GST Input Tax Credit

Input Tax Credit in GST is available to supplier/seller to set off the GST Output Tax Liability which he has paid earlier while purchasing of goods from registered GST seller from output GST on sale of goods. In this way, the tax will levied on the value addition which finally results in avoiding double taxation.

In GST, there are 3 taxes:–

    • Integrated Goods and Services Tax (IGST)
    • Central Goods and Services Tax (CGST)
  • State Goods and Services Tax (SGST)

Elegible

Migration in GST– From the DAY 1 of GST levied.

In Case of New Mandatory Registration– The Day from which he is liable to pay tax.

Voluntary Registration– He is eligible from the date of registration irrespective of turnover.

Composition to Normal Scheme Transfer– the Day from which he is liable to pay tax normally as per GST provisions.

Requirement

Tax Invoice– GST Tax Invoice/Debit Note issued by Supplier should be kept in records.

Receive Goods/Service– Good/Service on which GST input credit is claimed should be received by purchaser of goods/service.

GST Paid to Government– GST which has been paid to seller on which Input is taken should have been paid by seller to government.

GST Return Filed– GST returns should have been filed by Seller and invoices on which GST is charged should be included in return with correct amount.

Example

Purchase Amount INR 1, 00,000
  • IGST Paid INR 9,000
  • CGST Paid INR 4,500
  • SGST Paid INR 4,500
Sales Amount INR 2, 00,000
  • IGST Charged INR 18,000
  • CGST Charged INR 9,000
  • SGST Charged INR 9,000
Liability to pay Tax
  • IGST To Pay INR 9,000
  • CGST To Pay INR 4,500
  • SGST To Pay INR 4,500

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How To Utilize

SGST

  • Towards Payment of SGST.
  • Balance Towards Payment of IGST.

It can’t be used to pay CGST.

CGST

  • Towards Payment of CGST.
  • Balance Towards Payment of IGST.

It can’t be used to pay SGST.

IGST

  • Towards Payment of IGST.
  • Than Towards Payment of CGST.
  • Balance Towards Payment of SGST.

Example:

Suppose there is input tax credit to the tune of INR 1,80,000 in IGST than let’s get an understanding how IGST would set off against different liabilities. This illustration would give a clear view of set off of various GST types:

[su_table]

Particulars IGST CGST SGST
Amount Payable INR 1,00,000 INR 50,000 INR 50,000
IGST INPUT(A) INR 1,00,000
IGST INPUT(B) INR 50,000
IGST INPUT(C) INR 20,000
Balance Payable INR 30,000

[/su_table]

Ineligible Input Tax Credit

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S. No. Items Exceptions
1. Motor Vehicles Except in cases

  • Extended supply of such vehicles or conveyances;
  • Transportation of passengers or
2. Other Conveyances
  • Providing training on driving, navigating such vehicles or
  • Conveyances for transportation of goods;
3. Foods, Outdoor Catering, Beauty Treatment, Health Services Cosmetic, Plastic Surgery Except where an inward supply of goods or services or both of a particular category is consumed 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.
4. Membership of a Club –
5. Membership of a Health Center –
6. Membership of a Fitness Center –
7. Rent-a-cab, Life Insurance, Health Insurance
  • The Government states the services which are mandatory for an employer to provide to its employees under any law for the time being in force; or
  • 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.
8. Travel benefits extended to employees on vacation such as leave –
9. Travel benefits on home travel concession –
10. Works contract services when supplied for construction of an immovable property Except where it is an input service for extended supply of works contract service and plant and machinery.
11. Goods or services or both received by a taxable person for construction of an immovable property Except goods or services received on his own account including when such goods or services or both are used in the course or furtherance of business and plant and machinery.
12. Goods or services or both on which tax has been paid under section 10; ie. Under section 10 composition scheme
13. Goods or services or both received by a non-resident taxable person Except on goods imported by him
14. Goods or services or both used for personal consumption –
15. Goods lost –
16. Goods written off –
17. Goods destroyed –
18. Goods stolen –
19. Goods disposed of by way of gift or free sample –
20. Any tax paid in accordance with the provisions of sections 74, 129 and 130. I.e. In Fraud, Misstatement, etc.

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Reversal Of Input Tax Credit

To be able to claim this benefit, you must meet the following conditions –

  1. Payment of GST invoice on which Input Tax Credit is taken should be paid to the supplier within 180 days from issue of invoice.
  2. Inputs and capital goods should not be used for personal purposes, in case if they had been used than amount for which it had been used ,input taken on that amount should be reversed.
  3. Inputs and capital goods should not be used for providing exempt supplies, in case if they had been used than amount for which it had been used , input taken on that amount should be reversed.

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Time Period

180 Days

2 Years

September Of Next F.Y.

Particulars

Time period within which the inputs sent for job work has to be received back by the principal.

Time period within which the capital goods sent for job work has to be received back by the principal.

ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of annual return, whichever is earlier.The underlying reasoning for this restriction is that no change in return is permitted after September of next FY. If annual return is filed before the month of September then no change can be made after filing of annual return.

Other Point

Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, will ITC be allowed in such cases? As per section 16(10) of the MGL, the input tax credit shall not be allowed on the said tax component.

In case of mismatch between the inward and outward details, the supplier would be required to rectify the mis-match within a period of two months and if the mis-match continues, the ITC would have to be reversed by the recipient.

In case of supply of capital goods on which input tax credit has been taken, the registered taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by the percentage points as may be specified in this behalf or the tax on the transaction value of such capital goods, whichever is higher.