1. CA.S.Chandrasekar

2. Input Tax Credit (ITC)
The definition of ITC has been made wider and all-encompassing, subject to a few exceptions. The intention of GST is to allow and ensure smooth passage of credit to reduce the burden on the taxpayer at various stages of a transaction.

3. Current ITC Restrictions
Credit of VAT not allowed to be adjusted against service tax output liability
CST credit not to be adjusted against any output liability
SAD under Section 3(5) of Customs Tariff Act not allowed to service provider.
luxury tax, entertainment tax etc. not allowed to be adjusted against output liability.
SBC credit is not allowed to be adjusted;
Reversal of ITC under rule 6(3)
Artificial restrictions on availment of credit under Cenvat Credit Rules, 2004 and under VAT provisions of the State
Levy of entry tax on procurement of specified goods in few states

4. Important Definitions
Input tax- Sec 2(62)
in relation to registered person, means the
CGST,SGST/UTGST charged on any supply of goods or services or both
IGST + import of goods
tax payable (CGST/SGST/IGST/UTGST) by recipient of supply under RCM or on URD purchases
Does not include tax paid under Composition levy
Analysis:
Input Tax = [IGST (Interstate Supplies & Imports) + CGST & SGST/UTGST Intrastate Supplies + Taxes paid under Reverse Charge]

5. Important Definitions
Inputs
means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business;
Input service
means any service used or intended to be used by a supplier in the course or furtherance of business;
Capital goods
means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business;
Input service

6. Analysis Capitalization in the books of accounts as Capital Goods
Input does not include Capital Goods
Direct nexus with outward supply not essential
Used or intention of use in the course or furtherance of business
Input tax credit on Inputs and Capital Goods is allowed in one installment.

7. Principles of ITC System for a NEAR seamless flow of credit
Extends to inter-State supplies
Credit utilization would be as follows:
*The numbers represent the order of utilization of credit
Expectation: Accumulation of unutilized GST credits should be avoided except in cases of exports

8. Availment of ITC
Every registered person is entitled to take ITC on any supply of goods or services or both subject to restrictions.
The supply of goods or services are used or intended to be used in the course or furtherance of the business.
In case the supply of goods or services are used partly for business and party for other purpose – restriction
Same way, if the goods or services are used for taxable and non- taxable supplies – restricted proportionately

9. Conditions for Availment of ITC
For availing credit following conditions need to be fulfilled.
Possession of invoice or debit note or tax paying document.
Received the goods or services or both
Tax charged is actually paid to the appropriate Govt.
Furnished the return under section 39
Payment within 180 days from Invoice date
Else – ITC added to the output tax liability with interest

10. Conditions for Availment of ITC
7. In case of CG - No ITC if depreciation is claimed under Income Tax Act on tax component.
Eg :
In the above example ITC cannot be availed on the tax component i.e., Rs 1000
Plant & machinery of Rs
Add: Tax
Total
Less: Depreciation (10%)
10,000
+1000
11000
-1100
9900

11. Conditions for Availment of ITC
If the goods are received in lots or installments, ITC to be availed upon receipt of last lot or installment.
Illustration:
‘X’ , a registered person received inputs worth Rs.50,000/- from ‘Y’ on installment basis as follows:
1st installment Rs.10,000/-
2nd installment Rs.11,000/-
3rd installment Rs.16,000/-
4th installment Rs. 13,000/-
Input tax credit of Inputs worth Rs. 50,000/- can be availed on or after i.e. receipt of last installment subject to time limit for availing ITC.

12. Time limit for availment of ITC
Limitation for claiming ITC shall be earliest of the following:
Last Date of filing of return for the month of September following the end of Financial Year.
Date of filing of Annual return for the relevant current Financial Year

13. Time limit for availment of ITC
Ex: for the financial year availment of credit should be earlier
Sept 17 – to be filed by 20th of Oct, 17; or
Annual return for by 31st of Dec, 17 (whichever is earlier)
Eg:
Month of Invoice
Time limit (a)
Time limit (b)
Applicable time
Time limit to claim credit
20/03/18
20/10/18
31/12/18
7 months

14. Restrictions – not available
Motor vehicles and other conveyances – except
used for transportation of goods,
supply of vehicles or conveyances,
transportation of passengers,
imparting training of driving, flying, navigating such vehicles
rent-a-cab, life insurance, health insurance except
where Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force.

15. Restrictions
Works contract in relation to immovable property excluding P&M
Construction includes - re-construction, renovation, additions or alterations or repairs, to the extent of capitalization
Goods- lost, stolen, destroyed, written off or disposed by way of gift or free samples

16. Restrictions Membership of a club, health and fitness centre
Goods and services, namely:-
food and beverages
outdoor catering
beauty treatment
Health Services
cosmetic and plastic surgery
Above are eligible for making outward supply of the same category or as a composite / mixed supply as an element.
Membership of a club, health and fitness centre
Goods – used for personal consumption
Travel benefits to employees– leave or home travel concession

17. Restrictions Use of goods & / Services Partly for business purpose
Taxable Supplies
Eligible
Zero rated supplies
Exempt Supplies
Not Eligible
Partly for other purposes

18. ITC in respect of goods sent to Job work
Inputs/ Capital Goods sent for job work
Principal
Job Worker
Received back or directly supplied from job-worker’s premises within 1 year (inputs) or 3 years (capital goods) of being sent out
ITC available if the conditions and restrictions under job work are satisfied
If not received/directly supplied in time: Deemed supply of Inputs/Capital goods on the day when such inputs/capital goods are sent out.

19. ITC in respect of goods sent to Job work
Inputs/ Capital Goods sent directly for job work without being first brought to his place of business.
Principal
Job Worker
Received back or directly supplied from job-worker’s premises within 1 year (inputs) or 3 years (capital goods) of being sent out
Period of 1 year/3 Years shall be counted from the day on which job worker receives the goods
ITC available if the conditions and restrictions under job work are satisfied
If not received/directly supplied in time: Deemed supply of Inputs/Capital goods on the day when such inputs/capital goods are received by job worker.

20. ITC in respect of goods sent to Job work
Illustrations:
Eg: “A” a manufacturer located in Delhi sent inputs on to Z located in Kolkata who is a job worker registered under GST and Inputs received back on
Eg: “X” a manufacturer located in Bangalore sent Capital goods directly on which are received by Z located in Bangalore who is a job worker registered under GST on and Inputs received back on
No supply
Inter state supply
No supply
Intra state supply

21. ITC in special circumstances
Availability of credit in case of mandatory registration and voluntary registration:
Mandatory registration
Voluntary registration
Registration on crossing of exemption limit
Voluntary registration without crossing of exemption limit
Conditions:
Applied for registration within 30 days from the date on which he is required to obtain registration
Registration has been granted
No conditions prescribed
Eligible to take to ITC on inputs held in stock or inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date on which he becomes liable to pay tax
Eligible to take to ITC on goods held in stock or inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration.
No ITC can be availed after the expiry of 1 year from the invoice date.
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

22. ITC in special circumstances
ITC in case of switch over from Composition to Regular Scheme and vice-versa.
Composition to Regular Scheme
Regular to Composition Scheme
Avail ITC on:
Inputs held in stock
Inputs contained in WIP
Inputs contained in FG
Capital Goods
Held in stock on the day immediately preceding the date from which he becomes liable to pay tax under Regular Scheme.
ITC on Capital goods shall be reduced by such percentage points as may be prescribed- 5% per quarter
No ITC can be availed after the expiry of 1 year from the invoice date.
Pay an amount equivalent to ITC in respect of –
Capital Goods reduced by such percentage points as may be prescribed
Held in stock on the day immediately preceding the date of such switch over.
Payment can be made by way of debit to electronic credit or cash ledger
Balance input tax credit lying after payment of such amount in electronic credit ledger shall lapse
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

23. ITC in special circumstances
ITC in case of exempt supply of goods and/ services becoming taxable and vice-versa
Exempt supply of goods and/ services becoming taxable
Taxable supply of goods and/ services becoming exempt
Avail ITC on:
Inputs held in stock
Inputs contained in WIP
Inputs contained in FG
Capital Goods exclusively used for such exempt supply hitherto
Held in stock on the day immediately preceding the date from which such exempt supply becomes taxable
ITC on Capital goods shall be reduced by such percentage points as may be prescribed-5% per quarter
No ITC can be availed after the expiry of 1 year from the invoice date.
Pay an amount equivalent to ITC in respect of –
Capital Goods reduced by such percentage points as may be prescribed
Held in stock on the day immediately preceding the date of such exemption.
Payment can be made by way of debit to electronic credit or cash ledger
Balance input tax credit lying after payment of such amount in electronic credit ledger shall lapse
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

24. ITC in special circumstances
Dealers moving from Composition to Normal scheme/ Exempt supplies to taxable- claim ITC
File GST ITC-01 within 30 days from change over with details of
Stock of Inputs
Inputs contained in semi finished goods
Input contained in Finished goods
Capital Goods
Certificate of CA/CMA- if credit amount > 2,00,000
Tax credit will be allowed only after verification of corresponding sale by the supplier.
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

25. ITC in special circumstances
In case of change in the constitution of registered taxable person on account of sale, merger, de-merger, amalgamation, lease or transfer of the business with a specific provision for transfer of liabilities, ITC remaining unutilized in the books of the transferor shall be permitted to be transferred to transferee.
[Transferor – file FORM GSTR ITC 02+request for transfer of unutilized credit+certificate by CA/CMA. Unutilized shall be credited to electronic credit ledger of transferee ]
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

26. ITC in special circumstances
No credit shall be availed in respect of supply of G/S after 1 year from the date of issue of tax invoice.
In case of supply of capital goods or P & M on which ITC is availed, pay an amount equivalent to higher of–
ITC availed, reduced by such percentage points as may be specified or
Tax on transaction value.
In case of supply of refractory bricks, moulds & dies, jigs & fixtures are supplied as scrap, pay tax on transaction value.
Example for any other services billed outside India not liable, is destination door delivery services provided on standalone basis.

27. Thank you
For any clarification