1. What is input tax?

Input tax” has been defined under GST Law. Input tax in relation to a taxable person, means the (IGST and CGST) in respect of CGST Act and (IGST and SGST) in respect of SGST Act, charged on any supply of goods and/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 sub-section (3) of section 7.

Under the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply of goods and/or services.

We can claim the Input Tax against our Output Tax liability

2. What is the meaning of the different definition of “input tax” in CGST, SGST and IGST Acts?

• CGST Act  Includes IGST & CGST
• SGST Act Includes IGST & SGST
• IGST Act Includes IGST, CGST, and SGST.

This is significant to claim ITC Click here for details

3. Can we claim ITC on GST paid under reverse charge?

Yes. The definition of input tax includes the tax payable under reverse charge also. The credit can be availed if such goods and/or services are used, or are intended to be used, in the course or furtherance of his business.

ITC on GST paid under RCM can only be claimed after actual payment of the same.

4. What is considered as Input Tax under GST?

Input Tax under GST include CGST, SGST, and IGST paid on Input goods, Input services and/ or Capital goods

5. Can we claim ITC on Capital Goods and in what quantity?

Yes, we can claim ITC on Capital Goods

ITC of tax paid on capital goods can be claimed in one installment.

6. What is the eligibility of input tax credit on inputs in stock for a person who obtains voluntary registration?

The person who obtains voluntary registration is entitled to take the input tax credit of

1. Input tax on inputs held in stock, and/or
2. Inputs used in the manufacture of semi-finished goods and/or
3. Inputs used in the manufacture of Finished goods available in stock,

held on the day immediately preceding the date of registration.

7. What is the ITC entitlement of a person who 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

1. Input tax in respect of inputs held in stock and/or
2. Inputs contained in semi-finished or/and
3. Inputs contained in 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.

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.

8. Input Tax eligibility in cases of change in the constitution of a registered taxable person?

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.

Transferor transfer business as a whole to transferee

9. What documents are needed for claiming ITC?

• Tax invoice
• Debit note
• Bill of entry
• Invoice issued under reverse charge mechanism
• Document issued by the ISD

10. Whether Transferee needs to get new registration then there is a change in the constitution of a registered taxable person upon business transfer?

GSTIN is Pan Based number so Transferee needs to obtain a new GST registration number.

11. What are the conditions necessary for obtaining ITC?

As per GST Law, the following four conditions are stipulated:

1. The registered taxable person should be in possession of taxpaying document issued by a supplier;
2. The taxable person must have received the goods and / services;
3. The tax charged on such supply has been actually paid to the government either in cash or through utilization of input tax credit; and
4. The taxable person should have furnished the return

12. Where goods and/or services received by a taxable person are used for 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 / service attributable to only taxable supplies can be taken by the registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed under GST law and rules. It is important to note that credit on capital goods also would now be permitted on a proportionate basis.

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

The input tax credit for goods and / service attributable to only supplies effected for business purpose can be taken by the registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed under GST Law and rules. It is important to note that credit on capital goods also would now be permitted on a proportionate basis.

14. Input Tax eligibility in cases where the taxable person paying tax under section 7 opts to pay tax under Compounding Scheme under Section 10?

The registered taxable person, who was paying tax under section 7 opts to pay tax under Compounding Scheme under Section 10, has to pay an amount equivalent to the input tax credit in respect of

1. inputs held in stock and
2. inputs contained in semi-finished or
3. finished goods held in stock

on the day immediately preceding the date of such switch over.

After payment of the amount on such goods, the balance if any available in electronic credit ledger would lapse.

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

The dealer can avail ITC in respect of

1. inputs held in stock and
2. inputs contained in semi-finished or
3. finished goods held in stock

on the day immediately preceding the date from which he becomes liable to pay tax under section 7.

16. What would be input tax eligibility in a case where the goods and/or services supplied by a registered taxable person become fully exempted?

The registered taxable person who supplies goods and / services which become absolutely exempt has to pay an amount equivalent to the input tax credit in respect of

1. inputs held in stock and
2. inputs contained in semi-finished or
3. finished goods held in stock

on the day immediately preceding the date of such exemption.

After payment of the amount on such goods, the balance if any available in electronic credit ledger would lapse.

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

Mr. Nadu is eligible for the input tax credit on

1. inputs held in stock and
2. inputs contained in semi-finished or
3. finished goods held in stock as

on 30th July,2017.

18. Mr. A applies for voluntary registration on 5th June, 2018 and obtained registration on 20th June, 2018. As on which date Mr. A is eligible for the input tax credit on inputs in stock?

Mr. A is eligible for the input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 19th June, 2018.

19. Whether the principal is eligible to avail input tax credit of inputs sent to job worker for job work?

Yes, the principal is eligible to avail the input tax credit on inputs sent to job worker for job work.

20. What is the time period within which the inputs sent for job work has to be received back by the principal?

The time period for this is 180 days. The principal has to reverse the credit along with interest on inputs which have not been received back from job worker within 180 days but he can reclaim the credit on receipt of inputs.

21. Which type of supplies is included for computation of taxable supplies for the purpose of availing credit? Zero-rated supplies, Exempt supplies or both?

Only Zero-rated supplies are included for the calculation.

22. What is the time period within which the capital goods sent for job work has to be received back by the principal?

The time period for this is two years.

23. What is the liability of the principal if the capital goods sent to job worker have not been received within 2 years from the date of being sent?

The principal has to pay an amount equal to credit taken on such capital goods along with interest. But he can reclaim the credit on receipt of inputs.

24. Can ITC be available in respect of GST paid on the purchase of motor vehicle used for Executive Directors of the company? 

ITC on motor vehicles can be availed only if the taxable person is in the business of transport of passengers or goods or is providing the services of imparting training on motor vehicles.

25. 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?

The input tax credit shall not be allowed on the said tax component which is depreciated.

26. Where the goods against an invoice are received in lots or installments, how will a registered taxable person be entitled to ITC?

The registered taxable person shall be entitled to the credit upon receipt of the last lot or installment.

27. Who will get the ITC where goods have been delivered to a person other than the 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 in the direction of such taxable person. So ITC will be available to the person on whose order the goods are delivered to the third person.

28. What is the time limit for taking ITC?

ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of an 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 an annual return.

29. Is there any negative list on which ITC is not permitted?

It has been provided that the ITC on the following items cannot be availed: Click here to for full article..
(a) motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services—
(i) transportation of passengers, or
(ii) transportation of goods, or
(iii) imparting training on motor driving skills;

(b) goods and / or services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness center, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such goods and/ or services are used primarily for personal use or consumption of any employee;

(c) goods and/or services acquired by the principal in the execution of works contract when such contract results in the construction of immovable property, other than plant and machinery;

(d) goods acquired by a principal, the property in which is not transferred (whether as goods or in some other form) to any other person, which are used in the construction of immovable property, other than plant and machinery;

(e) goods and/or services on which tax has been paid under section 8; and

(f) goods and/or services used for private or personal consumption, to the extent they are so consumed.

30. GST Law provides that the ITC would be confirmed only if the inward details filed by the recipient are matched with the outward details furnished by the supplier in his valid return. What happens if there is a mismatch?

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

31. What will be the tax impact when capital goods on which ITC has been taken are supplied by the taxable person?

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.

32. What is the recovery mechanism for wrongly availed credit?

The wrongly availed credit would be recovered from the registered taxable person under section 73 and 74 of CGST Act.