ISSUES UNDER INPUT TAX CREDIT

Transcription

1 LIVE WEBCAST ORGANISED BY INDIRECT TAXES COMMITTEE OF ICAI ISSUES UNDER INPUT TAX CREDIT Presented by Adv. Raghuraman V. CA. Rajesh Kumar T.R 1

2 DEFINITIONS SECTION 2 Input [Section 2(59)] - input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business Input services [Section 2(60)] - input service means any service used or intended to be used by a supplier in the course or furtherance of business. Capital goods Section 2(19) - capital goods means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business; Input tax credit [Section 2 (63) ]: input tax credit means the credit of input tax. 2

3 DEFINITIONS CONT Input tax [Section 2 (62)] - input tax in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes the integrated goods and services tax charged on import of goods; the tax payable under the provisions of sub-sections (3) and (4) of section 9; the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, 3 but does not include the tax paid under the composition levy;

4 DEFINITIONS CONT Input service distributor [Section 2 (61): Input Service Distributor means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office. 4

5 ISSUES NO.1 Usage in the course or furtherance of business is one of the essential conditions for availing input tax. Considering the scope of definition of Business being very wide, what can be said to be not so used or intended for such use? How to identify non-business use? Some Examples 5

6 ISSUE NO. 2 Definition of Capital Goods is linked to capitalisation in the books of account. Capitalisation should be as per which of the following Income Tax Law; Companies Law; Other Law; Accounting Standard; Is it only confined to goods only or it is inclusive of services used for such capital goods, like transpiration, installation etc., If it is supplied by same supplier If it is supplied by different supplier 6

7 ISSUE NO. 3 There is a concept of Input Service Distributor. Further, different registrations are treated as separate business entities. As per Sch. I, supply of goods are services even without consideration is liable for GST. What is the difference between two, which of these has to be applied when? Is it inter-changeable. 7

8 ISSUE NO. 4 Eligibility of Credit as per Sec. 16(1) says it is to be taken in the manner specified under Sec. 49, which again refers to Sec. 41 wherein it says that the credit is to be taken on self-assessment basis in the returns and which is going to be provisional. What is the time of accrual of credit to the assessee? When it says it is provisional. When it becomes final? Since the complete matching mechanism is not set up can the revenue issue notice for mis-match of credit availed. Is it susceptible to challenge before Court? 8

9 ISSUE NO. 5 The input tax credit eligibility is subject to prescribed conditions and restrictions. Rule 36 dealing with documentary requirement and conditions only refers to certain documents for availing input tax and does not link to the matching of credit. Does it mean that non-matching of credit due to fault of supplier should not be considered as irregular availment of input tax credit. Is it an independent obligation put up in Section 42 to pay back unmatched credits and not ineligible credit. 9

10 ISSUE NO. 6 Sec. 16(2) puts up certain conditions. Is it sufficient that these conditions are fulfilled subsequent to availing of input tax or it is essential that it has to be fulfilled even before availing input tax. Eg. ITC matched online but documents received later. 10

11 ISSUE NO. 7 Condition under Sec. 16(2) says goods and services should be received. In case of AMC Contracts and Insurance contracts When to avail credit and to what extent. In case of transit sale, when the buyer does not instruct the seller but during transit before taking delivery endorses the LR/RR in favour of buyer, whether the explanation giving exception to receipt is fulfilled? 11

12 ISSUE NO. 8 Input Tax definition covers tax paid under reverse charge also. ITC defined as credit of the same. Whether tax payable for the month of May can it be used for payment of output tax payable for the month of may output tax? Whether available input tax can be used for payment of reverse charge? 12

13 ISSUE NO. 9 As per the contract the escalation or negotiation as to price adjustment to be done only on completion of contracts. The contact completion happens after October of subsequent financial year. Whether the recipient is debarred from availing input tax on the same. 13

14 ISSUE NO. 10 Sec. 17(2) & (3) empowers for making rules to determine the quantum of credit relatable to exempt supplies. There is no such prescription for non-business supplies whether rules prescribing 5% of common input tax is valid? When there is only few of Sch III items covered therein, whether others are to be included while considering exempt supplies? Whether reimbursement claims to be included in exempt supplies? 14

15 ISSUE NO. 11 Whether provisions of Section 17(4) relating to Banking sector is applicable qua a company or qua business line or qua registration? 15

16 ISSUE NO (5) reads as input tax credit shall not be available in respect of the following What is the scope of in respect of. What is the meaning of personal consumption in case of firms, LLP and body corporate? 16

17 ISSUE NO. 13 Whether following are eligible credits? Repair and Maintenance of M.V. Rent paid on cars used for employee use as per employment agreement. Rent paid on cars used for employee transportation. Lease Rent paid on buses taken for employee transportation. Operation charges paid on buses taken for the same. Motor Vehicles taken on lease further leased. 17

18 ISSUE NO. 14 Whether following are eligible credits? Food supplied by third party in factory/office canteen. Subsidy given for supply of food by third party to employees. Food supplied to employees when they are at site where the condition of the contract specifies it is suppliers responsibility to provide food. Restaurant service received by employee. 18

19 ISSUE NO. 15 Whether following are eligible credits? CSR expenses of company. Medicines purchased for dispensary in the factory. Services received for such dispensary. Membership of an industrial association. Cabs provided to female employees during night shift. 19

20 ISSUE NO. 16 What is the difference between sub-clause (c) & (d) of 17(5)? What is the scope of the term construction read with explanation? What is the meaning and relevance of on his own account in sub-clause (d)? Since there are separate clauses in Sch. II for contractor and developer, Whether input tax credit is eligible for developer? 20

21 ISSUE NO. 17 Whether, works contract service of interiors after completion handing over of building by contractor is to considered as construction and ineligible? Whether fixing of split air-conditioners is eligible for credit? If it is centralised air-conditioning system, does it makes difference? Whether ITC on supply and Installation of lift is eligible? Whether ITC on construction of theatre is eligible as plant and machinery? If it is composite supply can the credit be segregated and restricted only to the extent of construction? 21

22 ISSUE NO. 18 Whether credit needs to be reversed in cases of Inputs evaporated during transit due to natural causes. Inputs Damaged during flood/fire. Provision for written off partially Inputs given as free gifts to customers/distributors Finished goods given as free samples/gifts Replacement as warranty Production rejects Whether separate recovery mechanism is required for post facto events. 22

23 Other Issues Indirect Taxes Committee of ICAI at and Register on for updates and resource material from ICAI 23