INPUT TAX CREDIT (ITC ) under GST - PowerPoint Presentation

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INPUT TAX CREDIT (ITC) under GST

Prepared By:

Hashir

Mairaj

Assistant Professor

Department of Commerce, SBSC

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CONTENTS

Executive

Summary

Basic Concept and Principals

Some important Definitions

ITC-Eligibility Conditions and limitations

ITC Blocked Credit

Availability of ITC in Special cases

ITC- Input Service Distributor

Utilisation of Input Credit

Electronic Cash Ledger

Electronic

Credit Ledger

Electronic Credit Ledger

Refund of

Tax

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Executive Summary

Input Tax Credit (ITC) is available in respect of taxes paid on any supply of goods or services used or intended to be used in the course or furtherance of business (i.e. for business purposes)

Negative list approach for non-allowance of ITC

ITC of tax paid on goods or services used for making taxable supplies by a taxable person allowed subject to four conditions:

⁻ Possession of invoice;

⁻ Receipt of goods or services;

⁻ Tax actually paid by supplier to government;

⁻ Furnishing of return

Credit of CGST paid on inputs may be used only for paying CGST on the output

Credit of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST on the output

Credit of CGST, SGST/UTGST paid on inputs may be used only for paying IGST and Vice versa

Full ITC allowed on capital goods in one go

Proportionate credits allowed in case inputs, inputs services and capital goods are partly used for business and partly for non-business purposes

Proportionate credits allowed in case inputs, inputs services and capital goods are used for taxable including zero rated and exempt (including non-taxable) supplies

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Input Tax Credit-Basic Concept

Input tax credit is concept is introduced to levy tax on Value addition only.

ITC can be taken on the GST incurred for input supply which can be used to make the payment of tax liability on output supply.

To reduce the cascading of taxes.

Input

Tax

Credit

(ITC)

to

be

broad

based by making it

available

in

respect

of

taxes

paid on

any

supply of goods or services or both used or intended

to

be

used in

the

course

or

furtherance

of

business.

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Some Important Definitions

Sec. 2 (63) – Input Tax Credit:- ITC means the credit

of input

tax.

Sec. 2(62) – Input Tax is defined: It

includes

All taxes under CGST, SGST,UTGST and

IGST

IGST on import of goods and

service

Taxes paid under reverse charge under CGST,

SGST,UTGST and IGST

Taxes

paid by the recipient of supply if such supply

is made

by the unregistered person to registered

person under

these ACT.

It does not include tax paid under composition

levy Sec

. 2 (19) – Capital Goods - means goods, the value

of which

is

capitalised

the books of Accounts.

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Input Tax Credit- Major Principles

Allow credit of taxes paid on all

business expenses.

To

allow credit of expenses incurred in

relation to

taxable output /

supply.

Specify

the expenses for which credit is

denied or

blocked

Personal

expenses are not creditable

It

should be used or intended to be used

in the

course or furtherance of business.

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Input Tax Credit – Deviation from the existing practice

Credit of Vat/ CST/ entry tax/ entertainment tax/luxury tax

/

Octroi

etc. collected by the state, which is subsumed in

GST will

be allowed as GST credit to the manufacturer

and service

provider.

Similarly

credit of central excise/service tax/CVD

etc. collected

by center, which is subsumed in GST will

be allowed

as GST credit to the Vat dealer

Inter

adjustment of CGST, SGST and IGST has

been provided

.

ITC

has been linked to filing of return and payment of

taxes by

the supplier.

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ITC-Eligibility Conditions and limitations

Every Registered person is entitle to take

the credit

of Tax paid on input.

Credit

is allowed for input supply which

are used

or intended to be used in the course

or furtherance

of his business

Manner

of credit is provide in section 49

The

Input Credit is subject to some

conditions and

restriction as me be prescribed in Rules

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ITC- Conditions and limitations Contd.

Tax Invoice :- One should possesses the tax

invoice, debit

note or other tax paying

documents

Receipt of Good or services or both:- He has

received the

goods or services or

both.

If

goods are received in lots/installments then on receipt of

last installment/lot.

It

includes goods received by the agent or third person under

his direction

before or during movement of goods i.e. if goods

are sold

in

transit

Tax on the supply is paid by the supplier

Furnished

the return under the provision

of the act

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ITC- Conditions and limitations Contd.

He has paid to the supplier the value of the supply and

tax thereon

within 180 days of the date of issuance of invoice

.

If no such payment then the entire credit taken on such supply shall

be added

to output tax liability along with interest

thereon.

He

can take the credit again on making the payment for the value

of supply

and tax thereon.

No credit with respect to the amount of tax (if tax

is

capitalised

) on which depreciation is

claimed.

Credit

of input tax can be taken till the last date of

filing Annual

Return or actual date of filing annual

return whichever

is earlier

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ITC- Manner of Utilization

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Apportionment of Input Credit

If goods or services or both are used by the registered

person partly

for business and partly for other purposes then credit

is restricted

to input tax attributable to business purposes.

If

partly for taxable supply(including zero rated supply)

and partly

for exempted supply then credit is restricted

to attributable

to the taxable supply(including zero rated supply).

Exempt

supply includes non taxable supply. It also

includes supplies

taxable under reverse charge, transaction

in securities

, sale of land and sale of building

.

A banking Company, Financial institution, and NBFC have

the option

to take proportionate credit as discussed above or

can take

upto

50%

credit.

This

restriction is not applicable with respect to tax paid on

supplies made

within same PAN

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ITC- Blocked Credit

ITC shall not be available in respect of the following:

Motor

Vehicle and other conveyances

.

– Except if used for:-

•

Further Supply

•

transport of passengers, transportation of goods,

•

imparting training how to drive, navigate or fly them.

Supply

of following goods or services or both:

Food

Beverages, beauty treatment, cosmetic surgery, health

services, outdoor catering

Membership

of club/health and fitness

centre

Travel

benefit to employees

Rent

a cab, life insurance and health insurance (unless govt.

makes it mandatory to provide such facilities to the employee)

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ITC- Blocked Credit- Cont.

Works contract services for construction

of immovable

property other than plant

and machinery

.

Supply

where tax is levied under

composition scheme

Supplies

used for personal consumption

Goods

lost/ stolen/ destroyed/ written off

or disposed

of by way of

gift/free

sample

Any

tax paid after issuance of SCN with respect

to such

SCN, detention or

confiscation

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Availability of Credit in special Cases

Person who would like to take the credit of

input lying

in stock or contained in finished goods

or semi

finished goods at the time of registration-

–

he should apply with in 30 days from the date

he becomes

liable to take the registration and the

credit on

such inputs held on the day immediately

preceding the

date from which he becomes liable to pay tax

–

In case of voluntary registration then the credit

of such

inputs held in stock immediately preceding

the date

of registration

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Cont.

If registered person ceases pay tax

under composition

scheme or his exempt

supply becomes

taxable

supply-

– He

can take credit tax paid on such inputs held

in stock

on the day immediately preceding the

date from

which he becomes liable to pay tax

.

–

He can take credit of tax paid on capital

goods exclusively

used for such good or

services

Provided

that credit shall be reduced

such percentage

point

prescribed in rules

.

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Availability of ITC in Special Case

Input Credit can be taken within 1 year from the date of

issue of tax invoice with respect to special cases discussed

above.

Unutilised

credit can be transferred in case of sale/

amalgamation/ merger /demerger/lease/transfer of the

entity where there are specific provision for transfer of

liability

If

person opt for composition scheme or supply becomes

exempt-

– Amount equal to the credit of input held in stock or credit

on capital

goods reduced by the percentage point shall be debited

either in the e-cash ledger or e-credit ledger.

– Balance credit will lapse

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Availability of ITC in Special Case

If

capital goods are supplied on which credit

was taken- person shall pay an amount equal

to such credit reduced by percentage points or

transaction vale of such supply whichever is

higher.

– Person has the option in case of supply of

refractory bricks,

mould

and dies, jigs and fixtures

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ITC in respect of goods sent for Job Work

A registered taxable person shall be allowed to take credit of input tax

on input/capital

goods sent to a job-worker for job-work

;

Credit

is allowed even when inputs/capital goods are directly sent to a

job worker

for job-work without their being first brought to his place of business

If the input/capital good

sent for job work are not

received back within a

specified period it shall be

deemed that such inputs

had been supplied by the

principal to the job-worker

on the day when the said

inputs/capital goods were

sent out

Input

Capital Good

Specified period is

within 1 year of being

sent out

• Specified period

is

within 1 year of being

sent out Capital

Goods

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Cont.

Principal can take credit on input sent for job work even if

input are directly sent to the job worker for job work

without being first brought to his place of

business.

Such

goods are to be received back or supplied from the

place of the job worker with in one year of being sent out

or received by the job worker (in case of directly sent)- if

not then it will be deemed that such goods are supplied to

the job worker on the day when such goods are sent to job

worker either from the place of business of the principal or

directly by the

supplier

In

case of capital Goods the time limit is 3 years in place of

1 year

Above provisions are not applicable to

mould

and

dies, jigs and fixtures and tools

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ITC- Input service distributor

Central tax can be distributed as central tax

or integrated tax

Integrated

tax can be distributed as

integrated tax

or central

tax

A

document containing the amount being

distributed has to be

issued

Manner

of issuing such documents are

prescribed in the rules

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Condition for distribution

Distribution against a document containing prescribed

details

Distributed

credit can not exceed the credit available

for distribution

If

ITC attributable to a recipient then it should be distributed to

that recipient only

If

ITC is attributable to more than one recipient of credit then to

be distributed

among such recipients in the pro rata basis

:

Turnover

of such recipient in the state or UT during to relevant

period / Aggregate turnover of all such recipient (which

are operation

in the current year) during the relevant

period

Relevant

period means financial year preceding the year during

which credit is to be

distributed.

If

few recipient of credit do not have the turnover in the

preceding financial year then the last quarter for which turnover

details are available for all the recipient of credit previous to the

month credit is to be distributed

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Cont.

Credit can be distributed among the units

registered in different states under same

PAN.

If

there is any contravention

in distribution of credit

leading to excess credit to one or

more

of

the recipient of credit then the same

shall be

recovered from such recipient along with

interest

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Utilisation of ITC

Integrated tax shall first be utilised towards payment of integrated tax

and the

amount remaining, if any, may be utilised towards the payment

of central

tax and State tax, or as the case may be, Union territory tax, in

that order

;

the

central tax shall first be utilised towards payment of central tax and

the amount

remaining, if any, may be utilised towards the payment

of integrated

tax;

the

State tax shall first be utilised towards payment of State tax and

the amount

remaining, if any, may be utilised towards payment of

integrated tax;

the

Union territory tax shall first be utilised towards payment of

Union territory

tax and the amount remaining, if any, may be utilised

towards payment

of integrated tax;

the

central tax shall not be utilised towards payment of State tax or

Union territory

tax;

the

State tax or Union territory tax shall not be utilised towards payment

of central

tax

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Payment of Tax

System of electronic cash ledger

and electronic

ITC (Credit) ledger

Electronic Cash Ledger

Electronic Credit Ledger

Amount deposited in Cash

credited

May

be used for making

payment towards

tax, interest, penalty, fees or

any amount

Balance

after payment may be refunded

Input tax credit shall be credited

here

May

be used for making

payment towards

tax

payable

Balance may be refunded only in case

of

exports

/ rate of output is less than input

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Payment of GST

Under GST 3 types of taxes are to be paid : CGST, SGST/ UTGST,

IGST.

Four

Modes of Payment

:

Internet

Banking;

Electronic

including Credit Card/Debit

Card

Over

the Counter Payment (for Payments up to

Rs

. 10,000

/-)

Payment

through

RTGS/NEFT

Every deposit made towards tax, interest, penalty, fees or any other amount

, shall be credited to the electronic cash ledger of such

taxable person

.

The

date of credit to the account of the Government in the

authorized bank

shall be deemed to be the date of deposit .

The

ITC as self-assessed in the return of a person to be credited to

his electronic

credit ledger.

The

amount available in the electronic credit ledger to be used only for

the payment

of tax, under this Act

.

The

amount available in the electronic cash ledger to be used for

payment of

tax, interest, penalty, fees or any other amount payable under this Act.

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Electronic Cash ledger

The

electronic Cash ledger shall be maintained by every

persons.

All

amounts payable by a taxable person under this Act shall be

debited to

the said

register.

The

electronic Cash ledger shall be debited by:

-

The

amount payable towards tax, interest, late fee or any other

amount payable as per the return filed by the said

person;

The

amount of tax, interest, penalty or any other amount payable

as determined by a proper officer in pursuance of any

proceeding under

the

Act;

The

amount of tax and interest payable as a result of mismatch;

or

Any

amount of interest that may accrue from time to time.

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Electronic Cash Ledger

The electronic cash ledger should be maintained in

FORM GST PMT

3.

It

shall be credited by the amount deposited and debited for the

payment therefrom towards tax, interest, penalty, fee or any other

amount.

A

challan

in

FORM GST PMT – 4

shall be generated to enter the details

of the amount to be

deposited.

The

deposit can be made from any of the following modes

:

Internet Banking through authorized

banks;

Credit

card or Debit card after registering the same with

the Common

Portal through the

authorised

bank;

National

Electronic Fund Transfer (NEFT) or Real Time

Gross Settlement

(RTGS) from any

bank;

Over

the Counter payment (OTC) through authorized banks

for deposits

up to

Rs

. 10,000 per

challan

per tax period, by

cash, cheque or demand draft.

The challan in FORM GST PMT - 4 shall be valid for a period of 15 days.

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Electronic Credit Ledger

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Refund of Tax

Any person claiming refund of any tax or interest, paid on such

tax shall

make an application in FORM GST RFD-01

.

The application shall be accompanied by

:-

Documentary

evidence that a refund is

due,

When

refund claimed is more than 5 lac rupees, document or

other evidence

claiming incidence of tax has not fallen on any other person

A

taxable person may claim refund of any unutilized input tax credit

only in the following

cases:

Where

credit has accumulated on account of tax rate on inputs

being higher

than tax rate on outputs

;

Exports

which are not subjected to export

duty.

Exports

of services.

The

order sanctioning the refund shall be issued within 60 days

from the

date of filing the application.

No

refund shall be granted if the amount is less than

Rs

. 1000/

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Thank You