Case Studies

SECTION : Input Tax Credit

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  • Lesson Objectives

    On completion of this lesson, you will be able to understand:


    ·      Date of Input Tax Credit Availability

    ·       ITC on Voluntary Registration

    ·      ITC – Taxable and Non-Taxable Supply

    ·      Composition Scheme to Regular Scheme

    ·       Regular Scheme to Composition Scheme

     

     

    Please go through the Third Video of the Chapter 10.

     

    We will look upon some case studies to understand various situations where Input Tax Credit can be availed by the Taxable Person.

     

    Date of Input Tax Credit Availability

    Person should be registered within 30 days from the date on which he becomes liable for registration.

     

    If the person has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration, he 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.

     

    It may be noted that the credit on pre-registration stock would not be admissible if the registration has not been obtained within a period of 30 days from the date on which he becomes liable to registration.

     

    Case Study

    Mr. Ravi becomes liable to pay tax on 1stApril, 2017 and has applied and obtained registration on 15th April, 2017. Such person is eligible for input tax credit on inputs held in stock as on …….

     

    31st March, 2017.

    But if he does not apply for Registration within 30 days, credit will not be available. In such case Registration Date will be considered.

     Voluntary Registration

    The person who obtains voluntary registration is also eligible for Input tax credit on inputs in stock.

     

    The person who obtains voluntary registration is entitled to take the input tax credit of input tax on inputs in stock, inputs in semi-finished goods and finished goods in stock, held on the day immediately preceding the date of registration.

     

    Case Study

    Mr. Kishore applies for voluntary registration on 5thAugust, 2017 and obtained registration on 22nd August, 2017. Mr. A is eligible for input tax credit on inputs in stock as on …………..

     

    Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 21st August, 2017. That is Inputs held on the day immediately preceding the date of registration.

     

    Input Goods used for Taxable & Non-Taxable Supplies

    Where goods and/or services received by a taxable person are used for effecting both taxable and non-taxable supplies, whether the input tax credit is available to the registered taxable person?

     

    The input tax credit of goods and / or service attributable to only taxable supplies can be taken by registered taxable person.

    ·        The amount of eligible credit would be calculated in a manner to be prescribed in GST LAW read with GST ITC Rules.

    ·        It is important to note that credit on capital goods also would now be permitted on proportionate basis.

     

    Zero Rated Supplies and Exempt Supplies

    Zero rated supplies are included for computation of taxable supplies for the purpose of availing credit.

     

    But Exempt Supplies are not included for availing Input Tax Credit.

     

    Which of the following is included for computation of taxable supplies for the purpose of availing credit?

    (a) Zero-rated supplies;

    (b) Exempt supplies;

    (c) Both?

    Ans. Zero rated supplies.

     

    Lots or Installments

    Where the goods against an invoice are received in lots or instalments, The registered taxable person shall be entitled to the credit upon receipt of the last lot or installment.

     

    Delivery to Third Person

    The Taxable Person will get the ITC where goods have been delivered to a person other than taxable person (‘bill to’- ‘ship to’ scenarios).

     

    For this purpose of receiving the goods, it would be deemed that the taxable person has received the goods when the goods have been delivered to a third party on the direction of such taxable person.

     

    So ITC will be available to the person on whose order the goods are delivered to third person.

     

    We will look upon some case studies to understand various situations where Input Tax Credit can be availed by the Taxable Person.

     

    Change in the Constitution of Tax Payers

    What would be input tax eligibility in cases where there is a change in the constitution of a registered taxable person?

     

    As per the GST LAW, the transferor shall be allowed to transfer the input tax credit that remains unutilized in its books of accounts to the transferee provided that there is a specific provision for transfer of liabilities.

     

    Regular Scheme to Composition Scheme

    The registered taxable person, who was paying tax under Regular scheme opts to pay tax under Compounding Scheme, has to pay an amount equivalent to the input tax credit 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 such switch over.

     

    It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per GAAP (Generally Accepted Accounting Principles) in terms of the GST LAW.

     

    Composition Scheme to Regular Scheme

    A dealer paying tax on compounding basis crosses the compounding threshold and becomes a regular taxable person. Can he avail ITC and if so from what date?

     

    He can avail ITC 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 section.

     

    Mr. Ravi, a registered taxable person was paying tax under composition rate up to 30th July, 2017. However, w.e.f. 31st July, 2017.He becomes liable to pay tax under regular scheme. Is he eligible for ITC?

     

    Mr. B is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 30th July,2017.

     

                Goods get Exempted

    What would be input tax eligibility in case where the goods and/or services supplied by a registered taxable person become absolutely exempt?

     

    The registered taxable person who supplies goods and / or services which become absolutely exempt, has to pay an amount equivalent to the input tax credit 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 such exemption.

     

    It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per GAAP. (Generally Accepted Accounting Principles).

     


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