2. Provisions in a nutshell…
Section
Provisions
Corresponding Rules 16
Eligibility and Conditions for Claiming Input Tax Credit
Rule 36 & 37 17
Apportionment of Credits and Blocked Credits
Rule 38, 42, 43 18
Availability of Credit in Special Circumstances
Rule 40, 41, 44 19
ITC and Job Work
Rule 45 20
Input Service Distributor
Rule 39 21
Recovery of Excess Distribution

3. Input Credit – Eligibility and Conditions – Section 16
You should
Be Registered
Receive Goods/ Services
Possess Tax Invoice
Pay the vendor within 180 days
Vendor should
Have Paid the tax
Have uploaded the tax to the customers account
Supplies should
Be used for furtherance of business
Not used for exempted/non business us
Credit should not be blocked

4. Conditions for ITC - Issues
Whether excess tax charged by vendor is eligible as credit?
Whether wrong tax charged by vendor is eligible for credit?
Whether wrong place of supply could impact the claim of credit?
Whether registration is a must for claim of credit?
What if the payment terms with the vendor provide for payment after 180 days?
What happens to retention moneys?
Credit should be claimed before September return of next financial year
Whether vested right to claim the credit?

5. Conditions for ITC – Receipt of Goods/Services
Constructive Receipt in case of Bill to / Ship to
When are services received ?
Advances simpliciter
Milestone Obligations
Pass through Cases
Trading in Services
Reimbursement of Expenses

6. Ineligible Input Credit
Blocked Credits
Motor Vehicles & Rent-a-Cab
Food and Beverages
Club, Life/Health Insurance
Construction Related
Goods lost/written off/ provided free
Apportioned Credits
Partly for Business and Partly for Other Purposes
Partly for taxable and partly for exempted supplies
Banking Service Provider

7. Scope of Blocked Credits – Section 17(5)
Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely
“In Respect of” vs. “In Relation to”
State of Madras vs. Swastik Tobacco Factory (1966) 3 SCR 79 (SC)
Specific mention of goods or services or both in some cases

8. Blocked Credits – Motor Vehicles
motor vehicles and other conveyances except when they are used —
for making the following taxable supplies, namely :—
further supply of such vehicles or conveyances; or
transportation of passengers; or
imparting training on driving, flying, navigating such vehicles or conveyances;
for transportation of goods
Motor Car Insurance, Repairs, etc. whether eligible?
Motor Vehicles – Scope – Whether transport vehicles, cranes, vessels, aircrafts, etc. covered?
Distinction between passenger vehicles / goods vehicles

9. Blocked Credits – F&B
food and beverages, …… except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply
Whether credit for purchase of pantry items will be available?
Scope of Exception – further outward supply (restaurants) / element of composite supply (hotels/training services)

10. Blocked Credits – Losses & Freebies
goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
Whether both traded as well as manufactured?
Losses – Normal Losses vs. Abnormal Losses
Shortages discovered later
Could be an indicator of consumption or Loss/Theft/Pilferage
Scope of Gift/Free Samples
Buy1-Get1 Scheme – whether covered?

11. Blocked Credits – Construction Related
works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation. — For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

12. Credits : Understanding Apportionment
Acronym
What it denotes
Impact T1
Inputs/Input Services other than business
Not Eligible for Credit T2
Inputs/Input Services for exempted supplies T3
Blocked Credits C1
Intermediary Number T – (T1+T2+T3) T4
Inputs/Input Services for taxable supplies
Fully Eligible for Credit C2
Residual Common Credit C1 – T4 D1
Proportionate Common Credit attributable to exempted supplies E/F * C2
To be reversed D2
Presumed Non Business 5% of C2 E
Value of Exempted Supplies F
Value of Taxable and Exempted Supplies

13. Whether following constitute exempt supplies?
Scenario
Whether Exempted Supplies
Value of NIL Rated Goods
Yes
Value of Exempted Services
Zero Rated Goods/Services – otherwise taxable No
Zero Rated Goods/Services – otherwise exempt
Supplies effected by branches in other states
Supplies effected by branches in other countries
No??
Conditional Rates (Restaurants, Rent a Cab, etc.)
Transactions in Securities ??
Yes, 1% of Sale Price
Sale of Land / Building ??
Yes, stamp duty value
Interest on Deposits
No (Excluded)

14. Credits on Capital Goods: Understanding Apportionment
Acronym
What it denotes
Impact
Capital Goods other than business
Not Eligible for Credit
Capital Goods for exempted supplies
Blocked Credits
Capital Goods for taxable supplies
Fully Eligible for Credit
A = Tc
Residual Common Credit attributable to capital goods
Useful Life presumed to be 60 months Tm
Monthly Common Credit attributable to capital goods E
Value of Exempted Supplies F
Value of Taxable and Exempted Supplies Te
Amount to be reversed on monthly basis with interest

15. ITC : Special Situations
Impact
Reference
Inputs in Stock at the time of obtaining registration
Eligible for Credit
Section 18(1)(a) / (b)
Inputs in Stock at the time of opting out of composition
Section 18(1)(c )
Capital Goods in possession at the time of opting out of composition
Eligible for Reduced Credit
Inputs / Capital Goods in stock at the time an exempted supply becomes taxable supply
Eligible for credit as above
Section 18(1)(d)
Transfer of Business
Successor can claim credit
Section 18(3)
Stock at the time of opting for Composition or supply becoming exempt (Inputs and Capital Goods)
Pay an amount
Section 18(4)
Supply of Capital goods on which credit is taken
Higher of transaction value or reduced value
Section 18(6)