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INPUT TAX CREDIT UNDER GST

© Economic Laws Practice 2017

Harsh Shah
27 April 2017
Agenda
I. Input tax credit framework under the GST regime

II. Transitional provisions concerning Input tax credit

III. Documentation

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ITC framework under the GST
regime
Sr. No. Concept Section under Draft Rule
the CGST Act
1 Scope and conditions for availment of ITC 16(1), (2) 1, 2

2 Non-eligibility of credit to the extent of depreciation claimed under 16(3)


IT Act
3 Time limit for availment of credit 16(4)

4 Availment and reversal of credit for goods and services used for 17(1), (2), (3) 7, 8
taxable as well as exempted supplies
5 Special provisions for banking and financial services sector 17(4) 3

6 Blocked credits 17(5)

7 Availment of credit in special circumstances (such as upon obtaining 18(1), (2), (4), (5) 5, 9
registration, composition, etc.)
8 Credit upon change in constitution of business 18(3) 6

9 Supply of CG and P&M on which credit is availed 18(6)

10 Credit in respect of goods sent for job work 19 10

11 Distribution of credit by ISD and conditions for the same 20, 21 4

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SOME KEY DEFINITIONS

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Input Tax Credit and Input Tax
2(62) Input Tax Credit means the credit of Input Tax

2 (63) Input Tax means CGST, SGST, IGST or UTGST charged on any supply and
includes -

IGST charged on imports

Tax paid on Reverse Charge basis on Tax paid on Reverse Charge basis w.r.t
specified category of supplies under supplies made by unregistered supplier

CGST CGST

IGST IGST

SGST SGST

UTGST UTGST
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Input
Rule 2(k) of CENVAT Rules Section 2(59) of the CGST Act
All goods used in the factory…, for providing output Any goods except capital goods used
service…, except: or intended to be used by a supplier
(A) light diesel oil, high speed diesel oil and motor in the course or furtherance of
spirit, commonly known as petrol… business
(B) Any goods used for construction… … building or
laying of foundation or making of structures for
support of capital goods……
……

Analysis
•The concept of use within factory abolished
• Wider nexus to cover any thing used in the course or furtherance of business
•The definition not only covers goods ‘used’ but also goods ‘intended to be used’
•Goods used for warranty, generation of electricity for captive use may continue to be Inputs despite
omission of specific inclusion clause for the same
•Disputes on ‘in relation to manufacture’ will be a story of the past once GST is ushered in
(Maruti Suzuki Limited vs. CCE [2009 (24) ELT 641 (SC)])
• Some of the exclusions omitted from definition still persist due to blocked credits listed under Section
17(5)

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Input Service
Rule 2(l) of CENVAT Rules Section 2(60) of the CGST Act

Any service,- Any service used or intended


(i) used by a provider of taxable service for providing an to be used by a supplier in the
output service; or course or furtherance of
(ii) used by a manufacturer, directly or indirectly, in or in business.
relation to the manufacture… and clearance of final
products upto the place of removal
And includes… …
But excludes… …

Analysis
• Widened scope due to inclusion of all services used in the course or furtherance of business
• The concept of use of services ‘up to the place of removal’ abolished
• No specific inclusion clause under the GST reducing possibility of litigation as regards
inclusive vs. exhaustive scope of services, interpretation of inclusive part, etc. faced under
current regime (Coca cola India Pvt. Ltd. Vs. CCE [2009 (15) STR 657 (Bom)])
• Although various exclusions omitted, the credit restrictions persist due to blocked credits as
per Section 17(5)

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Capital Goods
Rule2 (a) of CENVAT Rules Section 2(19) of the CGST Act
All goods falling under Chapter 82, 84, Goods, the value of which is capitalised
85… … used in the books of account of the person
(1) In the factory of manufacture… … claiming the input tax credit and which
(1A) Outside the factory for generation are used or intended to be used in the
of electricity for captive use course or furtherance of business
(2) For providing output service
……
Analysis
• Tariff classification based definition dropped
• Parity between books of accounts and treatment under the CGST Act
• The concept of receiving Capital goods ‘in the factory’ no more applies
•Intention at the time of receipt of capital goods {Spenta international ltd. Vs. CCE, Thane
[2007 (216) E.L.T. 133 (Tri. - LB)]}
•Rule 6 (4) of CENVAT Credit Rules, 2004
• The condition of receipt of goods still continues [Section 16(2)]
•The concept of bifurcation of goods credit into Inputs and Capital goods continues

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AVAILMENT OF CREDIT AND
CONDITIONS
Section 16 read with Rule 1, 2

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Eligibility and conditions for
taking input tax credit
S. 16(1) Every registered person shall, subject to such conditions and restrictions
as may be prescribed and in the manner specified in section 49, be entitled to
take credit of input tax charged on any supply of goods or services or both to him
which are used or intended to be used in the course or furtherance of his
business and the said amount shall be credited to the electronic credit ledger of
such person.

Analysis

•Registration a pre-requisite for availment of credit


(Imagination Technologies India P. Ltd. Vs. Commr. of C. Ex., Pune-III [2011 (023) STR 0661
Tri.-Bom], Well Known Polyesters Ltd. Vs. Commissioner of C. Ex., Vapi [2012 (025) STR 0411
Tri.-Ahmd.])
• Uniform criteria for availment of credit on Inputs, Input services and Capital goods
• Credit availment through electronic credit ledger

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Conditions for Availing Credit [S. 16(2)]

Possession of Tax Invoice or Debit Note or other documents


(such as BOE, document issued by ISD, etc. as per Rule 1)

Receipt of goods or services or both

Tax has been actually paid to the Government

Return has been furnished

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Important to examine

Taxable supplies only

Inputs, input
Definitions
services and
under GST
capital goods?

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Conditions – payment by supplier
 Credit eligible only after payment of tax by supplier

 Practical difficulties

 Validity of granting credit only after payment by other person upheld by the
Bombay High Court in Mahalaxmi Cotton Ginning Pressing and Oil Industries vs.
State of Maharashtra [2012 (051) VST 0001 BOM]
 Similar view adopted by various High Courts

 Against the long established concepts under the CENVAT and erstwhile MODVAT
regime that credit is an inherent right and is indefeasible
 Collector of Central Excise vs. Dai Ichi Karkaria Ltd. [1999 (112) ELT 353 (SC)]
 Eicher Motors Ltd. vs. Union of India [1999 (106) ELT 3(SC)]

 Latin maxim - Nemo punitur pro alieno delicto (no one is punished for the crime of
another)

 Onerous condition can be read down


 Bhavya Apparels Pvt. Ltd. vs. Union of India [2007 (SC3) GJX 0858 SC]

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Conditions – receipt of goods or
services both
 Explanation I to Section 12(1) and 13(1) of the CGST Act
 Supply deemed to have been made to the extent it is covered by invoice or payment

 Receipt of goods or services vs. Supply deemed to have been made

 While time of supply arises upon receipt of advance, credit eligibility crystallised
only upon receipt of goods or services

Example
Date of booking order 25 April 2017
Date of payment / receipt of advance/ date of invoice 27 April 2017
Date of dispatch of goods 29 April 2017
Date of receipt of goods 1 June 2017

 While liability to pay tax arises in April 2017, whether credit will be eligible in
April or in June
 Will it result into credit mismatch?
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Other provisions
Goods received in lots – credit eligible upon receipt of last lot

Credit not eligible for amount claimed as depreciation under S. 32 of IT Act

Credit to be reversed with interest if value + tax of goods / services not paid within 180 days
(transactions liable for reversal to be specified in next monthly FORM GSTR -2 immediately following
180 days) – re-availment of credit after payment

Credit of a particular FY can be availed by 20 October of next FY or filing of annual return,


whichever is earlier

Analysis

• Concept of reversal of credit for non-payment of consideration and tax extended to goods
• Interest liability at the time of reversal
• Disputes in respect of retention money, amounts not paid due to commercial disputes
• Whether part credit permitted on part payment? Whether there will be a mismatch issue?

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APPORTIONMENT OF CREDIT
AND BLOCKED CREDITS
Section 17 read with Rule 7, 8

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Blocked credits [S. 17(5)]

 Various exclusions to the definition of Input, Input service and Capital


goods as per the CENVAT Rules introduced as blocked credits

 List of blocked credits (discussed in detail in ensuing slides)

Sr. No. Particulars


1 Motor vehicles and conveyances except where used for supply of specified services
2 Services such as beauty treatment, club membership, rent-a-cab
3 Works contract services used for provision of services other than the said service
4 Goods and services used for construction of an immovable property on own account
5 Supplies on which tax is paid under composition scheme
6 Goods and services received by non-resident person except imports
7 Goods lost, stolen, destroyed, free samples
8 Goods and services used for personal consumption
9 Tax paid as per S. 74, 129, 130

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Motor vehicles and conveyances
[S. 17(5)(a)]

 Credit restriction in respect of motor vehicles continue

 Credit not eligible on


“Motor vehicles and other conveyances except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or
conveyances;
(ii) for transportation of goods;”

 The restriction under the existing definition of Capital goods reframed

 Credit on motor vehicles eligible when used for transportation of goods,


whether or not designed for such purpose - Restriction in current regime

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Specified services (club
membership, insurance, etc.) [S. 17(5)(b)]

Sr. Services not eligible for credit Exception where credit eligible
No.
1 Food and beverages, outdoor Where used for making an outward taxable supply
catering, beauty treatment, of the same category of goods or services or both
health services, cosmetic and or as an element of a taxable composite or mixed
plastic surgery supply
2 Membership of a club, health and -
fitness centre
3 Rent-a-cab, life insurance and (A) Services notified by the Government to be
health insurance obligatory for an employer to provide to its
employees under any law
(B) Where used 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
4 Travel benefits extended to -
employees on vacation such as
leave or home travel concession

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Works contract services [S. 17(5)(c)]

 Similar to current Service tax regime, credit of works contract


services eligible only where it is input service for further supply of
said service

 Impact
Persons eligible for credit Persons not eligible for credit
Developer engaged in sale of under Developers operating under lease
construction properties model
Civil contractors Business procuring such services

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Goods and services used for
construction... [S. 17(5)(d)]
 Credit not eligible on :

“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”

 Credit restriction attracted where construction undertaken ‘on his own


account’

 Developers, contractors, etc. undertaking construction for others eligible


for credit – credit of various construction related goods such as cement,
steel, etc. used before receipt of OC not eligible under the current regime
now eligible
 Need to see valuation provisions and corresponding credit restrictions

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...Goods and services used for
construction [S. 17(5)(d)]
 Specific exclusions from scope of P&M
 Land, building or any other civil structures
 Telecommunication towers
 Bharti Airtel Ltd. Vs .CCE [2014 (35) STR 865 (Bom.)]
 Pipelines laid outside the factory premises
 Extension of pipelines outside the factory
 CCE vs. Pepsico India Holdings Limited [2001 (130) ELT 193 (Tri.-
Chennai)]

 Plant and machinery excluded from scope of such credit restriction


– probably to cover plant and machineries attached / embedded to
earth
 The definition of ‘Goods’ covers only movable property within its scope
 ‘Capital goods’ defined to mean goods capitalised in books of accounts
 Observations of the LB in Vandana Global Limited vs. CCE [2010 (253) ELT 440
(Tri.- LB) – Capital goods have to be goods first
 Disputes may continue

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Others [S. 17(5)(e) to 17(5)(i)]

 Goods or services or both on which tax has been paid under the
composition scheme
 Goods or services or both received by a non-resident taxable
person except on goods imported by him
 Goods or services or both used for personal consumption
 Goods lost, stolen, destroyed, written off or disposed of by way of
gift or free samples
 Any tax paid in accordance with the provisions of sections 74, 129
and 130
 Tax short / not paid or erroneously refunded due to fraud, etc.
 Amount paid for release of goods and conveyances in transit which are
detained
 Fine paid in lieu of confiscation

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Apportionment of Credits
Purpose Credit available

• Partly business and partly for • Only as is attributable to the


Goods or other purpose purpose of business [S. 17(1)]
Services or
both
• Partly for taxable supplies • Only as is attributable to the
(incl. Zero rated supplies) and said taxable supplies (incl. zero
partly for exempt supplies rated supplies) [S. 17(2)]

Value of exempt supplies shall be as may be prescribed and shall include


supplies on which recipient is liable to pay tax on Reverse Charge Mechanism,
transaction in securities, sale of land, sale of building post CC.

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Reversal of ITC on Inputs and Input
services ... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 o f I T C
Rules]
Step 1: Ascertain the common credit in respect of Inputs and Input services used for
taxable as well as exempt supplies:

Particulars Amount
Total Input Tax on Inputs and Input services T
Less: Input Tax on Input and Input services intended to be used (T1)
exclusively for purpose other than business
Less: Input Tax on Input and Input Services intended to be used (T2)
exclusively for effecting exempt supplies
Less: Input Tax on Inputs on which credit is not available u/s 17(5) (T3)
Input Tax Credit credited to the Electronic Credit Ledger C1
Less: Input Tax attributable to inputs and input services used exclusively (T4)
or in relation to business( Incl. zero rated supplies)
Common Credit C2
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...Reversal of ITC on Inputs and
Input services... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 of
ITC Rules]
Step 2: Amount of ITC attributable to exempted supplies (D1) shall be calculated as
follows:
D1 = (E/F)*C2

Where,

E is the aggregate of exempt supplies i.e. all supplies other than taxable and zero
rated supplies during the tax period, and
F is the total turnover of the registered person during the tax period

Value of exempt supplies include:


(i) Supplies on which tax payable on reverse charge basis
(ii) Value of land and building as adopted for the purpose of payment of Stamp
duty
(iii) 1% of the sale of security as the value of securities

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... Reversal of ITC on Inputs and
Input services... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 of
ITC Rules]

Step 3: If common Inputs and Input services are used partly for business and partly
for non-business purpose, then compute the amount of credit attributable to non-
business purpose (D2) as under:

D2 = C2* 5%
Step 4: ITC attributable to business purpose and taxable supplies to be computed as
under:
(C3) = C2 – (D1 + D2)

T1, T2, T3 and T4 shall be determined and declared by the registered person at
the invoice level in FORM GSTR - 2
D1 and D2 to be added to the output tax liability
C3 to be computed separately for CGST, SGST, IGST and UTGST

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... Reversal of ITC on Inputs and
Input services... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 7 of
ITC Rules]
Year end adjustments

Compute final Add excess to Output


ITC for the FY D1 +D2 > ∑(D1+D2) Tax Liability + Interest
before filing the (Sept)
return for the
month of Claim excess as credit
September D1 +D2 < ∑(D1+D2)
(Sept)
following the FY

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Reversal of ITC on Capital
Goods... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 8 o f ITC Rules]

 Unlike the current CENVAT Rules, the GST regime stipulates reversal
of credit for Capital goods partly used for non-business purpose /
exempt supplies

 Exempted turnover for computation of reversal


Includes Excludes
(i) Supplies on which tax payable on (i) Excise duty levied under Entry 84 of List
reverse charge basis I
(ii) Value of land and building as adopted (ii) State Excise duty levied under Entry 51
for the purpose of payment of Stamp of List II
duty (iii) Sales tax levied under Entry 54 of List II
(iii) 1% of the sale of security as the value
of securities

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…Reversal of ITC on Capital
Goods... [ S . 1 7 ( 1 ) a n d ( 2 ) r . w R u l e 8 o f I T C Rules]

Sr. No. Particulars Amount

1 Credit on CG used or intended to be used exclusively for non-business purposes or Not eligible
exclusively exempt supplies [a]
2 Credit on CG used or intended to be used exclusively for effecting taxable supplies Fully eligible
including zero rated supplies [b] (Also to be indicated in FORM GSTR – 2)
3 Total credit on CG less: (a+b) [A] credited to electronic credit ledger Tc

Where CG covered in [a] or [b] is subsequently covered here, derive value of A by


reducing ITC at the rate of 5% for every quarter or part thereof
4 Amount of common CG credit attributable to a tax period Tm= Tc / 60

5 ITC at a beginning of tax period for all CG whose residual life remains in the tax Tr= ∑ (Tm) for
period such goods
6 Common credit attributed towards exempted supplies (computed separately for Te= (E/F)*Tr
CGST, SGST, IGST, UTGST)

E = aggregate value of exempted supplies (computed as discussed above)


F = total turnover during the tax period

Te payable with applicable interest – no clarity over ‘applicable interest’ reference

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Special provisions for banking and FS
sector [S. 17(4)]
Banking companies or a financial institution including an NBFC shall exercise one of
the following options during a financial year:

Option A:
Avail credit and undertake Option B:
reversal as per general provisions Avail 50% of eligible ITC for Inputs,
Input services and CG used for business
purpose (excluding blocked ITC)*

FORM
GSTR 2

*Restriction of 50% shall not apply on following transactions between registered persons

Supply made

A Bank (Mumbai) A Bank (Bangalore)

SIMILAR PAN
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AVAILMENT OF CREDIT IN
SPECIAL CIRCUMSTANCES
Section 18 read with Rule 5, 6, 9

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Availment of credit in special
circumstances... [S. 18(1) and (2) r.w Rule 5 of ITC
Rules]
Event enabling availing of Credit

Person is liable for


Not liable for Pays Tax under
registration under
registration + Has Composition Levy Exempt supplies
GST + Has applied
been granted under GST; made by a
for registration
registration registered person
within 30 days + Subsequently, opts
(Voluntary becomes Taxable
Has been granted to pay tax u/s 9
registration)
registration

Entitled to claim credit on:


Entitled to claim credit on:
• Inputs held in stock
• Inputs held in stock
• Inputs contained in semi-finished goods
• Inputs contained in semi-finished goods
• Finished goods in stock
• Finished goods in stock
• Capital goods ( - 5% per quarter from
date of invoice)

Credit eligible only within 1 year from date of invoice

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…Availment of credit in special
circumstances... [S. 18(1) and (2) r.w Rule 5 of ITC
Rules]
 Conditions for availment of such credits

Sr. No. Condition


1 Filing of electronic declaration in Form GST ITC-01 within 30 days
from becoming eligible to avail credit
2 Declaration to specify details of Inputs in stock / Capital goods on
the day immediately preceding the day on which credit becomes
eligible
3 Details as per 2 above to be certified by a CA or Cost Accountant if
aggregate claim of CGST, SGST, IGST credit exceeds Rs. 2 lacs
4 Credit availed pursuant to opting out of composition or goods
supplies becoming taxable eligible subject to matching of credits
with details furnished by the supplier in FORM GSTR – 1 or FORM
GSTR – 4 as the case may be

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... Availment of credit in special
circumstances – issues [S. 18(2)]
 Time limit for availment of credit in special circumstances
Specific provisions of S. 18(2) General provisions of S. 16(4)
No credit eligible after expiry of 1 year Credit not eligible after due date of
from the date of invoice furnishing return for Sept. following the FY
to which the invoice pertains

 Does the general time limit as per S. 16(4) also applies to a person
availing credit under S. 18(1)?
 Curtailment of credit eligibility
 For example, a person obtaining registration in the month of Oct. 2018, would
be eligible to avail credit only for invoices pertaining to April to Sept. 2018
 Credit pertaining to Oct. 2017 To March 2018 not eligible despite within 1
year limitation period

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Reversal of credit in certain
circumstances... [S. 18(4), (6) r.w Rule 9 of ITC Rules]
Sr. No. Scenario Credit reversal
1 A registered person who Pay amount equal to:
has availed ITC opts to pay (i) Credit on Inputs held in stock
tax under composition (ii) Credit of Inputs contained in semi-finished / finished goods
2 Where supplies of a stock
registered person become (iii) Credit on Capital goods ( - 5% per quarter)
fully exempt The balance of ITC after such reversal /payment shall lapse [S. 18(4)]

3 Where registration is Pay amount equal to :


cancelled (i) Credit on Inputs held in stock
(ii) Credit of Inputs contained in semi-finished / finished good stock
(iii) Credit on Capital goods or P&M (- 5% per quarter)
Or output tax payable on such goods, whichever is higher [S. 29(5)]
4 Supply of CG or P&M on Pay amount equal to higher of the following:
which ITC has been taken (i) Credit on Capital goods or P&M (- 5% per quarter)
(except specified goods) (ii) Transaction value [S. 18(6)]
5 Supply of refractory Pay amount equal to tax on transaction value [Proviso to S. 18(6)]
bricks, moulds, dies jigs,
fixtures

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Reversal of credit in certain
circumstances... [S. 18 r.w Rule 9 of ITC Rules]
 Manner of computing credit to be reversed:
Scenario Credit reversal

Credit of Inputs (i) Credit calculated proportionately on the basis of corresponding invoices on
which credit had been availed
(ii) Where tax invoices are not available, estimate the credit reversal based on
estimate of market price of goods on the date on which reversal liability has
arisen
CG Input tax credit involved in the remaining residual life in months to be computed on
pro-rata basis
Example: If CG are used for 4 years, reversal to be made would be [credit*4/5]; viz., at
the rate of 5% per quarter

 Compliances
 Details of amount of credit reversal to be furnished in Form GST ITC-03 where
reversal is under S. 18/ Form GSTR 10 where reversal is under S. 29(5)

(i) Credit reversal / payment even if goods were exempt when purchased but taxable
when registration cancelled, composition opted, etc.
(ii) Separate credit reversal for CGST, IGST , SGST, UTGST

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Credit upon change in constitution of
business [S. 18(3) r.w Rule 6 of ITC Rules]
 ITC permitted to be transferred upon change in constitution of a person
on account of sale, merger, amalgamation, lease or transfer of business
with transfer of liabilities

 In case of demerger, ITC to be apportioned in the ratio of value of assets


of new unit as per the demerger scheme

 The inputs and capital goods transferred shall be duly accounted for by
the transferee in his books of accounts

 Procedure

Furnish details of change in Submit a copy of certificate issued Transferee shall accept the
by CA or Cost Accountant certifying
constitution in FORM GSTR details so furnished by the
that the change in constitution has
ITC-02 along with request been done with the specific transferor on the Common
to transfer ITC provisions for transfer of liabilities Portal

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DISTRIBUTION OF CREDIT
S. 20, 21 read with Rule 4

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Credit distributed as [S. 19 r.w. Rule 4 of ITC
Rules]

State A State A

IGST IGST

ISD CGST CGST Recipient


Same PAN Same PAN
SGST SGST

State A State B

IGST IGST

ISD CGST IGST Recipient


Same PAN Same PAN
SGST IGST

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Manner of distribution of credit
[S. 19 r.w. Rule 4 of ITC Rules]

Credit in hands of ISD in a


month

Pertaining to one Pertaining to more than


Pertaining to all recipients
recipient one recipients

Distribution on pro-rata basis


on turnover of such units in a Distribution on pro-rata basis
State or UT to aggregate on turnover of such unit in a
Distribute to the respective turnover of all recipients to State or UT to aggregate
recipient whom such credit is turnover of all recipients and
attributable and which are which are operational during
operational during the the current year
current year

• Turnover of previous FY to be considered, turnover of previous quarter to be considered in case some or


all recipients do not have turnover in previous FY
• Turnover of a registered person engaged in supply of taxable and exempt goods include turnover as
reduced by the amount of duty or tax levied under Entry 84 of List 1 / 51 and 54 of List II
• All details related to distribution of credit by ISD shall be included in FORM GSTR - 6

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ISD invoice
 Credit to be distributed under cover of ISD invoice containing the
following details [Rule 7 of Draft Invoice Rules]
Sr. No. Particulars
1 Name, address and GSTIN of the ISD
2 Consecutive serial number
3 Date of issue
4 Name, address and GSTIN of the recipient
5 Amount of credit distributed
6 Signature or digital signature of the ISD

 Details of ISD invoices to be furnished in monthly ISD return Form


GSTR 6

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Other conditions for distribution
 Credit distributed ≤ Credit available (S. 20(2)(b)

 Adjustments for excess/short credit distribution

 Credit of CGST, IGST, SGST and UTGST to be distributed separately


[Rule 4(1)(c) of ITC Rules]

 Excess credit distributed to be recovered with interest and penalty


(S. 21)

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TRANSITIONAL PROVISIONS
FOR ITC
Section 140 of the CGST Act read with Rule 1 of the Draft
Transition Rules

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Specific definitions under CGST
Act
 ‘Capital goods’, ‘First stage dealer’, ‘Second stage dealer’,
‘manufacture’ to have meaning as per CEA, 1944 [Explanation in
Chapter ‘Transitional Provisions’]

 Eligible duties and taxes[S. 140(10)]


Eligible duties Eligible tax
Basic Excise Duty Service tax as per Section 66B
of the Finance Act
CVD
SAD
Special Excise Duty, Additional
Duty of Excise (GSI), etc.

Carry forward of Cess???

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Provisions for carry forward of
credit

Sr. No. Scenario


1 Credit carried forward in return
2 Credit of Input Tax for goods or services for which corresponding invoice is
in possession
3 Credit not availed in return and invoice not in possession
4 Other special provisions

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General procedure for all credit claims [Rule
1(1) of Transitional Provision Rules]

Submit application
electronically in Form
GST TRAN-1

Specify the amount of


duty / tax of which credit
is entitled under
transitional provisions

Submit the application


within 60 days from the
appointed day
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Credit carried forward in
the return

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Carry forward of credit as per
returns [S. 140(1)Rule 1 of Transitional Provision Rules]
Sr. Particulars Central taxes State taxes
No.
1 Duties and taxes Eligible duties and taxes VAT and Entry tax
eligible for credit (other than those relating to Inter-
State sales)
2 Amount eligible Credit carried forward in the return immediately preceding appointed day
for carry forward

3 Conditions (i) Amount is also admissible as (i) Amount is also admissible as


credit under the CGST Act credit under the SGST Act
(ii) All returns for previous 6 months (ii) All returns for previous 6
filed months filed
(iii) Credit does not relate to notified
goods cleared under exemption
4 Credit in respect As per Rule 3(7) of the CENVAT Rules NA
of procurements (Excise duty equivalent to CVD+SAD)
from EOU, EHTP

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Credit not carried forward in
return (documents available)

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51
Balance credit on CG [S. 140(2) r.w. Rule 1 of
Transitional Provision Rules]

Sr. Particulars Central taxes State taxes


No.
1 Duties and Unavailed CENVAT credit on Capital goods Unavailed ITC on capital goods
taxes eligible (amount remaining after subtracting (amount remaining after subtracting
for credit credit already availed on such goods) credit already availed on such goods)
2 Person eligible Any registered person not paying tax under composition
for credit
3 Conditions (i) Amount is also admissible as credit (i) Amount is also admissible as
under the CGST Act credit under the SGST Act
(ii) Amount admissible as credit under (ii) Amount admissible as credit
the existing central tax laws under the VAT Act
4 Procedure Specify the following details in GST TRAN-1
(i) Amount of duty / tax to the extent of which credit on such goods is availed /
utilised till the appointed day
(ii) Amount of duty / tax yet to the extent of which credit is yet to be availed /
utilised till the appointed day

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Credit to specified persons [S. 140(3) r.w
Rule 2 of Transitional Provisions]

Sr. Particulars Central taxes State taxes


No.
1 Duties and Eligible duties / VAT, Entry tax on Inputs held in stock or contained in semi-finished /
taxes eligible finished goods stock
for credit
2 Person eligible A registered person who is: A registered person who is:
for credit (i) Not liable for registration under the (i) Not liable for registration under
existing law the existing law
(ii) Engaged in exempted goods / services (ii) Engaged in sale of exempted or tax
(iii) Providing works contract services with free goods, which are liable to tax
abatement benefit under SGST Act
(iv) First stage / second stage dealer, (iii) Entitled to credit of input tax at
depot, importer the time of sale of goods
3 Conditions (i) Goods used / intended to be used for making taxable supplies under the GST
(ii) Amount admissible as credit under the CGST / SGST Act
(iii) Person possesses invoice / other documents for credit availment
(iv) Documents not issued earlier than 12 months before the appointed day
(v) Supplier of service not eligible for abatement under the CGST Act (CGST)
4 Procedure Separately specify details of such stock held on the appointed day in Form GST TRAN-1

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Credit to persons paying tax at fixed
rate [S. 140(6) r.w. Rule 2 of Transitional Provisions]
Sr. Particulars Central taxes State taxes
No.
1 Duties and Eligible duties Inputs held in stock or VAT on Inputs held in stock or
taxes eligible contained in semi-finished / finished contained in semi-finished /
for credit goods stock finished goods stock
(No Entry tax credit eligible here)
2 Person A registered person who was paying tax at a fixed rate / paying fixed amount
eligible for in lieu of tax under the existing law and not paying tax under composition
credit scheme under the GST
3 Conditions (i) Goods used / intended to be used for making taxable supplies under the
GST
(ii) Amount admissible as credit under the CGST / SGST Act
(iii) Person possesses invoice / other documents for credit availment
(iv) Documents not issued earlier than 12 months before the appointed
day
4 Procedure Separately specify details of such stock held on the appointed day in Form
GST TRAN-1

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54
Person engaged in taxable / exempted
supplies [S. 140(4) r.w. Rule 2 of Transitional Provisions
Rules]
 Provisions applicable to persons engaged in
 Manufacture of taxable goods (dutiable) as well as exempted goods
 Provision of taxable services as well as exempted services
 Sale of taxable goods as well as exempted / tax free goods

 Eligible credit
Credit carried forward in return
AND
Credit of eligible duties / VAT, Entry tax on inputs held in stock, in semi-
finished / finished goods stock (as per previous slide)

 Specify details of such credits in GST TRAN-1

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55
Goods / services received after
appointed day [S. 140(5)]
 Registered person eligible to take credit of eligible duties and
taxes, VAT, Entry tax on Inputs / Input services received after the
appointed day on which duty / tax as per existing law has been paid

 Conditions
Sr. No. Condition
1 Invoice / other duty paying document recorded in books within 30 days from
appointed day (can be extended by Commissioner on showing sufficient cause)
2 Statement containing following details furnished with Form GST TRAN-1:
(i) Name of the supplier, sr. no. of invoice, date of issue of invoice by supplier
(ii) Description, quantity and value of goods / services
(iii) Amount of relevant duty / tax charged by the supplier in invoice
(iv) Date on which receipt of goods / services entered in books

 Practical difficulty – delayed receipt of invoices

No similar provision for Capital goods receipt

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Credit for which invoices are
not in possession

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57
Claim of credit stock (without
documents) [Proviso to S. 140(3) r.w. Rule 3 of Transitional
Provisions Rules]
Sr. Particulars Central taxes State taxes
No.
1 Duties and Eligible duties on Inputs for which the Tax on Inputs for which the eligible
taxes eligible eligible person is not in possession of person is not in possession of
for credit document evidencing duty payment document evidencing tax payment
2 Person eligible A registered person other than a manufacturer or supplier of service (who was
not registered under the existing law)
3 Quantum of 40% of Central / State tax applicable on supply of such goods after appointed day
eligible credit and such amount would be credited after output Central / State tax payable on
such supplies paid
4 Time limit Credit eligible for such goods supplied within 6 tax period from the appointed
day
3 Conditions (i) Goods not nil rated or wholly exempted under CEA, 1944 (Central tax)
Goods not wholly exempted under the State VAT Act (State tax)
(ii) Document for procurement available
(iii) Statement indicating supplies of such goods filed in Form GST TRN ___
(iv) Stock of such goods is so stored that it can be easily identified
(v) Benefit of credit passed on

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Other special provisions
for CGST Act

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Credit in special situations
[S. 140(7)]

Sr. Situation Transitional provisions


No.
1 Services received by ISD pre- Credit eligible for distribution as credit under the CGST
GST but invoices received after Act
appointed day
2 Centralised registration under (i) Credit eligible for CENVAT credit carried forward in
the current law returns filed (if original / revised return filed within 3
months, credit eligible provided that credit claimed
in such return is reduced form earlier claim)
(ii) Such amount admissible as credit under CGST Act
(iii) Such credit can be transferred to other registered
persons having same PAN (covered under existing
centralised registration)
3 CENVAT credit on Input services Credit eligible if payment made within 3 months from the
reversed due to non-payment appointed day
within 3 months

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Don’t Count The Days…. Make The Days Count

© Economic Laws Practice 2017 61


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62
Disclaimer: The information provided in this presentation is intended for informational purposes only and does not
constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the
information provided herein. This presentation is not intended to address the circumstances of any particular individual or
corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to
the views mentioned herein.

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© Economic Laws Practice 2017

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