only in the case of goods/services used for the purpose of business, if the use is for partly business and partly for other purpose, then the credit will be restricted to the extent of business purpose.
In case the goods or services used for the purpose of effecting taxable supplies and partly effecting non taxable (exempted supplies) and zero rated supplies then the amount of credit will be restricted only to the extent of taxable supplies & zero rated supplies
Example: Input tax available on purchases Rs. 100 and out tax goods supplies going to affect Rs.50 taxable goods, Rs,30 Exempted goods and Rs.20 zero rated supplies then the credit will be available for the out tax goods Rs. 80 (50+30) .
In simple words, this is existing provision such as input not available when manufacturing, supply exempted goods.
Manner of utilization:
IGST- The input tax available in IGST will be utilized first to make the payment of IGST and if anything remains shall be utilized next to CGST, and finally still remaining balance can be utilized to SGST
CGST- The input tax available in CGST will be utilized first to make the payment of CGST and if anything remains shall be utilized next to IGST. CGST input cannot be utilized against SGST
SGST- The input tax available in SGST will be utilized first to make the payment of SGST and if anything remains shall be utilized next to IGST. SGST input cannot be utilized against CGST
Where the input tax exceeds for the same period in any of IGST ,CGST, SGST may be carried forward to subsequent period and adjusted with output tax as the same manner and order as above.
Table :- GST Input utilization mechanism
|S.No||GST input||1st utilisation against||2nd utilization Against||3rd utilization Against||Further balance|
|1||IGST||IGST output||CGST||SGST||Carry over to next period and against adjust the same manner|
|2||CGST||CGST||IGST||Not applicable||Carry over to next period and against adjust the same manner|
|3||SGST||SGST||IGST||Not applicable||Carry over to next period and against adjust the same manner|
Any unutilized credit available at the end of tax period at any category of input may be refunded as per act.
GST restrict the input tax credit and not available for the following
A. motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services—
(i) Transportation of passengers,
(ii) Transportation of goods,
(iii) Imparting training on motor driving skills;
B. High speed diesel oil, motor spirit, aviation turbine fuel, petroleum crude oil, aviation gasoline,
C. goods or services provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such goods and/or services are used primarily for personal use or consumption of any employee.
D. Goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery;
E. Goods acquired by a principal, the property in which is not transferred (whether as goods or in some other form) to any other person, which are used in the construction of immovable property, other than plant and machinery;
F. Goods and/or services on which tax has been paid under section 8 of the Act (Compound levy)
G. Goods and/or services used for private or personal consumption, to the extent they are so consumed.