GST: Input Tax Credit Analysis - PowerPoint Presentation

1. GST: Input Tax Credit Analysis Gopal Mondal

2. Cascading effect No credit of CST No credit of VAT to Service providers No credit of basic customs duty and custom cess No credit of Swachh Bharat cess to Manufacturer & service providerNo credit to exempt SectorsPresently cascading effect in the existing system in IndiaNo Excise duty &Service tax for VATNo credit of Entry tax or octroiNo credit of Krishi Kalyan cess to Manufacturer

3. Model GST: November 2016Model GST: June 2016(S.2 (6) “Aggregate turnover” means the aggregate value of all taxable supplies, exempt supplies, exports of goods and/or services and inter-state supplies of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be;S.2 (6) “Aggregate turnover” means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be;Aggregate Turnover -MeaningExplanation – Aggregate turnover does not include the value of supplies on which tax is levied on reverse charge basis and the value of inward supplies.

4. Model GST: November 2016Model GST: June 2016S.2(56) “input tax credit” means credit of ‘input tax’ as defined in section 2(55)S.2(58) “input tax credit” means credit of ‘input tax’ as defined in section 2(57)S.2(55) “input tax” in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes tax payable under section 8(3) but does not include the tax paid under section 9.S.2(57) “input tax” in relation to a taxable person, means the {IGST and CGST}/(IGST and SGST} charged on any supply of goods or services to him which are used, or are intended to be used, in the course or furtherance of his business and includes the tax payable under section 7(3).Input tax credit and input tax

5. Model GST: November 2016Model GST: June 2016S.2(52) “input” means any goods other than capital goods used or intended to be used by supplier in the course or furtherance of business.S.2(54) “input” means any goods other than capital goods, subject to exception as may be provided under this Act or the rules made thereunder, used or intended to be used by supplier for making an outward supply in the course or further of business.S.2(53) “input service” means any service used or intended to be used by a supplier in the course or furtherance of business.S.2(55) “input service” means any service subject to exceptions as may be provided under this Act or the rules made thereunder, used or intended to be used by a supplier for making an outward supply in the course or furtherance of business.Meaning of Input

6. Model GST: November 2016S.2(19) “capital goods” means goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course of furtherance of business.Meaning of Capital GoodsClaim of Input Tax Credit: [Section 36]Every taxable person shall be entitled to take credit as self-assessed in his return and such amount shall be credited on a provisional basis to his electronic credit ledger The credit shall be utilised only for payment of self –assessed output tax liability.

7. Eligibility and ConditionsFor taking input tax credit [Section 16]Every registered taxable person shall be entitledTo take credit of input tax charged on any supply of goods or services Which are used or intended to be used in the course or furtherance of his businessSubject to such conditions and restrictions as may be prescribed and within the time and manner specified in Section 44The said amount shall be credited to the electronic credit ledger of such person

8. Essential requirements for availing ITC under GST(a) Registered taxable person is in possession of a tax invoice, debit note, supplementary invoice or such other taxpaying document as may be prescribed, issued by a supplier registered under GST Act9s) or the IGST Act.Registered taxable person has received the goods and/or services(c) The tax charged in respect of such supply has been actually to the credit of the appropriate Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and .(d) Registered taxable person has furnished the return under S 27Requirements for availing Input Tax Credit

9. Time Limit for availing ITC under GSTWhere the goods against an invoice are received in lots or instalments, the registered taxable person shall be entitled to take credit upon received of the last lot or installment. Restriction on use of input tax credit: Pipelines and telecommunication tower fixed to earth1/3 of total input tax in the financial year in which the goods are received 1/3 of total input tax in the next financial year Balance 1/3 in any subsequent financial year

10. Time Limit for availing ITC under GSTFiling of return for September month of next financial yearFilling of annual return of the financial yearWhichever is earlier Date of filing of return for the September month of next FYDate of filing of annual return for the FYMaximum period by which input tax credit for the FY can be availedOctober 20December 31October 20October 20September 30September 30

11. Apportionment of credit [Section-17]Where goods and/or services are used by the registered taxable person Party for the purpose of business Party for other purposes Section 17(1) Section 17(2) Party for effecting taxable supplies including zero-rated supplies under this Act or IGST Act. Party for effecting exempt supplies including under reverse charge basis Section 8(3)Amount of credit shall be attributable to the purpose of business [Section 17(1)]/taxable supplies including zero rated supplies [Section 17(2)]

12. Example Supplier “A” in Delhi supplies goods worth INR 500/- to “B” in Delhi. “B” further used 60% of such goods in manufacturing of taxable goods and 40% of such goods in manufacturing exempted goods. After 40% value addition, “B” supplies goods to consumer in Delhi.Let us assume the CGST rate as 9% and SGST rate as 9% to be levied goods supplied. Thus, GST would be levied in the following manner:

13. “A” supplies goods worth Rs. 500“B” supplies with 40% value addition ConsumerDelhiDelhiDelhiParticularsAmt.(Rs)Value for A500.00CGST @ 9%45.00SGST @ 9%45.00Total590.00ParticularsTaxableExemptedAmt. (Rs)Amt. (Rs)Value for “B”300.00200.00Value Add. (40%)120.0080.00Base value for GST420.00280.00CGST @ 9%37.800.00SGST @ 9%37.800.00Total Value495.60280.00Tax to be paid in Cash:Central Govt.:CGST : 37.80-CGST(45*60%) : 27.00Paid in cash :10.80Delhi Govt.:SGST : 37.80-SGST(45*60%) : 27.00Paid in Cash :10.80ITC of GST paid on goods used shall not be available to the supplier. Credit booked on such input shall be reversed in the books of accountsTotal Amount Collected:CG : 45.00+10.80 = 55.80Delhi Govt.: 45.00+10.80 = 55.80

14. Credit for Banking and Financial Institution Credit option: Banking company/financial institution/NBFCEither comply with the provisions of Section 17(2); or Avail of, every month, an amount equal to 50% of the eligible input tax credit on input, capital goods and input service in that month. Note: the option one exercised shall not be withdrawn during the remaining part of the financial year.

15. Motor vehiclesExcept when they are used:For making the following taxable supplies, namely:further supply of such vehicles; ortransportation of passengers; orimparting training on driving, flying, navigating such vehicles;For transportation of goodsSupply of goods and services for personal use or consumption of any employeeNamelyFood and beverages,outdoor catering,beauty treatment,health services,cosmetic and plastic surgeryExcept where such inward supply of goods or services of a particular category is used by a registered taxable person for making an outward taxable supply of the same category of goods or services;List of items not eligible for ITC[ Section-17(4)]

16. (ii) Membership of a club, health & fitness centre , (iii) rent-a-cab, life insurance, health insuranceExcept where the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; and(iv) Travel benefits extended to employees on vacation such as leave or home travel concessionWork contract servicesWhen supplied for construction of immovable property, other than plan and machinery, except where it is an input service for further supply of works contract service;List of items not eligible for ITC[ Section-17(4)]

17. Construction of immovable propertyGoods or services received by a taxable person for construction of an immovable property on his own account, other than plan and machinery, even when used in course or furtherance of business.Composition scheme (Section 9)Goods and/or services on which tax has been paid under Section 9List of items not eligible for ITC[ Section-17(4)]

18. Registration vs Input Tax Credit (ITC)X becomes liable to registration on April 1, 2017Section 18(1) – explanation with example Suppose, X has to apply for Registration on April 29, 201730 days X is entitled to ITC in respect of:Inputs held in stock; andInputs contained in semi-finished goods; orfinished goods held in stock On the day immediately preceding the date of registration (i.e. March 31, 2017)Section 18(2) – Is ITC on voluntary registration available w.e.f. March 31, 2017 ? What about ITC on capital goods and input services as on March 31, 2017?Note : Section 23(3) a person may get himself registered voluntarily and all the provisions of the Act as are applicable to a registered taxable person shall apply to such person.

19. Registration vs Input Tax Credit (ITC)X’s taxable turnover exceeds INR 50 lakhs on May 1, 2017 (Section9)Section 18(3) – composition scheme (Section 9)X will not enjoy the benefit of Section 9X is entitled to ITC in respect of :Inputs held in stock; andInputs contained in semi-finished goods; orfinished goods held in stock , and Capital goods, immediately preceding the date of May 1, 2016 [i.e. on April 30, 2017]Section 9: (a) Permission requires from proper officer; (b) tax rate not less that 2.5% for manufacturer and 1% for other cases (c) no permission to service provider, inter-state supplier, E-commerce operator; (d) applicable to all taxable person having same PAN (e) no ITC (f) permission withdrawn on > 50 lacs.

20. Registration vs Input Tax Credit (ITC)Conditions for eligible ITC to a taxable person switching over from composition scheme under this Act. (Section 172):Such input and or goods are used or intended to be used for making taxable supplies under this Act;The said person is not paying tax under Section 9the said taxable person is eligible for input tax credit on such inputs under this ActThe said taxable person is in procession of invoice and /or other prescribed documents evidencing payment of duty under earlier law in respect of such inputs; and Such invoices are not earlier than 12 months immediately preceding the appointed day.

21. Registration vs Input Tax Credit (ITC)X, a taxable person, switch over to Section 9 or Section 11Section 18(7) – Switches over to composition scheme (S9) & exempt supply (S11)X shall pay an amount by way of debit in the electronic credit or cash ledger equivalent to the credit of:Inputs held in stock; andInputs contained in semi-finished goods; orFinished goods held in stock andCapital goodsOn the day immediately preceding the day of such switchover or the date of such exemption

22. Registration vs Input Tax Credit (ITC)Where an exempt supply of goods or services by a taxable person becomes a taxable supplySection 18(4) – exempt supply becomes a taxable supply of goods and servicesSuch person is entitled to ITC in respect of :Inputs held in stock; andInputs contained in semi-finished goods; orfinished goods held in stock and capital goodsExclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable.A taxable person shall not be entitled to take input tax credit under sub section (1), (2), (3) or (4) as the case many be, in respect of any supply of goods and/or services to him after the expiry of 1 year from the date of issue of tax invoice relating to such supply [S 18(5)].

23. Disposal of Capital Goodsunder Section 18(10)Registered taxable personSupply of capital goods or plant/machinery With/without considerationShall pay an amount equal to ITC taken on said CG or P&M reduce by the % points as may be specifiedThe tax on transactional value of CG or P&MWhichever is higher

24. ITC FOR JOB WORKSupplier of GoodsPrincipalJob WorkerPurchase from Supplier: Allow ITC to principal on inputs sent to a job worker for job work.Input directly sent to job worker without being first bough to his place of business: Allow ITC on input directly sent to a job worker.If the inputs are not received back by the principal: after completion of job work, or otherwise, or not supplied from the place of business of the Job Worker.Within a period of 1 year of being sent out, it shall be deemed to be supplied on the day when the said inputs are sent out.(a)(b)(c) With one yearIntra/Inter-State Purchase

25. Manner of Distribution of ITC by ISDParticularsISDDelhiRecipientDelhiRecipientMumbaiCGST ActCGSTIGSTCGSTIGSTSGST ActSGSTIGSTSGSTIGSTCentre will transfer IGST Credit to stateState will transfer SGST Credit to centre

26. (a) Credit can be distributed against a prescribed document issued to each of the recipients the amount of the credit distributed shall not exceed the amount of credit available for distribution (c) Credit of tax paid on input services attributable to a supplier shall be distributed only to that supplier.(d) Credit of tax paid on input services attributable to more than one recipient, shall be distributed on pro rata on the basis of the turnover in a State of such recipient. Conditions for distributing Input Tax Credit by ISDManner of Distribution of ITC by ISD(e) Credit of tax paid on input services attributable to all recipient, shall be distributed on pro rata on the basis of the turnover in a State of such recipient,

27. Taxable personSEZ developerCredit of input tax may be availed for making zero rated suppliesExport without payment IGST and claim refund of unutilized input tax credit (Section 48)Export with payment of IGST and claim refund of IGST paid on goods and services.(a) Zero rated supplySupply of good and/or servicesOutside IndiaIndiaExportGoods and/or ServiceExport

28. Submission of last return with due care ITC and Matching concept (section 37) condition for availing ITCDepreciation on capital goods vs. ITC Apportionment of credit: Business vs. other purpose separate guideline Banking & Financial Institution Restriction of seamless credit system Tax planning in case of newly registration under this Act. ITC for Jon work and ISDSummary of Discussion

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