INPUT TAX CREDIT GST

Transcription

1 Intrductin:- INPUT TAX CREDIT GST Chapter V f GST Act deals with input tax credit. The chapter is divided int 7 sectins: (i) Sectin 16 : Eligibility and cnditins fr taking input tax credit (ii) Sectin 17 : Apprtinment f credit and blcked credits (iii) Sectin 18 : Availability f credit in special circumstances (iv) Sectin 19 : Recvery f Input Tax Credit and Interest theren (v) Sectin 20 : Taking input tax credit n inputs sent fr jb wrk. (vi) Sectin 21 : Manner f distributin f credit by ISD. (vii) Sectin 22 : Manner f recvery f credit distributed in excess. Input tax credit is the backbne f the GST regime. GST is nthing but a value added tax n gds & service cmbined. It is these prvisins f Input Tax Credit that make GST a value added tax i.e., cllectin f tax at all pints after allwing credit fr the inputs. The prcedures and restrictins laid dwn in these prvisins are imprtant t make sure that there is seamless flw f credit in the whle scheme f transitin withut any misuse. Relevant Definitins:- Sectin 2(98) read alng with Sectin 9 f Mdel GST Act - Taxable persn means a persn wh carries n any business at anyplace in India/State f _ and wh is registered r required t be registered under Schedule III f the Act.

2 Sectin 2 (55) f Revised Mdel GST Act - It means credit f Input tax as defined in Sectin 2 (56). Sectin 2 (56) f Revised Mdel GST Act - Input tax in relatin t a taxable persn, means - the {IGST and CGST}/{IGST and SGST} charged n any supply f gds and/r service t him - which are used, r are intended t be used, - in the curse r furtherance f his business - And includes the tax payable under reverse charge. Sectin 8(3) f Revised Mdel GST Act -Levies tax n gds and/r services n reverse charge. Therefre, input tax credit is the tax paid by a taxable persn under the Act whether n frward charge r reverse charge fr the use f such gds and/r services in curse r furtherance f his business. Sectin 2 (43) f Revised Mdel GST Act - Electrnic Credit Ledger - The input tax credit ledger in electrnic frm maintained at the cmmn prtal fr each registered taxable persn in the manner as may be prescribed in this behalf. Sectin 2 (19) f Revised Mdel GST Act - Capital Gds means - any gds, - the value f which is capitalised in the bks f accunts - f the persn claiming the credit - and which are used r intended t be used - In the curse r furtherance f business. Sectin 2 (52) f Revised Mdel GST Act - Input: Input means - any gds, - ther than capital gds, - used r intended t be used by a supplier - In the curse r furtherance f business Sectin 2 (53) f Revised Mdel GST Act - Input service: Input service means

3 - any service - used r intended t be used - by a supplier - In the curse r furtherance f business Sectin 16 f Revised Mdel GST Act - Eligibility & Cnditins fr taking ITC:- Registered persn t take credit: Every registered taxable persn subject t Sectin 44 (Persn liable t pay tax under GST Law), shall be entitled t take credit f admissible input tax. The input tax credit is credited t the electrnic credit ledger. Cnditins fr availing input tax credit: Registered taxable persn is nt entitled t input tax credit n supply f gds and/r services unless he: (i) is in pssessin f a - tax invice, debit nte, supplementary invice r - such ther taxpaying dcument as may be prescribed. (ii) Has received the gds and/r services. The gds are deemed t be received by the taxable persn when - Gds are delivered by supplier t recipient r ther persn n directin f the taxable persn whether an agent r therwise befre r during mvement f gds by way f transfer f dcuments f title f gds r therwise. (iii) Tax charged fr such supply - is actually paid t the credit f the apprpriate Gvernment, - either thrugh cash r thrugh utilisatin f input tax credit admissible in respect f such supply (iv) He has furnished return as per Sectin 34 f MGST Law. In case f the gds which are received in lts r instalments, against an invice the credit culd be availed upn receipt f last lt r instalment by registered taxable persn. (a) Eligibility f input tax credit n inputs held in Stck and cntained in Semi-Finished and Finished Gds held in Stck: (Sec 17 f MGST Law)

4 The credit n inputs held in stck and inputs cntained in semi-finished gds and finished gds held in stck are available in the fllwing manner: S.N. Eligible persns Credit entitled As n Restrictin/c nditins 1 Persn applied Inputs held in The day fr stck and inputs immediately Cannt avail registratin within 30 days frm the date f liability t pay tax cntained in semi-finished r finished gds held in stck preceding the date frm which he becmes liable t pay tax credit f gds and / r services after 1 year frmtax invice date register and registered 2 Persn applied fr registratin after 30 days frm the date f liability t pay tax, registers and registered 3 Persn wh is ntrequired tregister, butbtainsvlunta ry registratin 4 Persn ceases t pay cmpsitin tax (Sec 9 t Sec 8) Nil Inputs held in stck and inputs cntained in semi-finished r finished gds held in stck Inputs held in stck and inputs cntained in semi-finished r finished gds held in stck NA The day immediately preceding the date f registratin The day Immediately preceding the date frm which he becmes liable t pay tax under regular scheme The amunt f credit calculated as per GAAP (B) Prprtinate Credit: The gds and / r services are used by a registered taxable persn partly fr business and partly fr nn-business; he is eligible t input tax credit f gds and / r services attributable t the purpses f business.

5 The gds and / r services are used partly fr effecting taxable supplies (plus zerrated supplies) and partly fr effecting nn-taxable supplies (plus exempt supplies); he is eligible fr credit attributable t the taxable supplies including zer-rated supplies. (C) Input Tax Credit and Change in cnstitutin f Taxable Persn: The change in cnstitutin f taxable persn due t sale merger, demerger, amalgamatin, lease r transfer f business with prvisin fr transfer f liabilities, the registered taxable persn allwed transferring the input tax credit remaining unutilized in the bks f accunt t such sld, merged, demerged, amalgamated, leased r transferred business. (D) Ineligible Credit: (i) mtr vehicles, except when they are supplied in the usual curse f business r are used fr prviding taxable services f - Transprtatin f passengers - Transprtatin f gds - Imparting training r mtr driving skills (ii) Gds and / r services prvided in relatin t - fd and beverages, utdr catering, csmetic and plastic surgery - life insurance, health insurance - travel benefits t emplyees n vacatin such as leave r hme travel cncessin - membership f a club, beauty treatment, - health services, - health and fitness centre Such gds and / r services as are used primarily fr persnal use r cnsumptin f emplyee (iii) Gds and/r services acquired by principal in the executin f wrks cntract - when such cntract results in cnstructin f immvable prperty, - Other than Plant and Machinery. (iv) Gds acquired by principal, the prperty in which is nt transferred - whether as gds r in sme ther frm - t any ther persn, - which are used in cnstructin f immvable prperty, - Other than Plant and Machinery.

6 (v) Gds and/r services n which cmpsitin tax has been paid as per Sec 9 f Mdel GST Law. (vi) Gds and/r services used fr private r persnal cnsumptin t the extent they are s cnsumed. Where the registered taxable persn has claimed depreciatin n the tax cmpnent f the cst f capital gds under the prvisins f the Incme Tax Act, 1961, the input tax credit shall nt be allwed n the said tax cmpnent. When taxable persn switches ver frm regular scheme t cmpsitin scheme: - pay an amunt by debiting electrnic cash ledger, - equivalent t input tax credit f - inputs held in stck r - inputs cntained in semi-finished r finished gds held in stck - On the day immediately preceding the date f such switch ver. - Balance f input tax credit lying in the electrnic credit ledger, after payment f the abve said amunt, shall lapse. - The amunt payable is t be determined as per general accepted accunting 0principles (GAAP). The abve prvisin is als applicable where gds r services suppliedby taxable persn are abslutely exempt. Supply f capital gds n which Input Tax Credit is taken: The registered taxable persn shall: - pay an amunt equal t input tax credit taken n such capital gds - reduced by percentage pints as prescribed r - Tax n the transactin value f such capital gds, whichever is higher. Credit in respect f invice fr supply f gds r services fr the mnth f September, after filing returns: A taxable persn shall nt take input tax credit - in respect f any invice fr supply f gds and/r services, - after the filing f the return fr the mnth f September, - fllwing the end f financial year t which such invice pertains r - Filing f the relevant Annual Return, whichever is earlier. Sectin 19 f Revised Mdel GST Law - Recvery f ITC and Interest theren:-

7 Input tax credit taken wrngly; the same shall be recvered frm the registered taxable persn in the manner prescribed. Sectin 20 f Revised Mdel GST Law - Input Tax Credit - Jb Wrk:- (i) Relevant Definitins: - Jb wrk: Any treatment r prcess dne by a persn n gds belnging t aregistered taxable persn - Jb wrker: A persn wh des any treatment r prcess n gds f registered taxable persn. - Principal: A persn n whse behalf an agent carries n the business f supply rreceipt f gds and/r services. (ii) Entitlement f Credit n Inputs: - The principal can take credit f input tax n inputs sent t jb-wrker, fr jb wrk - subject t such cnditins and restrictins as may be prescribed - the inputs, after cmpletin f jb-wrk, are received back by him within 1 Year f their being sent ut - Credit f inputs can be taken even if inputs are sent directly t jb-wrker s place withut bringing t principal s place f business. - If input sent directly t jb wrker, the perid f 180 days is cunted frm the date when jb wrker receives input. - If the inputs are nt received back within 180 days, the principal shall pay an amunt equal t input tax credit taken n the said inputs. - If the inputs are received back by the principal, he may reclaim the input tax credit and interest paid earlier. (iii) Entitlement t Credit n Capital Gds: The principal can take credit f input tax n capital gds sent t jb-wrker - The said capital gds, after cmpletin f jb-wrk, are received back by him within 3 years f their being sent ut - The principal can take credit f capital gds even if such capital gds are sent directly t jb-wrker s place withut bringing t principal s place f business.

8 - If the capital gds are nt received back within 2 years, the principal shall pay an amunt equal t input tax credit taken n the said capital gds. - If the capital gds are received back by the principal, he may reclaim the input tax credit and interest paid earlier. Sectin 21 f Revised Mdel GST Law Manner f distributin f credit by Input Service Distributr:- Input Service Distributr (ISD) is an ffice f the supplier f gds and/r services where dcument (like invice) f services attributable t ther lcatins are received (since they might be registered separately). Since the services relate t ther lcatins the crrespnding credit shuld be transferred t such lcatins (having separate registratins) as the utput services are being prvided there. It is deemed that an ISD is a supplier f services fr the purpses f distributing the credit. Distributin f credit where ISD and recipient are lcated in different States under CGST Act: ISD can distribute as prescribed, credit f CGST r IGST as the case maybe as IGST by issuing prescribed dcument mentining the amunt f credit distributed t recipient f credit lcated in different States. Distributin f credit where ISD and recipient are lcated in different States under SGST Act: ISD culd distribute as prescribed credit f SGST as IGST by issuing a prescribed dcument cntaining the amunt f credit distributed. Distributin f credit where ISD and recipient are lcated within the State under CGST Act: In case f different registratins within the same State by an entity, it may have t distribute credit t such lcatins als as in the case f lcatins with different registratins utside the State. In rder t enable the same, it is prvided that ISD can distribute in the prescribed manner, credit f CGST and IGST as CGST by issuing prescribed dcument mentining the amunt f credit distributed t recipient being a business vertical. Distributin f credit where ISD and recipient are lcated within the State under SGST Act: Similar t the premises f CGST as indicated supra under CGST Act, evenunder the SGST Act, it is prvided that an ISD can distribute in the prescribed manner, credit f SGST and IGST as SGST by issuing prescribed dcument mentining the amunt f credit distributed t recipient being a business vertical. Sectin 22 f Revised Mdel GST Law Manner f recvery f credit distributed in excess:- Excess distributin f credit t ne r mre recipients f credit, the excess credit s distributed shall be recvered frm such recipients alng with interest, and the prvisins f sectin 66 r 67, as the case may be, shall apply mutandis mutandis fr effecting such recvery.

9 Intrductin: Transitinal Prvisins Transitinal Prvisins in GST Act is t clarify as t when and hw the perative parts f the enactments are t take effect. The Transitinal Prvisins generally are intended t take care f the events during the perid f transitin. What is the Status f Existing Officers? What is the Status f Existing Dealers, Manufacturers & Service Prvider? ITC Related Transitinal Prvisins? Refund f Cenvat Credit & Input Tax Credit? Mvement f Gds after the enactment f GST? Price Fluctuatins? Taxability in case f Jb Wrk? Adjudicatin /Appeals under earlier law? Hw transactins in midway can be treated? 01. ITC Related Transitinal Prvisins? (Other than Cenvat Credit n Inputs, Input Services & Capital Gds) 01.1 Credit distributin f service tax by ISD? (Sec 190 f Mdel GST Law) The input tax credit n accunt f services received prir t the appinted day by an ISD

10 Shall be eligible fr distributin as credit under this Act Even if invices relating t such services received n r after the appinted day Date f receipt f services is mre imprtant. Prvisin nly CGST Law 01.2 Prvisin fr transfer f unutilized Cenvat Credit by Taxable Persn having Centralised Registratin (Sec 191 f Mdel GST Law) Where a taxable persn having Centralized Registratin. Obtained a registratin under GST. The registered persn is allwed t take, in his Electrnic Credit Ledger, credit f the amunt f Cenvat Credit carried frward in a return, furnished under the earlier law. If the taxable persn files his return fr the perid ending with the day immediately preceding the appinted day within 3 Mnths f the appinted day, such credit shall be allwed subject t the cnditin that the said return is either an riginal return r a revised return where the credit has been reduced frm that claimed earlier: The taxable persn shall nt be allwed t take credit unless said amunt admissible as Input Tax Credit under GST Law. The cenvat credit may be transferred t any f the registered taxable persns having the same PAN fr which the centralized registratin was btained under the earlier law. Prvisin nly under CGST Law Tax paid n Gds lying with Agents t be allwed as credit? (Sec 192 f Mdel GST Law)

11 Gds f Principal lying at the premises f the agent n the appinted day The agent shall be entitled t take credit If Agent is registered under GST Law Such stck is declared by bth the principal and agent in the frm and manner within such time as may be prescribed Invices relating t such gds nt earlier than 12 mnths frm appinted day The principal has either reversed r nt availed input tax credit in respect f such gds. Prvisin nly under SGST Law Tax paid n Capital Gds lying with Agents t be allwed as credit? (Sec 193 f Mdel GST Law) Capital Gds f Principal lying at the premises f the agent n the appinted day. The agent shall be entitled t take credit f tax paid n such capital gds subject t the cnditins: The Agent is registered under GST Law. Such stck is declared by the principal and agent in the frm and manner within such time as may be prescribed. Invices relating t such gds nt earlier than 12 mnths frm appinted day. The principal has nt availed input tax credit r reversed the tax credit t the extent availed by him. Prvisin nly under SGST Law In case f Branch Transfers? (Sec 194 f Mdel GST Law) Any amunt f Input Tax Credit reversed prir t the appinted day

12 Shall nt be eligible as credit f input tax Under GST Law. Reversal f ITC in case f Branch Transfer is Imprtant. Prvisin nly under SGST Law. 02. Refund f Cenvat Credit & ITC? If refund claims are Pending t be dispsed f under earlier law? (Sec 179 f Mdel GST Law) Every claim f Refund f any duty/tax/interest/any ther amunt filed befre the appinted day Shall be dispsed ff in accrdance with the prvisins f earlier law Refund claim accepted shall be paid in cash. Partially/ cmpletely rejected refund claim shall be lapsed If the amunt has been carried frwarded under GST Law as n the appinted day, refund claim n such amunt shall nt be allwed. Prvisin applicable fr CGST & SGST Law Illustratin: An exprt manufacturer files a claim fr refund f Rs. 15,00,000/- n 15th June, Assume applicability f GST frm 1st July, Explain the treatment? Sl: The refund claim will be prcessed under the prvisin f the earlier law i.e. Central Excise Law itself. If the refund is cnsidered as admissible by the Department, then the same will be paid in cash subject t the Dctrine f Unjust Enrichment Refund claims filed after the appinted day fr gds cleared r services prvided befre the appinted day and exprted befre r after the appinted day t be dispsed f under earlier law? (Sec 180 f Mdel GST Law)

13 Every claim fr refund f any duty r tax paid under earlier law, filed after the appinted day, fr the gds r services exprted befre r after the appinted day, shall be dispsed f in accrdance with the prvisins f earlier law. Where any claim fr refund f Cenvat credit is fully r partially rejected, the amunt s rejected shall lapse: That n refund claim shall be allwed f any amunt f Cenvat credit where the balance f the said amunt as n the appinted day has been carried frward under GST Law. Prvisin nly under CGST Law. Illustratin t discuss? Refund claims filed after the appinted day fr payments received and tax depsited befre the appinted day in respect f services nt prvided? (Sec 181 f Mdel GST Law) Every claim fr refund f tax depsited under the earlier law in respect f Services Nt Prvided, filed after the appinted day, shall be dispsed f in accrdance with the prvisins f earlier law. Any amunt eventually accruing t him shall be paid in cash, ntwithstanding anything t the cntrary cntained under the prvisins f earlier law ther than the prvisins f subsectin (2) f sectin 11B f the Central Excise Act, 1944 (1 f 1944). Prvisin nly under CGST Law. Illustratin t discuss? 03.Mvement f Gds After the enactment f GST: (Only Sale r Return) If Gds sent n apprval basis returned n r after the appinted day? (Sec 195 f Mdel GST Law) Gds sent n apprval basis, nt earlier than 6 mnths befre the appinted day, Gds returned within six mnths r extended perid (2 Mnths) frm the appinted day. N tax shall be payable under GST Law Gds nt returned within given perid, GST Payable by Supplier. Gds returned after given perid, GST Payable by persn returning gds.

14 Prvisin nly under SGST Law. Illustratin: A Trader had remved gds n sale n apprval basis wrth Rs. 5,00,000/- n 1st Nvember, These gds was cnfirmed by the recipient n 10th September GST is assumed t be applicable frm 1st July, I GST Tax is Payable? In the abve IIIustratin, if the persn returned gds n 10th January, 2018, is there any change in taxability? 04.Price fluctuatin? Issue f supplementary invices, debit r credit ntes where price is revised in pursuance f a cntract (Sec 178 f Mdel GST Law) Upward Revisin in Cntract: Cntract prir t the appinted day Price revised upwards n r after the appinted day Issue debit nte/supplementary invices t the recipient Within 30 days f such revisin Debit nte shall be deemed t have been issue under GST Law Dwnward Revisin in Cntract: Price revised dwnwards n r after the appinted day Issue credit nte/supplementary invices t the recipient Within 30 days if such revisin Taxable persn allwed t reduce utput tax liability, when the recipient has reduced his input tax credit t the extent reductin in price. Illustratin:-

15 A cntract fr supply f manpwer was entered n 10th March, 2017 fr Rs. 8,00,000. Due t certain renegtiatins, this price was escalated t Rs. 10,60,000 n 15th April, Assuming applicability f GST frm 1st April, 2017, hw the variatin in price shuld be treated? Sl: The supplier shuld issue a supplementary invice/debit nte fr Rs. 2,60,000 within 30 days f 15th April, 2017 i.e 15th May, This supplementary invice/debit nte will be assumed t be fr utward supply f Rs. 60, Adjudicatin /Appeals under earlier law? Claim f CENVAT Credit t be dispsed f under the earlier law? (Sec 182 f Mdel GST Law) Every prceeding f appeal, revisin, review r reference relating t a claim f CENVAT Credit under the earlier law. Shall be dispsed f in accrdance with the prvisins f earlier law, and any amunt f credit fund t be admissible shall be refunded in cash. If anything cntrary cntained under the earlier law ther than Sectin 11B(2) f Central Excise Act, 1944 Shall be dispsed f in accrdance with the prvisins f earlier law, and if any amunt f credit becmes recverable as a result f such appeals etc. The same shall be recvered as an arrears f tax revenue under GST Law and the amunt s recvered shall nt be admissible as input tax credit under GST Law. Prvisin applicable fr Bth CGST & SGST Law Finalizatin f prceedings relating t utput duty liability? (Sec 183 f Mdel GST Law) Every prceeding f appeal, revisin, review r reference relating t any utput duty liability initiated befre the appinted day, shall be dispsed f in accrdance with the prvisins f earlier law,

16 If any amunt becmes recverable as a result f such appeal etc., revisin, review r reference, the same shall be recvered as an arrear f tax under GST Law and amunt s recvered shall nt be admissible as input tax credit under GST Law. If any amunt fund t be admissible shall be refunded in cash, ntwithstanding anything cntained under the prvisin f earlier law ther than prvisins f 11B (2). Prvisin applicable fr Bth CGST & SGST Law Amunt recvered r refunded in pursuance f assessment r adjudicatin prceedings? (Sec 184 f Mdel GST Law) Where in pursuance f an assessment r adjudicatin instituted, whether befre r after the appinted day, under the earlier law any amunt f tax, interest, fine r penalty payable. During the curse f assessment r adjudicatin tax r duty is recverable as an arrear f tax under GST Law and the amunt s recvered shall nt be eligible fr input tax credit under GST Law. Refundable t the taxable persn, the same shall be refunded t him in cash under the earlier law, subject t Sectin 11B (2) f Central Excise Act Prvisin applicable fr Bth CGST & SGST Law Amunt recvered r refunded pursuant t revisin f returns? (Sec 185 f Mdel GST Law) Where any return, furnished under the earlier law, is revised and if, pursuant t such revisin, Any amunt is fund t be recverable frm the taxable persn, the same shall be recvered as an arrear f tax under GST Law and the amunt s recvered shall nt be admissible as input tax credit under GST Law.

17 Any amunt fund t be refundable t any taxable persn, the same shall be refunded t him in cash under the earlier law, subject t prvisins f Sectin 11B(2) f the Central Excise Act, Prvisin applicable fr Bth CGST & SGST Law. 06.Hw transactins in midway can be treated? Deductin f tax surce? (Sec 196 f Mdel GST Law) Where a supplier has made any sale f gds in respect f which tax was required t be deducted at surce under the earlier law and has als issued an invice fr the same befre the appinted day, n deductin f tax at surce under sectin 46 shall be made by the Deductr under the said sectin where payment t the said supplier is made n r after the appinted day Transitinal prvisins fr availing Cenvat Credit in certain cases (Sec 197 f Mdel GST Law) Where any Cenvat credit availed fr the input services prvided under the earlier law has been reversed due t nn-payment f the cnsideratin within a perid f three mnths, such credit can be reclaimed prvided that the taxable persn has made the payment f the cnsideratin fr that supply f services within a perid f three mnths frm the appinted day X-----