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All about Input Tax Credit under Revised GST Law




Q1: What is Input Tax?
Input Tax is tax paid on supply of goods and/or service which is used or intended to be used in course or furtherance of business.

Q2: What if the intention to use in business is extinguished at the later stage?
If taxpayer has claimed the ITC against an invoice which he intended to use in business but at the later stage it is not used. The mount of ITC claimed shall have to be reversed. If appropriate balance is not available in ITC ledger the same has to be paid in cash.

 Q3: What taxes are eligible for Input Credit?
Under GST, taxpayer can avail ITC of only IGST/CGST/SGST paid by them on the supply procured. No other duty/cess/tax shall be eligible for ITC. Compensation Cess as proposed by Draft Compensation Law shall not be eligible for claiming input tax credit.

Q4: What are the conditions to avail Input tax Credit?
The taxpayer has to satisfy four conditions for availing input tax credit:
1.      Taxpayer should have proper tax invoice.
2.      Goods and/or services should be actually received.
3.      The taxes paid to the supplier should be deposited with the government.
4.      Taxpayer should have filed valid return u/s 34 of the act.

Q5: Can a taxpayer avail ITC of Cesses and additional duties charged under GST?
No, Cesses proposed to be leived on certain sin goods shall not be eligible for ITC.

Q6: Since Basic Custom Duty is not merged under GST, will it be eligible for Input Tax Credit
No, ITC shall be available only in respect of IGST/CGST/SGST
  
Q7: In what time period can a taxpayer avail Input tax Credit?
ITC against a particular invoice can be claimed before filing of GSTR 3 for the month of September of succeeding year or the date of filing of annual return GSTR-9 whichever is earlier.

Q8: What if recipient’s supplier does not deposit the GST with the government?
If the supplier does not deposit the GST with the Government, GST Network will show a mismatch which shall remain open for 2 months. Either the amount of such tax should be deposited by the supplier or recipient have to reverse the ITC claimed provisionally u/s 36 against that invoice.

Q9: What is recipient’s responsibility in case of mismatch?
In case of mismatch of ITC the supplier and the recipient shall have equal responsibility. Recipient shall be able to avail ITC only when the supplier deposit the tax with the Government, else the amount of ITC claimed has to be reversed by the recipient.

Q10: Is there any negative list for ITC?
Yes section 16 of the Model GST Act has prescribed the negative list for ITC:
1.      Motor vehicles
2.      Health care and personalized services
3.      Construction of Immovable Property
4.      Purchases from Composition Taxpayer
5.      Items which are personally consumed.

Q11: Is Motor Vehicles totally barred for claiming ITC or there are some exceptions?
Yes there is an exception in case of motor vehicles. ITC on motor vehicles shall be allowed when they are supplied in usual course of business or providing transportation services, Goods Transport and imparting motor driving skills.

Q12: Who is an Input Service Distributor?
Input Service Distributor (ISD) is nothing but a head office where the supplier raises the bill but the consumption against those bills is done at the branches of such head office. In this case the ISD is eligible to transfer the accumulated tax credits to its branches.

Q13: How can an ISD transfer tax credit to its branches?
If the branch of the ISD is situated within the state of ISD the Taxes would be transferred in the same manner as charged by the actual supplier. For instance CGST as CGST, SGST as GSST.
Where the branches of the ISD are situated in different states in that case CGST has to transferred as IGST, SGST as IGST and IGST as IGST.

Q14: what will be the scenario of ITC in case of composition scheme?
As per the provisions of the law Purchases made from the Composition assessee shall not be eligible for claiming ITC. Hence the taxes paid to the composition dealer shall become the cost for the taxpayer.

Q15: What is the eligibility of ITC in case taxpayer supplies exempted items?
In case where the final output of the supplier is exempted, taxes paid on input/input service/capital goods with respect to these exempted goods shall be reversed by the taxpayer. 

Q16: What would happen to the Taxes paid on stock lying on 01.04.2017?
In case of migration from earlier law, taxes paid on the purchases shall be carried forwards to GST as well provided those taxes should also be eligible for claiming ITC under the GST Law.

Q18: What are ITC provisions in case of Job Worker?
ITC shall be available to the principal on inputs/capital goods if the goods are returned back to the principal taxpayer within 180 days/2years from the transfer to the job worker. If they are not received in the prescribed time, the ITC claimed shall have to be reversed.

Q19: What if principal receive the goods back from the job worker after the prescribed time?
In such a case principal shall be eligible to reclaim the ITC which was reversed due to non-receipt within the prescribed time.

Q20: Is Cross set-off allowed under GST?
No Cross setoff is allowed under GST. The tax liability can be set-off only in following manner:
1.      IGST with 1) IGST 2) CGST 3) SGST
2.      CGST with 1) CGST 2) IGST

3.      SGST with 1) SGST 2) IGST

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