1. Presented By: Adv. C. B. Thakar
Gst: input tax credit
Presented By:
Adv. C. B. Thakar

2. MVAT Input Tax reversal
Credit not available
Current Taxation Scenario
INDIA
Form F
MVAT Input Tax reversal
KVAT
Import
BCD
CVD
SAD
Trader X ED +
MVAT
Trader X
Manufacturer A
Customer
CST
Factory
LBT
Hub W/H
Spoke W/H
Tamil Nadu
Mumbai
Pune
Maharashtra
Karnataka
Customer
Tax Collection
Central Government – BCD, ED
Maharashtra State Government – MVAT
Pune Municipal Corporation – LBT
Karnataka State Government – KVAT, CST
Tamil Nadu State Government – NIL
Issues
Origin based tax
Loss of credit
Tax cascading

3. GST Taxation Scenario INDIA Tax Collection Issues Radical Changes CGST+
SGST
Import
BCD
IGST
Manufacturer A
CGST +
SGST
Trader X
Trader X
Customer
IGST
IGST
Factory
Hub W/H
Spoke W/H
Tamil Nadu
Mumbai
Pune
Maharashtra
Karnataka
Customer
*Credit not available
Tax Collection
Central Government – BCD, CGST
Maharashtra State Government – NIL
Pune Municipal Corporation – NIL
Karnataka State Government – SGST
Tamil Nadu State Government – SGST component of IGST
Issues Radical Changes
Origin based tax Destination based tax
Loss of credit Seamless credit
Tax cascading Reduced cascading (BCD)
Taxable Person

4. Input Tax Credit - Definitions
“input” means any goods other than capital goods, 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
2(55) Input Service
“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
2(57) Input Tax
(57) "input tax" in relation to a taxable person, means the {IGST and CGST}/{IGST and SGST} 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
2(58) Input Tax Credit
“input tax credit” means credit of ‘input tax’ as defined in section 2(56)
7(3) – reverse charge

5. Input Tax Credit – Definitions analysis
IGST/CGST/SGST charged on any supply of goods and/or services to Taxpayer Used or intended to be used in the course or furtherance of business
Pre-registration ITC – Only inputs.
No Credit of capital goods and services
Inputs / Input Services
Goods/Service
used or intended to be used
by a supplier
for making an outward supply
in the course or furtherance of business;
Capital Goods
Specified goods similar to Cenvat Credit Rules used-
at the place of business for supply of goods
outside the place of business for generation of electricity for captive use
for supply of services
Issues
Capital Goods used outside for pumping of water / used at captive mines?
Office equipment's
Condition of Rs 10,000
Earlier “used in the factory” | Cadilla Guj HC, Ambika overseas Punj HC business promotion expense |
Factory marketing office etc not available
Electricity generation Cap goods – Guj not allowed | CENVAT – allowed Solaris Chemtech
No provision for capital goods
Current CENVAT credit, input definition has exclusions. GST section 16 has exclusions

6. Negative list of items
Motor vehicles, except when used for providing specified taxable services.
Specified goods and / or services used primarily for personal use or consumption of any employee.
Goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery.
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.
Issues :
Factory building / Storage tank / bunker / pipelines?
ITC on immovable property rented rented out
ITC by developer / works contractor on sub contractor services
Plant and machinery : Not defined
No denial for rent a cab
Plant and machinery not defined
Rule 54(g) and (h) MVAT Works contract – g employer, h dealer. Error in GST law
Fuel, Natural gas etc not included as outside GST itself

7. Input Tax Credit Section 2 (80) – Recipient ? Person making payment?
Conditions for availing ITC
Valid document.
Taxpayer has received the goods and/or services. (Exception Bill to Ship to cases)
ITC only on last lot or instalment.
Supplier has actually paid the tax.
Buyer has filed GSTR 3/6.
Time limit for availing ITC
2 (80) consideration person paying is recipient
No ITC on advance paid
(d) Is badly drafted. Not the intention
16(14) provision similar to 3(5A) – not needed as it will be a supply. No mention of already reverse prop credit
16(16) – only wrongly taken. No mention of utilization
Gujarat – ITC only on receipt of original invoice | Sec 11(7A) Credit only if tax paid into Govt Treasury
Section 2 (80) – Recipient ?
Person making payment?

8. Place of supply and ITC : Bill-to/ Ship-to Model
First supply:
Principal place of business of first purchaser
Second supply:
Where delivery terminates i.e. location of second purchaser
Input Tax Credit
Deemed that first purchaser has received the goods and shall be eligible to avail ITC provided other eligibility conditions are satisfied.
First Supply
Vendor
First purchaser
invoice
invoice
Delivery
of goods
Second
Supply
Movement of credit
Deeming definitions 5(2A) POS,
Expl to 16(11)
Second purchaser

9. General provisions on input tax Credit
Variable time limit for availing credit on goods/ services:
filing of the return under section 27 for the month of September following the end of financial year to which such invoice pertains; or
filing of the relevant annual return, whichever is earlier.
No Cross utilization between CGST and SGST.
No cross utilization between IGST, CGST and SGST of one GSTIN with other GSTIN.
Proportionate reversal of ITC on capital goods also for exempted supplies
No reduction of ITC on interstate-stock transfers
No provision like Rule 6 of Cenvat Credit Rules, 2004
Pre-registration ITC allowed
16(5) and (6) proportionate credit for Cap goods also
Cap goods 2 year time limit for manufacturing taxable goods. Else credit denied.
Gujarat does not allow pre-registration ITC

10. Input Tax credit and job work
Principal entitled to take credit of inputs sent for job work only if returned within 180 days
Principal entitled to take credit of capital goods sent for job work only if returned within 2 years
Credit can be taken even if inputs/ capital goods are sent directly to the job worker’s premise
If goods are not returned within time, credit availed must be reversed
Contradiction with Section 43A
No provision to retain credit if goods are supplied directly from job-worker’s premise to final customer

11. Deemed Supply (Schedule I)
Contradictions
Provisions under ITC
Deemed Supply (Schedule I)
Section 16(5)
Where the goods and/or services are used by the registered taxable person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
Temporary application of business assets to a private or non business use
Services put to a private or non business use.
Section 21(7)
Every registered taxable person whose registration is cancelled shall pay an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods or the output tax payable on such goods, whichever is higher.
Assets retained after deregistration

12. Mismatch of Invoices VAT /Carousel Fraud: collected but not deposited
ITC credit eligible only on matching of invoices
The supplier should file the Return and pay TAX for the purchaser to claim ITC
Credit reversal with interest for purchaser
Demand of tax from supplier
Matching at invoice level v. TIN level
VAT /Carousel Fraud: collected but not deposited
Who should suffer – the innocent customer or the duped Government?
Mahalakshmi Cotton 2012 (51) VST 1 (Bom)
Give gist of GSTR-1, 2 and matching concept.
Intimation to both parties
Accept/ reject
Provisional credit
Interest on reversal

13. Input Service Distributor
ISD means an office of the supplier of goods and / or services which receives tax invoices issued under Section 23 towards receipt of input services and issues tax invoices for the purpose of distributing credit of CGST / SGST and / or IGST paid on the said services to a supplier of taxable goods and / or services having the same PAN as that of the office referred above.
Explanation: For the purposes of distributing credit of CGST / SGST and / or IGST, ISD shall be deemed to be a supplier of services.
Location of Supplier
Location of Immovable property
State A
State A
CCR - The input service distributor shall distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or unit providing output service or an outsourced manufacturing units
State B
Location of Service Receiver

14. Transitional provisions on input tax Credit
Transitional Credit - Eligibility
CENVAT credit/ input tax credit
balance reported in return
balance of capital goods not reported in return
goods held in stock – Output exempt under earlier law but taxable under GST
goods lying with agent
capital goods lying with agent
Excise
Service
Tax
VAT
GST
Transitional Credit
Deemed Credit?
Goods in transit on appointed day. Will move under excise invoice. No provision too allow credit of ED
CST?
Entry Tax?
CENVAT credit for Trader?
VAT credit for service provider?
Credit must be eligible in Current law as well as GST law
Relevant documents to be preserved

15. Special situations – movement of goods
Goods removed before appointed date and returned thereafter
Exempted goods
Duty paid goods
Inputs removed for job work
Semi-finished goods removed for job work
Finished goods removed for carrying out specified processes
Goods sent on sale or approval basis
NO GST on such return movement if goods are returned within 6 months from appointed date
Taxable if returned after 6 months
Precise identification of goods and records to be maintained
Valuation provisions are not clear.

16. Pending claims/ refunds and outcome of proceedings
Pendency
Refund claims
CENVAT Credit claim/ recovery
Assessment or adjudication proceedings
Appeal, revision, review or reference relating to output duty liability
Revision of returns
If amount due to the Taxpayer – Cash refund
If amount due from the Taxpayer – recover as arrears of tax under GST law
Pending matters to be governed by earlier law

17. Presented By: Adv. C. B. Thakar E-mail: cbtc@vsnl.com Mob: 9821135674
Thank You