Chapter 8 – Input Tax Credit
Introduction
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The provisions relating to Input Tax Credit are given in Sections 16, 17, and 18 of the CGST Act,
2017.
Section 16 talks about Eligibility and Conditions for taking Input Tax Credit.
Section 17 talks about Apportionment of credits and blocked credits.
Section 18 talks about Credit in Special Circumstances.
Section 16(1): Eligibility for Taking Input Tax Credit
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As per Section 16(1), Registration under GST is mandatory requirement for claiming input tax
credit.
Thus, every registered person shall be entitled to ITC charged on inward supply of goods
and/or services.
This is subject to the provisions relating to use of ITC under Section 49 and the conditions and
restrictions in the rules. (Section 49 prescribes provisions relating to payment of tax, interest,
penalty & other amounts.)
ITC is available on goods and/or services which are used in the course or furtherance of the
business.
The ''intention to use" the goods and/or services in the course or furtherance of business
would also lead to availing of credit on such goods and/or services.
Thus, tax paid on goods and or/services which are used or intended to be used for nonbusiness purposes cannot be availed as credit.
ITC is credited in Electronic credit ledger. (The electronic credit ledger is maintained for each
registered person on the common portal and every claim of input tax credit is to be credited
to this ledger.)
Section 16(2): Conditions to be Satisfied for Taking Input Tax Credit
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There are 6 clauses under this subsection.
Clause (a), (aa), (b), (ba), (c), (d)
ITC can be availed only if the conditions mentioned in all these six clauses are satisfied.
Section 16(2)(a): Possession of Tax Paying Document
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As per Section 16(2)(a), ITC can be availed on the basis of any of the following documents:
o Invoice issued by the supplier of goods and/or services
o Invoice issued by the recipient receiving goods and/or services from unregistered
supplier along with proof of payment of tax, in case of reverse charge
o Debit note issued by the supplier
o Bill of entry or similar document prescribed under the Customs Act
o Revised invoice
o Document issued by input service distributor
The documents on the basis of which ITC is being taken should contain at least the following
details:
o Amount of tax charged
o Description of goods or services
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o Total value of supply of goods and/or services
o GSTIN of the supplier and recipient
o Place of supply in case of inter-State supply
Input tax credit shall not be available if the credit is availed on account of any fraud, wilful
misstatement, or suppression of facts.
Section 16(2)(aa): Details of Supplier and Recipient Should Match
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As per Section 16(2)(aa), a registered person is entitled to the credit of any input tax in respect
of any supply of goods or services or both, if the details of the invoice or debit note referred
above has been furnished by the supplier in the statement of outward supplies and such details
have been communicated to the recipient of such invoice or debit note in the manner specified
under section 37.
Input tax credit can be availed by a registered person in respect of invoices or debit notes the
details of which are required to be furnished under Section 37(1) only if:
o the details of such invoices or debit notes have been furnished by the supplier in the
statement of outward supplies in FORM GSTR-1 or using the invoice furnishing facility;
and
o the details of input tax credit in respect of such invoices or debit notes have been
communicated to the registered person in FORM GSTR-2B under Rule 60(7).
Thus, ITC can now be taken only for those invoices/debit notes whose details are reflected in
Form GSTR-2B, i.e., only when the respective suppliers (vendors) have filed the details of such
invoices in their Form GSTR-1. (Earlier, ITC in respect of invoices/debit notes not uploaded by
the suppliers in their Form GSTR-1s/IFF, could be availed by recipient upto 5% of the eligible
credit available in respect of invoices/debit notes the details of which had been furnished by
the suppliers in their Form GSTR-1s/ using IFF.)
Notes:
o GSTR-1 is a monthly/quarterly statement containing details of outward supplies made
by a registered supplier.
o Such details of outward supplies furnished by the supplier are communicated and
made available electronically (auto populated) to the respective recipient(s) in GSTR2A.
o GSTR-2B is an auto-drafted ITC statement generated for every registered person based
on GSTR-1 filed by supplier.
o Invoice Furnishing Facility (IFF) is a facility provided to quarterly taxpayers who are in
QRMP (Quarterly Return Filing and Monthly Payment) scheme, to file their details of
outward supplies in first two months of the quarter, to pass on the credit to their
recipients.
Section 16(2)(b): Receipt of Goods/Services
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As per Section 16(2)(b), a registered person is entitled to the credit of any input tax in respect
of any supply of goods or services or both if he has received the goods and/or services.
Bill to Ship to Model:
o Under this model, the goods are delivered to a third party - C on the direction of the
customer (registered person) – B who purchases the goods from the vendor (supplier)
– A.
o In other words, A bills to B but ships the goods to C on direction of B.
o In effect, two supplies take place in this scenario viz., from A to B and from B to C.
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Thus, under this model, the customer (registered person) who purchases such goods
does not receive the said goods.
In such case, it shall be deemed that goods have been received by B, and B would get
the credit.
So, ITC will be available to the registered person, on whose direction the services are
provided to a third person.
Question 1
X is a trader who places an order on Y for a consignment of chemicals. X receives a buying order from
Z for the same quantity of chemicals. X instructs Y to deliver the goods to Z, and in turn he raises an
invoice on Z. Would X be entitled to ITC?
Solution
Though the goods are not physically received at the premises of X, the condition of Section16(2)(b) is
satisfied, and X is entitled to ITC on the consignment.
Question 2
The registered head office (Jaipur, Rajasthan) of JJ Pvt. Ltd. enters into a contract with SS Pvt. Ltd. of
Jaipur, Rajasthan for repair and maintenance of computers systems installed at its registered branch
office in Bengaluru, Karnataka. DEF Pvt. Ltd. issues an invoice on JJ Pvt. Ltd., Jaipur for the services
provided by it. Would JJ Pvt. Ltd. be entitled to ITC?
Solution
Though the actual services are received by the branch office and not by the head office, section16(2)(b)
allows ITC of such repair and maintenance services to head office.
Section 16(2)(ba): ITC Must Not Be Restricted
The details of input tax credit in respect of the said supply communicated to such registered person
u/s 38 should not be restricted.
Section 16(2)(c): Tax Charged is Actually Paid to Government
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As per Section 16(2)(c), a registered person is entitled to the credit of any input tax in respect
of any supply of goods or services or both if the supplier has actually paid the tax charged on
the goods and/or services, for which ITC is being taken, either in cash or by utilizing ITC.
Presently, suppliers are required to file GSTR-1 (Statement of details of outward supplies), the
details of which get auto-populated in GSTR-2A of the recipient for viewing.
Further, GSTR-2B, an auto-drafted ITC statement, is also generated for the taxpayer based on
GSTR-1 filed by the supplier.
On the basis of the details available in GSTR-2A and GSTR-2B, the taxpayer takes provisional
ITC on self-assessment basis in GSTR-3B for discharging the tax liability.
Section 16(2)(d): Furnishing of Return
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As per Section 16(2)(d), a registered person is entitled to the credit of any input tax in respect
of any supply of goods or services or both if he has filed his return u/s 39.
Presently, a summary return in form GSTR-3B is being filed on monthly basis.
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Thus, a taxpayer should file GSTR-3B to avail ITC on eligible inward supplies.
First Proviso to Section 16(2): Goods Received in Lots
In case the goods covered under an invoice are not received in a single consignment but are received
in lots / instalments, ITC can be taken only upon receipt of the last lot / instalment.
Question 3
XYZ enters into a contract with ABC for supply of 10 MT of a chemical for ₹1,18,000 (inclusive of GST
of ₹18,000) in the month of August. The chemical is to be delivered in lots over a period of three
months. ABC raises the invoice for the entire amount in August and XYZ also makes the payment in the
same month but the supply is completed in November. XYZ paid the full tax in August. When would be
the ITC available?
Solution
Though XYZ paid the full tax as early as August, it can take the ITC of the same only on receipt of last
instalment of the chemical in the month of November.
Question 4
S Ltd. a registered manufacturer of Jaipur entered in a contract with a supplier for supply of Input 'X'
in October, 2021. As per contract it was agreed that 10,000 kgs of Input 'X' will be supplied for
₹7,28,000 (inclusive of CGST and SGST @ 6% each) in 4 lots. Invoice of ₹7,28,000 has been issued with
supply of first lot of Input 'X'. Following further information has been provided regarding supply of
Input received in subsequent lots. Briefly explain whether S Ltd. eligible to take credit on proportionate
basis.
Input ‘X’ (in lots)
First Lot
Second Lot
Third Lot
Fourth Lot
Quantity in Kgs
2,500
3,000
1,500
3,000
Date of Receipt of Supply
19-10-2022
21-10-2022
12-11-2022
01-12-2022
Solution
No, S Ltd. is not eligible to take credit on proportionate basis. As per first proviso to Section 16(2),
where the goods against an invoice are received in lots or installments, the registered person shall be
entitled to take credit upon receipt of the last lot or instalment. Therefore, in the given case Input 'X'
has been received in lots hence, the credit of tax of ₹78,000 i.e., (₹7,28,000 × 12 ÷ 112) paid on such
input shall be taken by S Ltd. only after receipt of fourth lot i.e., 01-12-2022.
Section 16(3): ITC Not Admissible if Depreciation Claimed on Tax
Component
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If the person taking the ITC on capital goods and plant and machinery has claimed depreciation
on the tax component of the cost of the said items under the Income-tax Act 1961, the ITC on
the said tax component shall not be allowed.
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Thus, in respect of the tax paid on such items, dual benefit cannot be claimed under Incometax Act, 1961 and GST laws simultaneously.
In other words, either depreciation on the tax component can be claimed under Income Tax
Act or ITC of such tax paid can be availed under GST laws.
Question 5
From the following information determine the amount of Input tax credit admissible to ABC Ltd. in
respect of various inputs purchased during the month of September, 2021.
Inward Supplies
GST (₹)
1. Goods purchased without invoice
25,000
2. Goods purchased from PQR Ltd. (Full Payment is made by ABC Ltd to PQR Ltd. 1,20,000
against such supply but tax has not been deposited by PQR Ltd.)
3. Purchases of goods not to be used for business purposes
18,000
4. Purchases of goods from TT Ltd. (Invoice of TT Ltd. is received in month of
24,000
September 2021, but goods were received in month of October 2021)
5. Goods purchased against valid invoice from FF Ltd. Tax has been deposited by FF
36,000
Ltd. ABC Ltd. has made payment to FF Ltd. for such purchases in the month of
October 2021.
Solution
Computation of Admissible ITC to ABC Pvt. Ltd. for the month of September, 2021
Particulars
₹
Goods purchased without invoice (Note 1)
Goods purchased from PQR Ltd. (Note 2)
1,20,000
Purchases of goods not to be used for business purposes (Note 3)
Purchases of goods from TT Ltd. (Invoice of TT Ltd. is received in month of September
2021, but goods were received in month of October 2021) (Note 4)
Goods purchased against valid invoice from FF Ltd. Tax has been deposited by FF Ltd.
36,000
ABC Ltd. has made payment to FF Ltd. for such purchases in the month of October 2021
(Note 5)
Total admissible input tax credit for the month of September, 2021
1,56,000
Notes:
1. No Input tax credit will be available since ABC Ltd. is not in possession of valid tax paying
document.
2. ITC can be claimed provisionally in September since all the conditions necessary for availing
the same have been complied with (Section 16 of the CGST Act, 2017). However, the claim will
get confirmed only when the tax charged in respect of such supply has been actually paid to
the Government.] [Section 16(2)(c)]
3. A registered person shall be entitled to take input tax credit on goods which are used or
intended to be used in the course or furtherance of his business. Since ABC Ltd. has purchased
the goods for non-business purpose, hence no credit will be admissible on such purchases.
4. Input tax credit is admissible only when registered person has received such goods. Since the
goods are received in the month of October, 2021, input tax credit cannot be taken in the
month of September, 2021.
5. Input tax credit shall be admissible in month of September, 2021 even if payment is made by
ABC Ltd. in month of October, 2021.
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Section 16(4): Time Limit for Taking ITC
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Earlier, section 16(4) provided as follows:
A registered person shall not be entitled to take input tax credit in respect of any invoice or
debit note for supply of goods or services or both
o after the due date of furnishing of the return under section 39 for the month of
September following the end of financial year to which such invoice or debit note
pertains or
o furnishing of the relevant annual return, whichever is earlier.
With effect from 01.10.2022, section 16(4) has been amended by the Finance Act, 2022.
Amended section 16(4) reads as follows:
A registered person shall not be entitled to take ITC in respect of any invoice or debit note
for supply of goods or services or both
o after the 30th day of November following the end of financial year to which such
invoice or debit note pertains or
o furnishing of the relevant annual return, whichever is earlier.
The time limit u/s 16(4) does not apply to claim for re-availing of credit that had been reversed
earlier. [Come back to this point after reading Second Proviso to Section 16(2), then you’ll
understand.]
Provisions regarding Debit Note:
o Section 16(4) was earlier amended (with effect from 01.01.2021) vide the Finance Act,
2020, so as to delink the date of issuance of debit note from the date of issuance of
the underlying invoice for purposes of availing ITC.
o A doubt arose as to which of the following dates are relevant to determine the
‘financial year’ for the purpose of section 16(4) in terms of the provision as amended:
▪ date of issuance of debit note, or
▪ date of issuance of underlying invoice.
o In this regard, Circular No. 160/16/2021 GST dated 20.09.2021 has clarified that with
effect from 01.01.2021, in case of debit notes, the date of issuance of debit note (not
the date of underlying invoice) shall determine the relevant financial year for the
purpose of section 16(4).
o A debit note dated 07.07.2021 is issued in respect of the original invoice dated
16.03.2021. As the invoice pertains to F.Y. 2020-21, the relevant financial year for
availment of ITC in respect of the said invoice in terms of section 16(4) shall be FY
2020-21. However, as the debit note has been issued in FY 2021-22, the relevant
financial year for availment of ITC in respect of the said debit note shall be FY 2021-22
in terms of amended provision of section 16(4).
Question 6
XYZ Ltd. purchased goods valuing ₹6,00,000 (exclusive of CGST and SGST @ 9% each) under the cover
of invoice dated 25-12-2022. The company made payment to the supplier on the same date. Since
there was a doubt regarding admissibility of tax credit on such inputs, the company did not take the
input tax credit at the time of receipt of input. The company obtained clarification from a legal
consultant who opined that the goods were eligible as inputs under Input tax Credit Rules. The opinion
was received on 05-05-2023. The company now wants to avail Input tax credit of the tax paid on such
inputs. Can it do so? The company has filed its annual return for the year 2022-23 on12-08-2023.
Solution
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As per Section 16(4), a registered person shall not be entitled to take input tax credit in respect of any
invoice or debit note for supply of goods or services or both after:
1. 30th day of November following the end of the financial year to which such invoice or debit
note pertains, or;
2. Furnishing of the relevant annual return, whichever is earlier.
In this case the inputs were purchased by invoice dated 25-12-2022, hence Input tax credit in respect
of such inputs can be taken on earlier of following dates:
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30-11-2023; or
12-08-2023 being the date of furnishing of annual return.
Since, XYZ Ltd. can avail credit of input tax paid on inputs till 12-08-2023. Therefore, it can avail credit
of CGST ₹54,000 and SGST of ₹54,000 on 05-05-2023.
Second Proviso to Section 16(2): Payment for the Invoice to be made
Within 180 Days
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The registered person must pay to the supplier, the value of the goods and/or services along
with the tax within 180 days from the date of issue of invoice.
If he fails to do so, he shall furnish the
o details of such supply,
o the amount of value not paid, and
o the amount of input tax credit availed of proportionate to such amount not paid
to the supplier in FORM GSTR-2 for the month immediately following the period of 180 days
from the date of the issue of the invoice.
The corresponding credits availed by the registered person would be added to his output tax
liability, with interest.
Interest will be paid @ 18% from the date of availing credit till the date when the amount
added to the output tax liability is paid.
However, once the recipient makes the payment of value of goods and/or services along with
tax, he will be entitled to avail the credit again without any time limit u/s 16(4).
In case part-payment has been made, proportionate credit would be allowed.
Exceptions: This condition of payment of value of supply plus tax within 180 days does not
apply in the following situations:
a) Supplies on which tax is payable under reverse charge
b) Deemed supplies without consideration
c) Additions made to the value of supplies on account of supplier’s liability, in relation to
such supplies, being incurred by the recipient of the supply
Under situations given in points (b) & (c), the value of supply is deemed to have been paid.
Rule 37: Procedural Requirements for Reversal of ITC In Case of NonPayment of Consideration
Rule 37 provides for reversal of ITC in case of non-payment of consideration. Sub-rule (1) and (2) have
been substituted and sub-rule (3) has been omitted, with effect from 01.10.2022. Consequently, the
amended position of law is as follows:
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o
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The registered person must pay to the supplier, the value of the goods and/or services
along with the tax within 180 days from the date of issue of invoice [Second proviso
to section 16(2)].
o However, where a registered person, who has availed of ITC on any inward supply fails
to pay to the supplier thereof, the amount towards the value of such supply along with
the tax payable thereon, within the time limit specified in the second proviso to
section 16(2) [viz. 180 days from the date of issue of invoice], shall pay an amount
equal to the ITC availed in respect of such supply along with interest payable thereon
under section 50, while furnishing the return in Form GSTR-3B for the tax period
immediately following the period of 180 days from the date of the issue of the invoice.
o Exceptions: This condition of payment of value of supply plus tax within 180 days does
not apply in the following situations:
a) Supplies on which tax is payable under reverse charge
b) Deemed supplies without consideration
c) Additions made to the value of supplies on account of supplier’s liability,
in relation to such supplies, being incurred by the recipient of the supply
Under situations given in points (b) & (c), the value of supply is deemed to have been
paid.
Where the said registered person subsequently make the payment of the amount towards the
value of such supply along with tax payable thereon to the supplier thereof, he shall be entitled
to re-avail the input tax credit paid earlier.
The time limit of availing credit as specified in Section 16(4) shall not apply to a claim for reavailing of any credit, in accordance with the provisions of the Act or the provisions of this
Chapter, that had been reversed earlier.
Question 7
A registered supplier of taxable goods supplied goods valued at ₹2,24,000 (inclusive of CGST ₹12,000
and SGST ₹12,000) to Mohan Ltd. under the forward charge on 15-08-2022 for which tax invoice was
also issued on the same date. The inputs were received by Mohan Ltd. on 15-08-2022. Mohan Ltd.
availed credit of ₹24,000 on 18-08-2022. But Mohan Ltd. did not make any payment towards such
supply along with tax thereon to the supplier. Is Mohan Ltd. eligible to avail input tax credit on such
supply? What are the consequences of such non-payment by Mohan Ltd.?
Discuss input tax credit provisions if Mohan Ltd. makes the payment of ₹2,24,000 to the supplier on
18-03-2023.
Solution
As per section 16 of the CGST Act, 2017, Mohan Ltd. is eligible to avail input tax credit (ITC) of the tax
paid on inputs received by it on the basis of the invoice issued by the supplier provided other conditions
for availing ITC are fulfilled.
Payment of value of the goods along with the tax to the supplier is not a pre-requisite at the time of
availing credit, but Mohan Ltd. has to pay the said amount within 180 days from the date of issue of
invoice.
If Mohan Ltd. does not make payment within 180 days from the date of invoice: A registered person,
who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay
to the supplier thereof, the amount towards the value of such supply along with the tax payable
thereon, within 180 days from the date of invoice, shall pay an amount equal to the input tax credit
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availed in respect of such supply along with interest payable @ 18% p.a., while furnishing the return
in FORM GSTR-3B for the tax period immediately following the period of 180 days from the date of the
issue of the invoice. Thus, Mohan Ltd. will be liable to pay ₹24,000 along with interest @ 18% p.a. while
furnishing GSTR-3B for the month of February, 2023.
Mohan Ltd liable to general penalty not exceeding ₹25,000: If Mohan Ltd. does not pay the supplier
as mentioned above, subject to the provisions of section 126 of the CGST Act, 2017, a general penalty
which may extend to ₹25,000 may also be levied for such contravention by Mohan Ltd. u/s 125 of the
CGST Act, 2017.
Re-credit of input tax if payment made after 180 days: Where the said registered person subsequently
makes the payment of the amount towards the value of such supply along with tax payable thereon
to the supplier thereof, he shall be entitled to re-avail the input tax credit paid earlier. Thus he will be
entitled to re-avail the Input Tax Credit of ₹24,000 in the month of March, 2023.
Some Important Definitions
Input tax credit is allowed for capital goods, inputs, and input services.
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Capital goods means goods, the value of which is capitalized in the books of account of the
person claiming the ITC and which are used or intended to be used in the course or furtherance
of business.
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 service means any service used or intended to be used by a supplier in the course or
furtherance of business.
Section 17
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Section 17 talks about apportionment of credits and blocked credits.
Let’s first take a look at Blocked Credits.
We’ll discuss all the other provisions contained in Section 17 after the discussion of Blocked
Credits.
Section 17(5): Blocked Credits
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ITC of tax paid on almost every inputs and input services used for supply of taxable goods or
services or both is allowed under GST except a small list of items provided under Section 17(5).
The negative list covers mainly items of personal consumption, inputs use of which results into
formation of an immovable property (except plant and machinery), telecommunication
towers, pipelines laid outside the factory premises, etc. and taxes paid as a result of detection
of evasion of taxes.
It has a total of 11 clauses → (a), (aa), (ab), (b), (c), (d), (e), (f), (g), (h), (i)
Section 17(5)(a): Motor Vehicles
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Tax paid on purchase of ineligible motor vehicles cannot be claimed as ITC.
“Ineligible motor vehicles” means motor vehicles for transportation of persons with seating
capacity ≤ 13 persons (including the driver).
Exceptions: If the ineligible motor vehicles are used for any of the following purposes (eligible
purposes), tax paid on their purchase can be claimed as ITC:
o making further taxable supply of such motor vehicles;
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o making taxable supply of transportation of passengers;
o making taxable supply of imparting training on driving such motor vehicles.
Remarks:
o ITC on ineligible motor vehicles used for any purpose other than the eligible purposes
is not allowed.
o ITC on motor vehicles for transportation of persons with seating capacity > 13 persons
(including the driver) used for any purpose is allowed.
o ITC on motor vehicles other than ineligible motor vehicles (e.g., motor vehicle used for
transportation of goods, dumpers, tippers etc.) used for any purpose is allowed.
Section 17(5)(aa): Vessels and Aircrafts
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Tax paid on purchase of vessels and aircrafts cannot be claimed as ITC.
Exceptions: If the vessels and aircrafts are used for any of the following purposes, tax paid on
their purchase can be claimed as ITC:
o making further taxable supply of such vessels or aircraft;
o making taxable supply of transportation of passengers;
o making taxable supply of imparting training on navigating such vessels;
o making taxable supply of imparting training on flying such aircrafts;
o transportation of goods.
Section 17(5)(ab): General Insurance, Servicing, Repair and
Maintenance Relating to Ineligible Motor Vehicles, Vessels, or Aircrafts
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The Input Tax Credit in respect of general insurance, servicing, repair and maintenance of the
motor vehicle, vessels, or aircrafts which are not entitled for Input Tax Credit shall not be
allowed.
Exceptions: ITC is allowed on:
o Such services relating to ineligible motor vehicles, vessels or aircraft when used for
eligible purposes
o Such services when received by:
▪ Manufacturer of ineligible motor vehicles, vessels or aircraft; or
▪ Supplier of general insurance services in respect of ineligible motor vehicles,
vessels or aircraft insured by him
Remarks:
o ITC is not allowed on services of general insurance, servicing, repair and maintenance
relating to motor vehicles, vessels or aircraft, ITC on which is not allowed.
o ITC is allowed on services of general insurance, servicing, repair and maintenance
relating to motor vehicles, vessels or aircraft, ITC on which is allowed.
Leasing, Renting, or Hiring of Ineligible Motor Vehicles, Vessels, or
Aircrafts
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ITC is not allowed on leasing, renting, or hiring of ineligible motor vehicles, vessels, or aircrafts.
Exceptions: ITC is allowed on:
o Such services when used for making an outward taxable supply of the same category
of services or as an element of a taxable composite or mixed supply
o Such services when provided by an employer to its employees under a statutory
obligation
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Remarks:
o ITC on leasing, renting or hiring of motor vehicles, vessels or aircraft on which ITC is
allowed, is also allowed.
o ITC on such services is allowed in the case of subcontracting, i.e., when such services
are used by the taxpayer who is in the same line of business.
Question 8
Fill in the blanks:
1. ITC on cars purchased by a manufacturing company for official use of its employees is _______.
2. ITC on cars purchased by a car dealer for sale to customers is ________.
3. ITC on cars purchased by a company engaged in renting out cars for transportation of
passengers, is _______.
4. ITC on cars purchased by a car driving school is _______.
5. ITC on buses (seating capacity for 24 persons) purchased by a company for transportation of
its employees from their residence to office and back, is _______.
6. ITC on trucks purchased by a company for transportation of its finished goods is _______.
7. ITC on aircraft purchased by a manufacturing company for official use of its CEO is _______.
8. ITC on aircraft purchased by an Aviation School providing training on non-flying aircrafts, is
_______.
9. ITC on general insurance taken on a car used by employees of a manufacturing company for
official purposes, is _______.
10. ITC on maintenance & repair services availed by a company for a truck used for transporting
its finished goods, is _______.
11. ITC on general insurance services taken on cars manufactured by a car manufacturing company
is _______.
Solution
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Blocked
Allowed
Allowed
Allowed
Allowed
Allowed
Blocked
Allowed
Blocked
Allowed
Allowed
Section 17(b): Food & Beverages, Outdoor Catering, Health Services
and Other Services
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Part 1
o ITC is not allowed on:
▪ Food and beverages
▪ Outdoor catering
▪ Beauty treatment
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o
o
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▪ Health Services Cosmetic and plastic surgery
▪ Life insurance and health insurance
Exceptions: ITC is allowed on:
▪ Such goods and/or services when used by a registered person for making an
outward taxable supply of the same category of goods and/or services or as
an element of a taxable composite or mixed supply
▪ Such goods and/or services when provided by an employer to its employees
under a statutory obligation
Remarks
▪ ITC on such goods and/or services is allowed in the case of sub-contracting,
i.e., when such goods and/or services are used by the taxpayer who is in the
same line of business, e.g., outdoor catering service availed by another
outdoor caterer.
▪ When such goods and/or services are provided by the employer to its
employees without any statutory obligation, ITC thereon is blocked.
Part 2
o ITC is not allowed on membership of a club, health and fitness centre
o Exception: ITC is allowed on such services when provided by an employer to its
employees under a statutory obligation
o Remarks: When such goods and/or services are provided by the employer to its
employees without any statutory obligation, ITC thereon is blocked.
Part 3
o ITC is not allowed on travel benefits extended to employees on vacation such as leave
or home travel concession
o Exception: Such services when provided by an employer to its employees under a
statutory obligation
o Remarks: When such goods and/or services are provided by the employer to its
employees without any statutory obligation, ITC thereon is blocked.
Question 9
Fill in the blanks:
1. A manufacturing company purchases food items for being served to its customers, free of cost.
ITC on such goods is _______.
2. AB & Co., a caterer of Amritsar, has been awarded a contract for catering in a marriage to be
held at Ludhiana. The firm has given the contract for supply of snacks, to be served in the
marriage, to CD & Sons, a local caterer of Ludhiana. ITC on such outdoor catering services
availed by AB & Co., is _______.
3. ITC on outdoor catering services availed by a garment exporter for a marketing event
organised for its prospective customers, is _______.
4. Outdoor catering service is availed by a company to run a free canteen in its factory. The
Factories Act, 1948 requires the company to set up a canteen in its factory. ITC on such outdoor
catering is _______.
5. The Managing Director of a company has taken membership of a club, the fees for which is
paid by the company. ITC on such service is _______.
6. A company avails services of a travel agency for organizing a free vacation for its top
performing employees. ITC on such services is _______.
Solution
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1.
2.
3.
4.
5.
6.
Blocked
Allowed
Blocked
Allowed
Blocked
Blocked
Section 17(5)(c): Works Contract Services for Construction of
Immovable Property
•
•
•
•
•
Works contract means a contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair, maintenance, renovation,
alteration or commissioning of any immovable property wherein transfer of property in goods
(whether as goods or in some other form) is involved in the execution of such contract.
ITC is blocked on input service relating to construction activity like office building, factory
building etc.
However, ITC is available for routine construction related services like repairs, maintenance,
renovation etc. of office and factory building.
Thus, broadly, ITC in respect of construction services is not available when the expenses are
capitalised in books of account.
Therefore, ITC on works contract services for construction of immovable property is available
only in the following three situations:
o When the works contract service is availed by a works contractor for being used in
providing the works contract service.
o For construction of plant and machinery. In this case, ITC is allowed to all recipients
irrespective of their line of business.
o When the value of works contract service is not capitalized. In this case, ITC is allowed
to all recipients irrespective of their line of business.
Definition of Plant and Machinery
•
•
•
“Plant and machinery” means apparatus, equipment, and machinery fixed to earth by
foundation or structural supports that are used for making outward supply of goods and/or
services and includes such foundation or structural support but excludes
o land, building or other civil structures,
o telecommunication towers, and
o pipelines laid outside the factory premises.
Please note that the credit on pipelines is blocked only if the pipelines are laid outside the
factory premises, as it is specifically excluded from the definition of plant and machinery.
Therefore, if the pipelines are laid out inside the factory premises, ITC is available.
Question 10
Fill in the blanks:
1. ITC on works contracts services availed by a software company for construction of its office, is
_______.
2. CD & Co., a works contractor of Noida, has been awarded a contract for construction of a
commercial complex in Lucknow. The firm avails services of EF & Co., a local works contractor
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3.
4.
5.
6.
of Lucknow, for the construction of complex. ITC on such works contract services availed by
CD & Co., is _______.
ITC on works contract services availed by an automobile company for construction of a
foundation on which a machinery (to be used in the production process) is to be mounted
permanently, is _______.
ITC on works contract services availed by a manufacturing company for construction of
pipelines to be laid outside its factory, is _______.
A consulting firm has availed services of a works contractor for repair of its office building. The
company has booked such expenditure in its profit and loss account. ITC on such services is
_______.
A telecommunication company has availed services of a works contractor for repair of its office
building. The company has capitalized such expenditure. ITC on such services is _______.
Solution
1.
2.
3.
4.
5.
6.
Blocked
Allowed
Allowed
Blocked
Allowed
Blocked
Section 17(5)(d): Goods/Services Used for Self-Construction of
Immovable Property
•
•
ITC is not allowed on goods and/or services received by a taxable person for construction of
an immovable property (other than plant and machinery) on his own account (for his own use)
even if such goods and/or services are used in the course or furtherance of business.
ITC on goods and/or services used in construction of immovable property is available only in
the following three situations:
o For construction of plant and machinery
o When the value of goods and/or services is not capitalized
o When the construction is not on own account
Question 11
Fill in the blanks:
1. A company buys cement, tiles etc. and avails the services of an architect for construction of its
office building. ITC on such goods and services is _______.
2. MN & Constructions procures cement, paint, iron rods and services of architects and interior
designers for construction of a commercial complex for one of its clients. ITC on such goods
and services is _______ to MN & Co.
3. A company buys cement, tiles etc. and avails the services of an architect for renovation of its
office building. The company has booked such expenditure in its profit and loss account. ITC
on such goods and services is _______.
4. ITC on goods and/or services used by an automobile company for construction of a foundation
on which a machinery (to be used in the production process) is to be mounted permanently,
is _______.
Solution
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1.
2.
3.
4.
Blocked
Allowed
Allowed
Allowed
Section 17(5)(e): Inward Supplies Charged to Tax Under Composition
Levy
•
•
•
A composition supplier cannot issue invoice to his customers, and therefore, cannot collect tax
from his customers.
Hence, it is obvious that he won’t be able to claim ITC.
Section 17(5)(e) specifically disallows it anyway.
Section 17(5)(f): Inward Supplies Received by a Non-Resident Taxable
Person
•
•
•
Non-resident taxable person means any person who occasionally undertakes transactions
involving supply of goods or services or both, whether as principal or agent or in any other
capacity, but who has no fixed place of business or residence in India.
Tax paid on goods and/or services received by such non-resident taxable person, is not
available as ITC.
However, tax paid by him on imported goods is allowed as ITC.
Section 17(5)(g): Inward Supplies Used for Personal Consumption
•
•
•
•
ITC can be availed only on the inward supplies of goods or services or both which are used in
the course or furtherance of business.
Therefore, if any goods or services are used for personal consumption, ITC is not available.
Further, where goods and/or services are used partly for the purpose of any business and
partly for other purposes, the credit will be allowed only for so much of the ITC as is
attributable to business purposes.
Example: Mr. X owns a grocery store. He procures rice, wheat and biscuits for being sold in its
store. Out of the inventory so purchased, he gives 10 kgs each of rice and wheat to his wife for
household use. Being used for personal consumption, ITC on 10 kg of rice and 10 kg of wheat
is blocked.
Section 17(5)(h): Free Samples, Gifts, Goods Lost/Stolen etc.
•
•
ITC shall not be available to the supplier on the inputs, input services and capital goods to the
extent they are used in relation to the gifts or free samples distributed without any
consideration.
However, where the activity of distribution of gifts or free samples falls within the scope of
"supply" on account of the provisions contained in Schedule I of the said Act, the supplier
would be eligible to avail the ITC.
Section 17(5)(i): Evasion, Confiscation, etc.
•
Tax paid under sections 74, 129 and 130 is not available as ITC.
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•
These sections prescribe the provisions relating to tax paid as a result of evasion of taxes, or
upon detention of goods or conveyances in transit, or towards redemption of confiscated
goods/conveyances.
Question 12
X Ltd. a registered manufacturer engaged in taxable supply of goods procured the following goods
during the month of October. The same has been capitalized in the books of accounts of X Ltd.
Determine the amount of Input tax credit available by giving necessary explanations for treatment of
various items.
Inward Supplies
GST (₹)
1. Electrical transformers used in the factory
2,16,000
2. Moulds and dies used in the factory
26,000
3. Pollution control equipment used in the factory
2,34,000
4. Capital goods purchased on which depreciation has been taken on full value 1,35,000
including input tax thereon
5. Capital goods used as parts purchased from supplier who paid tax of ₹10,000
under composition scheme and the composite tax has not been collected from X
Ltd.
Solution
Computation of Admissible ITC to X Ltd.
Particulars
Electrical transformers used in the factory (Note 1)
Moulds and dies used in the factory (Note 1)
Pollution control equipment used in the factory (Note 1)
Capital goods purchased on which depreciation has been taken on full value including
input tax thereon (Note 2)
Capital goods used as parts purchased from supplier who paid tax under composition
scheme and the composite tax has not been collected from X Ltd. (Note 3)
Total input tax credit available
Notes:
₹
2,16,000
26,000
2,34,000
4,76,000
1. Capital goods means goods, the value of which is capitalized in the books of account of the
person claiming the ITC and which are used or intended to be used in the course or furtherance
of business. Hence electrical transformers, moulds and dies, pollution control equipment
which are used or intended to be used in the course or furtherance of business are eligible for
ITC as capital goods.
2. As per Section 16(3), no input tax credit shall be admissible where registered person has
claimed depreciation on the tax component of the cost of capital goods and plant and
machinery under the provisions of the Income-tax Act,1961.
3. As per Section 17(5)(e), input tax credit shall not be available in respect of goods or services or
both on which tax has been paid u/s10. Thus, no ITC shall be allowed of tax paid under
composition scheme by the supplier.
Question 13
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Determine the amount of Input tax credit available to Kalyan Ltd. in respect of the following goods and
services procured by them in the month of April 2021:
Inward Supplies
GST (₹)
1. Motor vehicles for transportation of persons having approved seating capacity
70,000
of 7 persons (including driver)
2. Motor bus for transportation of persons having approved seating capacity of 14 1,40,000
persons (including driver)
3. Motor lorries for transportation of goods
2,80,000
4. Food and Beverages procured from Sweet Caterers for being used in dealer's
48,000
meet
5. Services of repair and maintenance of motor lorries used for transportation of
36,000
goods
6. Services of general insurance of motor vehicles for transportation of persons
18,000
having approved seating capacity of 7 persons (including driver)
7. Services of servicing of motor vehicles for transportation of persons having
54,000
approved seating capacity of 14 persons (including driver)
Solution
Computation of Admissible ITC to Kalyan Ltd.
Particulars
₹
Motor vehicles for transportation of persons having approved seating capacity of 7
persons (including driver) (Note 1)
Motor bus for transportation of persons having approved seating capacity of 14 persons 1,40,000
(including driver) (Note 2)
Motor lorries for transportation of goods (Note 3)
2,80,000
Food and Beverages procured from Sweet Caterers for being used in dealer's meet (Note
4)
Services of repair and maintenance of motor lorries used for transportation of goods
36,000
(Note 5)
Services of general insurance of motor vehicles for transportation of persons having
approved seating capacity of 7 persons (including driver) (Note 6)
Services of servicing of motor vehicles for transportation of persons having approved
54,000
seating capacity of 14 persons (including driver) (Note 7)
Total input tax credit available
5,10,000
Notes:
1. As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(including the driver), unless they are used for making the following taxable supplies, namely:
(A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting
training on driving such motor vehicles. Hence, no input tax credit is available on the said
motor vehicles.
2. As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(including the driver). Thus, input tax credit shall be admissible on motor bus.
3. In respect of motor vehicle used for the purpose of transportation of goods, the same is not
be covered under the ambit of blocked credit, hence input tax credit shall be admissible in
respect of such motor vehicles.
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4. As per Section 17(5)(b), no Input tax credit is available in respect of 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 or if provision of such
goods or services is obligatory for an employer to provide to its employees under any law for
the time being in force. Hence, no input tax credit is available on food and beverages procured
from Sweet Caterers for being used in dealer's meet.
5. Since motor lorries meant for transportation of goods is not covered under the ambit of
blocked credit, hence services of repair and maintenance of motor lorries is also eligible for
credit.
6. Services of general insurance of motor vehicles for transportation of persons having approved
seating capacity of 7 persons (including driver) shall not be eligible for input tax credit since
the same is covered under the ambit of blocked credit under Section17(5)(ab) of the CGST Act,
2017.
7. Since Input tax credit is eligible for motor vehicles for transportation of persons having
approved seating capacity of 14 persons, hence services of servicing of such motor vehicles
shall be eligible for input tax credit.
Question 14
Determine the amount of Input tax credit available to Posco Ltd. in respect of the following items
procured by them in the month of February:
Inward Supplies
1. Input used for the manufacture of the final product
2. Food and Beverages procured from Sweet Caterers for employees under
statutory obligation
3. Goods used for providing services during warranty period
4. Goods used for setting up Telecommunication Towers being immovable
property
5. Inputs stolen from the factory store
GST (₹)
72,000
48,000
12,000
90,000
13,200
Solution
Computation of Admissible ITC to Pocso Ltd.
Particulars
Input used for the manufacture of the final product
Food and Beverages procured from Sweet Caterers for employees under statutory
obligation (Note 1)
Goods used for providing services during warranty period (Note 2)
Goods used for setting up Telecommunication Towers being immovable property (Note
3)
Inputs stolen from the factory store (Note 4)
Total input tax credit available
Notes:
₹
72,000
48,000
12,000
1,32,000
1. As per Section 17(5)(b), no Input tax credit is available in respect of 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
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services or both or as an element of a taxable composite or mixed supply or if provision of such
goods or services is obligatory for an employer to provide to its employees under any law for
the time being in force. Since in this case food and beverages are provided to employees under
statutory obligation, Hence, input tax credit is available.
2. Since goods are used in the course of business, ITC is available.
3. As per Section 17(5)(d), Goods received by taxable person for construction of an immovable
property (other than Plant and Machinery) on his own account including when such goods
used in course or furtherance of business shall be considered as ineligible input and no credit
shall be allowed of tax paid on such goods. Since Telecommunication tower is an immovable
property, hence, no input tax credit shall be allowed in respect of goods used for setting it up.
4. As per Section 17(5)(h), Goods lost, stolen, destroyed, written off or disposed of by way of gift
or free samples are considered as ineligible input and credit of GST paid on such goods cannot
be taken.
Question 15
Determine the amount of Input tax credit admissible to PQR Ltd. in respect of the following goods
procured by it in the month of January:
Inward Supplies
1. Goods used in constructing an additional floor of office building
2. Packing Materials used in a factory
3. Goods destroyed due to natural calamities
4. Goods used for repairing the office building and cost of such repairs is debited to
profit and loss account
5. Paper for photocopying machine used in Administrative Office
6. Goods given as gifts
7. Inputs used for tests or quality control check
Note:
GST (₹)
28,800
6,000
12,500
12,000
950
25,000
15,600
1. All the conditions necessary for availing the ITC have been fulfilled.
2. Registered Person is not eligible for any threshold exemption.
Solution
Computation of Admissible ITC to PQR Ltd.
Particulars
Goods used in constructing an additional floor of office building (Note 1)
Packing Materials used in a factory (Note 2)
Goods destroyed due to natural calamities (Note 3)
Goods used for repairing the office building and cost of such repairs is debited to profit
and loss account (Note 4)
Paper for photocopying machine used in Administrative Office (Note 2)
Goods given as gifts (Note 3)
Inputs used for tests or quality control check (Note 2)
Total input tax credit available
Notes:
₹
6,000
12,000
950
15,600
34,550
1. As per Section 17(5)(d), input tax credit shall not be available in respect of 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
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the course or furtherance of business. Hence, input tax credit shall not be available in respect
of goods used in construction of an additional floor of office building.
2. Since goods are used in the course of business, ITC is available.
3. Section 17(5)(h), input tax credit shall not be available in respect of goods lost, stolen,
destroyed, written off or disposed of by way of gift or free samples. Hence, no ITC shall be
available in respect of goods destroyed due to natural calamities.
4. As per the explanation, the expression "Construction" includes re-construction, renovation,
additions or alterations or repairs, to the extent of capitalisation, to the immovable property.
Goods used for revenue repairs are considered as an eligible input and credit shall be allowed
on the same.
Question 16
Determine the amount of Input tax credit admissible to P Ltd. in respect of the following items
procured by them in the month of March 2022:
Inward Supplies
1. Goods supplied for captive consumption in a factory
2. Goods purchased for being used in repairing the factory shed and same has been
capitalized in books
3. Cement used for making foundation and structural support to Plant and
Machinery
4. Inputs used in trial runs
5. Food and beverages purchased for the employees during office hours not under
statutory obligation
Note:
GST (₹)
9,800
18,000
14,000
14,560
8,400
1. All the conditions necessary for availing the ITC have been fulfilled.
2. Registered Person is not eligible for any threshold exemption.
Solution
Computation of Admissible ITC to P Ltd.
Particulars
Goods supplied for captive consumption in a factory (Note 1)
Goods purchased for being used in repairing the factory shed and same has been
capitalized in books (Note 2)
Cement used for making foundation and structural support to Plant and Machinery
(Note 3)
Inputs used in trial runs (Note 1)
Food and beverages purchased for the employees during office hours not under
statutory obligation (Note 4)
Total input tax credit available
Notes:
₹
9,800
14,000
14,560
38,360
1. Since goods are used in the course of business, ITC is available.
2. As per Section 17(5)(d), input tax credit shall not be available in respect of 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. Construction includes re-construction, renovation,
additions or alterations or repairs, to the extent of capitalisation, to the said immovable
CA NISHANT KUMAR
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property. Since the cost of repairs is capitalized in books, no credit of input tax paid on goods
used shall be allowed.
3. As per Explanation to Section 17, "plant and machinery" means apparatus, equipment, and
machinery fixed to earth by foundation or structural support that are used for making outward
supply of goods or services or both and includes such foundation and structural supports. Input
tax credit is admissible in respect of goods or services or both received by a taxable person for
construction of plant or machinery. Hence, tax paid on cement shall be available for input tax
credit.
4. As per Section 17(5)(b), No input tax credit is available in respect of 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 or where it is
obligatory for an employer to provide the same to its employees under any law for the time
being in force. Hence, no input tax credit is available on food and beverages for use of
employees during office hours.
Question 17 – July, 2021 – 6 Marks
A Ltd. procured the following goods in the month of December, 2021:
Inward Supplies
GST (₹)
1. Goods used in constructing an additional floor of office building
18,450
2. Goods given as free sample to prospective customers
15,000
3. Trucks used for transportation of inputs in the factory
11,000
4. Inputs used in trail runs
9,850
5. Confectionary items for consumption of employees working in the factory
3,250
6. Cement used for making foundation and structural support to plant and
8,050
machinery
Compute the amount of ITC available with A Ltd. for the month of December 2021 by giving necessary
explanations. Assume, that all the other conditions necessary for availing ITC have been fulfilled.
Solution
Computation of Admissible ITC to P Ltd.
Particulars
Goods used in constructing an additional floor of office building (Note 1)
Goods given as free sample to prospective customers (Note 2)
Trucks used for transportation of inputs in the factory (Note 3)
Inputs used in trail runs (Note 4)
Confectionary items for consumption of employees working in the factory (Note 5)
Cement used for making foundation and structural support to plant and machinery (Note
6)
Total input tax credit available
Notes:
₹
11,000
9,850
8,050
28,900
1. ITC on goods received by a taxable person for construction of an immovable property on his
own account is blocked even if the same is used in the course or furtherance of business. It
has been assumed that cost of construction of additional floor has been capitalized.
2. ITC on goods disposed of by way of free samples is blocked.
3. ITC on motor vehicles used for transportation of goods is not blocked.
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4. Being used in trial runs, inputs are used in the course or furtherance of business and hence ITC
thereon is allowed.
5. ITC on food or beverages is blocked unless the same is used in same line of business or as an
element of the taxable composite or mixed supply. Further, ITC on goods and/or service used
for personal consumption is blocked.
6. ITC on goods used for construction of plant and machinery is not blocked. Plant and machinery
includes foundation and structural supports through which the same is fixed to earth.
Question 18
An Elite Training institute provides service of training pilot in flying commercial aircraft so that
candidates become eligible for obtaining Aviation license. Determine whether the institute is eligible
to take credit on aircraft purchased for imparting training.
Solution
As per Section 17(5)(aa), no credit of input tax shall be allowed on vessels and aircraft except when
they are used:
1. for making the following taxable supplies, namely:
a. further supply of such vessels or aircraft; or
b. transportation of passengers; or
c. imparting training on navigating such vessels; or
d. imparting training on flying such aircraft;
2. for transportation of goods.
Since, Aircraft is used to impart training on flying, therefore credit of input tax paid on purchase of
aircraft shall be available to Elite Institute.
Question 19
Krishna Motors is a car dealer selling cars of an international car company having seating capacity of 7
persons (excluding driver). It also provides maintenance and repair services of the cars sold by it as
also of other cars. It seeks your advice on availability of ITC in respect of the following expenses
incurred by it during the course of its business operations:
1. Cars purchased from the manufacturer for making further supply of such cars. Two of such
cars are destroyed in accidents while being used for test drive by potential customers.
2. Works contract services availed for constructing a car washing shed in its premises.
Solution
As per Section 16(1) of the CGST Act, 2017, every registered person can 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. However, Section 17(5) of CGST Act, 2017 specifies certain goods and
services on which the input tax credit is not available.
In the light of the foregoing provisions, the availability of input tax credit (ITC) in respect of the various
expenses incurred by Krishna Motors is discussed below:
1. Cars Purchased from the Manufacturer:
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a. Section 17(5)(a) specifically blocks ITC on motor vehicles for transportation of persons
having approved seating capacity of not more than thirteen persons (including the
driver).
b. However, the same is allowed when the motor vehicles are used, inter alia, for further
supply of such motor vehicles.
c. Thus, ITC on cars purchased from the manufacturer for making further supply of such
cars will be allowed.
d. However, ITC on the cars destroyed in accident will not be allowed as the ITC on goods
destroyed for whichever reason is specifically blocked under Section17(5)(h) of CGST
Act.
2. Works Contract Service
a. Section 17(5)(c) specifically blocks ITC on 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.
b. Since, in this case the car washing shed is not a plant and machinery and the works
contract service is not used for further supply of works contract service, ITC thereon
will not be allowed.
Question 20
ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the following items during
the month of July.
Inward Supplies
GST (₹)
1. Electrical transformers to be used in the manufacturing process
3,60,000
2. Truck used for transportation of inputs in the factory
2,24,000
3. Raw material
2,00,000
4. Confectionery items for consumption of employees working in the factory under
25,000
statutory obligation
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving necessary
explanations for treatment of various items.
Note:
1. All the conditions necessary for availing the ITC have been fulfilled.
2. ABC Co. Ltd. is not eligible for any threshold exemption.
Solution
Computation of Admissible ITC to ABC Co. Ltd.
Particulars
Electrical transformers to be used in the manufacturing process (Note 1)
Truck used for transportation of inputs in the factory (Note 2)
Raw material (Note 3)
Confectionery items for consumption of employees working in the factory under
statutory obligation (Note 4)
Total input tax credit available
Notes:
₹
3,60,000
2,24,000
2,00,000
25,000
8,09,000
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1. As per Section 16(1), ITC is admissible in respect of any goods used in the course or furtherance
of business. Hence, ITC is admissible in case of electrical transformers and raw materials used
in course or furtherance of business.
2. Motor vehicles used for transportation of goods do not fall under the ambit of blocked credit.
Hence, input tax credit shall be allowed on same.
3. Being goods used in the course or furtherance of business, ITC thereon is available in terms of
Section16(1).
4. As per Section 17(5)(b), ITC on food or beverages is specifically disallowed unless the same is
used for making outward taxable supply of the same category or as an element of the taxable
composite or mixed supply or where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force. Hence, input tax credit is available on
Confectionery items for consumption of employees working in the factory, since the same is
provided under statutory obligation.
Question 21
XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available with XYZ Ltd. for the
month of October, 2021 from the following particulars:
S.
No.
1.
2.
3.
4.
Inward
Supplies
Input ‘X’
Input ‘Y’
Capital
Goods
Input
Services
GST (₹)
Remarks
1,20,000 One invoice on which GST payable was ₹10,000, is missing
1,00,000 Inputs are to be received in two instalments. First instalment has
been received in October, 2021.
1,80,000 XYZ Ltd. has capitalised the capital goods at full invoice value
inclusive of GST as it will avail depreciation on the full invoice value.
2,50,000 One invoice dated 20-01-2021 on which GST payable was ₹50,000
has been received in October, 2021.
Notes:
1. All the conditions necessary for availing the ITC have been fulfilled.
2. XYZ Co. Ltd. is not eligible for any threshold exemption.
3. The annual return for the financial year 2020-21 was filed on15th September, 2021.
Solution
Computation of Admissible ITC to XYZ Ltd. for the month of October, 2021
Particulars
Input 'X' (Note 1)
Input 'Y'
Capital Goods
Input Services
Total input tax credit available
Notes:
₹
1,10,000
2,00,000
3,10,000
1. As per Section 16(2)(a), ITC cannot be taken on missing invoice. The registered person should
have the invoice in its possession to claim ITC.
2. As per the first proviso to Section 16(2), when inputs are received in instalments, ITC can be
availed only on receipt of last instalment.
CA NISHANT KUMAR
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3. As per Section 16(3), Input tax paid on capital goods cannot be availed as ITC, if depreciation
has been claimed on such tax component.
4. As per section 16(4), ITC on an invoice cannot be availed after the due date of furnishing of the
return for the month of September following the end of financial year to which such invoice
pertains or the date of filing annual return, whichever is earlier. Since the annual return for
the FY 2020-21 has been filed on 15th September, 2021 (prior to due date of filing the return
for September, 2021 i.e., 20th October, 2021), ITC on the invoice pertaining to FY 2020-21
cannot be availed after 15th September, 2021.
Question 22
Compute the Input tax credit available with Ujjwal Motors Ltd., manufacturer of cars, in respect of the
following services availed by it in the month of October, 2021:
Inward Supplies
1. Accounting and Auditing Services
2. Health insurance services for employees (Services are not provided under
Government obligation)
3. Routine maintenance of the cars manufactured by Ujjwal Motors Ltd.
4. Repair services for office building (Cost of repairs is charged to Profit and loss
Account)
5. Travel benefits extended to employees on vacation under statutory obligation
6. Testing services availed for car engines
Notes:
GST (₹)
7,200
16,200
18,000
14,400
3,360
9,000
1. All the conditions necessary for availing the ITC have been fulfilled.
2. Registered Person is not eligible for any threshold exemption.
Solution
Computation of Input tax credit available with Ujjwal Motors Ltd.
Particulars
₹
Accounting and Auditing Services (Note 1)
7,200
Health insurance services for employees (Services are not provided under Government
obligation) (Note 2)
Routine maintenance of the cars manufactured by Ujjwal Motors Ltd. (Note 1)
18,000
Repair services for office building (Cost of repairs is charged to Profit and loss Account) 14,400
(Note 3)
Travel benefits extended to employees on vacation under statutory obligation (Note 4)
3,360
Testing services availed for car engines (Note 1)
9,000
Total input tax credit available
51,960
Notes:
1. ITC is eligible since such services are used in course of business.
2. As per Section 17(5)(b), no ITC shall be available in respect of health insurance services availed
for employees since the Government has not notified the said services as obligatory services
to be provided to employees.
3. Repairs are revenue in nature, hence, credit of tax paid shall be available.
4. As per Section 17(5)(b), ITC shall be allowed on travel benefits extended to employees on
vacation since it is obligatory for an employer to provide the same to its employees under any
law for the time being in force.
CA NISHANT KUMAR
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Question 23
XYZ Ltd. engaged in supplying taxable goods has availed following services in month of September,
2021. Compute the input tax credit admissible on such input services.
Inward Supplies
1. Sales promotion services
2. Health and fitness services availed from Physique Club for upkeep of health of
their employees. The said services are not availed under Government obligation
3. Hiring of motor bus for transportation of employees. Seating capacity of motor
bus is 40 passengers
4. Market research services
5. Quality control services
6. Work contract services for construction of office building
Notes:
GST (₹)
16,200
10,800
4,500
10,080
18,000
45,000
1. All the conditions necessary for availing the ITC have been fulfilled.
2. Registered Person is not eligible for any threshold exemption.
Solution
Computation of Input tax credit available with XYZ Ltd.
Particulars
Sales promotion services (Note 1)
Health and fitness services availed from Physique Club for upkeep of health of their
employees. The said services are not availed under Government obligation (Note 2)
Hiring of motor bus for transportation of employees. Seating capacity of motor bus is 40
passengers (Note 3)
Market research services (Note 1)
Quality control services (Note 1)
Work contract services for construction of office building (Note 4)
Total input tax credit available
Notes:
₹
16,200
4,500
10,080
18,000
48,780
1. "Input service" means any service used or intended to be used by a supplier in the course or
furtherance of business. So, services like sales promotion services, market research services,
quality control services, are used by supplier in course or furtherance of business. Hence, the
credit of the tax paid on the aforesaid supply of services is available.
2. As per Section 17(5)(b), No input tax credit is available in respect of health and fitness centre
services where it is obligatory for an employer to provide the same to its employees under any
law for the time being in force. Thus, no input tax credit shall be admissible on health and
fitness services provided to employees.
3. As per Section 17(5)(b), Input tax credit is not allowed in respect of leasing, renting or hiring of
motor vehicles referred to in clause (a) except when used for the purposes specified therein.
Since bus having seating capacity of 40 passengers do not fall under the ambit of motor
vehicles specified in Section 17(5)(a), hence input tax credit shall be admissible.
Question 24 – May, 2018 – 4 Marks
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Fun Pharma Private Limited, a registered supplier is engaged in the manufacture of taxable goods. The
company provides the following information of GST paid on the purchases made/input services availed
by it during the month of September 2021:
Inward Supplies
GST (₹)
1. Purchase of cabs used for the transportation of its employees
3,30,000
2. Inputs consisting of three lots, out of which first lot was received during the 1,25,000
month
3. Capital Goods (out of three items, invoice for one item was missing and GST paid 2,50,000
on that item was ₹25,000)
4. Outdoor catering service availed on Women's day
72,000
Determine the amount of Input Tax Credit available with M/s. Fun Pharma Private Limited for the
month of September 2021 by giving necessary explanations for treatment of various items. All the
conditions necessary for availing the input tax credit have been fulfilled.
Solution
Computation of ITC available with Fun Pharma Private Ltd. for the month of September, 2021
Particulars
₹
Purchase of cabs used for the transportation of its employees (Note 1)
Inputs consisting of three lots, out of which first lot was received during the month (Note
2)
Capital Goods (out of three items, invoice for one item was missing and GST paid on that 2,25,000
item was ₹25,000) (Note 3)
Outdoor catering service availed on Women's day (Note 4)
Total input tax credit available
2,25,000
Notes:
1. As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(including the driver), unless they are used for making the following taxable supplies, namely:
(A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting
training on driving such motor vehicles. Hence, no input tax credit is available on the said
motor vehicles.
2. As per first proviso to Section 16(2), when inputs are received in lots/instalments, ITC can be
availed only on receipt of last lot/instalment.
3. As per Section 16(2)(a), ITC cannot be taken on missing invoice. The registered person should
have the invoice in its possession to claim ITC.
4. As per Section17(5)(b), input tax credit cannot be availed in respect of supply of outdoor
catering service.
Question 25 – November, 2018 – 4 Marks
CANWIN Ltd., a registered supplier, is engaged in the manufacture of Tanks. The company provides
the following information pertaining to GST paid on the purchases made/input services availed by it
during the month of January 2022:
Inward Supplies
GST (₹)
1. Purchase of Machinery where debit note is issued
1,15,000
2. Input purchased was directly delivered to Mr. Joe, a job worker and a registered
80,000
supplier
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3. Computers purchased (Depreciation was claimed on the said GST portion under
50,000
the ITA, 1961)
4. Works Contract services availed for construction of Staff quarters within the 4,25,000
company premises
Determine the amount of ITC available to M/s. CANWIN Ltd. for the month of January 2022 by giving
brief explanations for treatment of various items. Subject to the information given above, all the
conditions necessary for availing the ITC have been fulfilled.
Solution
Determination of the amount of ITC available to M/s. CANWIN Ltd.
Particulars
₹
Purchase of Machinery where debit note is issued (Note 1)
1,15,000
Input purchased was directly delivered to Mr. Joe, a job worker and a registered supplier
80,000
(Note 2)
Computers purchased (Depreciation was claimed on the said GST portion under the ITA,
1961) (Note 3)
Works Contract services availed for construction of Staff quarters within the company
premises (Note 4)
Total input tax credit available
1,95,000
Notes:
1. ITC can be availed on the basis of debit note issued by the supplier in accordance with Rule 36
of CGST Rules, 2017.
2. As per Explanation to Section 16(2), it shall be deemed that the registered person has received
the goods where the goods are delivered by the supplier to a recipient or any other person on
the direction of such registered person, whether acting as an agent or otherwise, before or
during movement of goods, either by way of transfer of documents of title to goods or
otherwise. Thus, ITC can be availed in case the goods are directly delivered to job-worker on
direction of CANWIN Ltd.
3. As per Section 16(3), where the registered person has claimed depreciation on the tax
component of the cost of capital goods and plant and machinery under the provisions of the
Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.
4. The same comes under the ambit of blocked credit u/s 17(5)(c), hence ITC shall not be
admissible.
Question 26 – RTP November, 2018
Cloud Seven Private Limited, a registered supplier, is engaged in the manufacture of taxable goods.
The company provides the following information pertaining to GST paid on the purchases made/input
services availed by it during the month of February, 2022:
Inward Supplies
GST (₹)
1. Trucks used for the transport of raw material
1,20,000
2. Food and beverages for consumption of employees working in the factory
40,000
3. Inputs are to be received in five lots, out of which third lot was received during
80,000
the month
4. Membership of a dub availed for employees working in the factory
1,50,000
5. Capital goods (out of five items, invoice for one item was missing and GST paid 4,00,000
on that item was ₹50,000)
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6. Raw material (to be received in March, 2022)
1,50,000
Determine the amount of input tax credit available with Cloud Seven Private Limited for the month of
February, 2022 by giving necessary explanations for treatment of various items. All the conditions
necessary for availing the input tax credit have been fulfilled.
Solution
Computation of ITC available with Cloud Seven Private Limited
Particulars
₹
Trucks used for the transport of raw material (Note 1)
1,20,000
Food and beverages for consumption of employees working in the factory (Note 2)
Inputs are to be received in five lots, out of which third lot was received during the
month (Note 3)
Membership of a dub availed for employees working in the factory (Note 4)
Capital goods (out of five items, invoice for one item was missing and GST paid on that 3,50,000
item was ₹50,000) (Note 5)
Raw material (to be received in March, 2022) (Note 6)
Total input tax credit available
4,70,000
Notes:
1. ITC on motor vehicles used for transport of goods is not blocked u/s17(5) of the CGST Act,
2017.
2. As per Section 17(5)(b), ITC on food or beverages is specifically disallowed unless the same is
used for making outward taxable supply of the same category or as an element of the taxable
composite or mixed supply or where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force.
3. When inputs are received in instalments, ITC can be availed only on receipt of last instalment
[Section 16(2)].
4. Membership of a club is specifically disallowed under section 17(5) of the CGST Act, 2017.
5. ITC cannot be taken on missing invoice. The registered person should have the invoice in its
possession to claim ITC [Section16(2) of CGST Act, 2017].
6. Input tax credit is available only upon the receipt of goods in terms of section 16(2) of CGST
Act, 2017.
Question 27 – RTP May, 2019
Le Marc Ltd. of Nashik, Maharashtra, a registered supplier, is engaged in manufacturing taxable goods.
It provides the following details of items purchased and services availed by it from Gujarat, for the
month of March, 2022:
Inward Supplies
GST (₹)
1. Motor vehicle seating capacity 5 persons (including driver) purchased for 1,50,000
employees to be used for personal as well as business purposes
2. Motor vehicle purchased for transportation of goods within the factory
2,00,000
3. Food items for consumption of employees. These items were supplied free of
2,000
cost to the employees in lieu of services rendered by them to the manufacturer
in the course of employment.
4. Rent-a-cab facility availed for employees to fulfil a statutory obligation in this
36,000
regard. The Government has notified such service under section17(5) of the
CGST Act, 2017.
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Calculate the amount of eligible input tax credit for the month of March, 2022.
Solution
Computation of ITC available with Cloud Seven Private Limited
Particulars
₹
Motor vehicle seating capacity 5 persons (including driver) purchased for employees to
be used for personal as well as business purposes (Note 1)
Motor vehicle purchased for transportation of goods within the factory (Note 2)
2,00,000
Food items for consumption of employees. These items were supplied free of cost to the
employees in lieu of services rendered by them to the manufacturer in the course of
employment. (Note 3)
Rent-a-cab facility availed for employees to fulfil a statutory obligation in this regard.
36,000
The Government has notified such service under section17(5) of the CGST Act, 2017.
(Note 4)
Total input tax credit available
2,36,000
Notes:
1. As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(including the driver), unless they are used for making the following taxable supplies, namely:
(A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting
training on driving such motor vehicles. Hence, no input tax credit is available on the said
motor vehicles.
2. ITC on motor vehicles used for transport of goods is not blocked u/s17(5) of the CGST Act,
2017.
3. As per Section 17(5)(b), ITC on food or beverages is specifically disallowed unless the same is
used for making outward taxable supply of the same category or as an element of the taxable
composite or mixed supply or where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force.
4. ITC on supply of rent-a cab services is not blocked where the Government notifies the services
which are obligatory for an employer to provide such service to its employees. Thus, ITC is
available on said service.
Question 28
XYZ Ltd., a manufacturer, which is engaged in supply of taxable goods has purchased 10,000 kg of
inputs for ₹10,00,000 (exclusive of CGST @ 6% and SGST @ 6%) on which input tax credit has been
taken. Due to technical changes in manufacturing process, the said inputs became obsolete, and their
value has been written off in the books of accounts. Explain Input tax credit treatment in above case.
Solution
As per Section 17(5)(h) of the CGST Act, 2017, if the value of any goods is written off in the books of
account, then no input tax credit shall be allowed in respect of the said input. Where input tax credit
has been taken in respect of the said goods, the same has to be paid by recipient of input goods. Since
in the given case, XYZ Ltd. has availed input tax credit, thus it has to pay ₹60,000 (₹10,00,000 @ 6%)
towards CGST and ₹60,000 towards SGST liability.
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Question 29
XYZ Ltd. is engaged in supply of works contract services for construction of immovable property. It
gives a part of the construction work to a sub-contractor. The sub-contractor charges GST in his invoice
to XYZ Ltd. You are required to advice XYZ Ltd. if it can avail Input tax credit of the GST charged to it by
the sub-contractor.
Solution
As per Section 17(5)(c), input tax credit shall not be available in respect of works contract services
when supplied for construction of an immovable property. However, credit is allowed where it is an
input service for further supply of works contract service. In the given case, the services supplied by
the sub-contractor have been used by the XYZ Ltd. for supply of works contract service. Hence, XYZ
Ltd. can avail the Input tax credit of the GST charged on the input service provided by the subcontractor.
Question 30
XYZ Ltd. is engaged in supply of passenger transportation services. In the month of September 2021, it
has purchased 10 motor cabs for ₹36,00,000 plus GST @ 28%. You are required to advice XYZ Ltd. if it
can avail Input tax credit of the GST paid by it on motor cabs.
Solution
As per Section 17(5)(a), input tax credit shall not be available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons (including the
driver). However, credit will be available when they are used for making the taxable supplies of
transportation of passengers. In this case XYZ Ltd. is engaged in transportation of passengers it will be
entitled to take credit of GST amounting ₹10,08,000, i.e., 36,00,000 × 28%.
Question 31
XYZ Ltd. conducted its 50th Annual General meeting at its head office in New Delhi and availed services
of Delicious caterers on that occasion. Delicious caterers charged ₹15,00,000 plus GST @ 18% for the
supply of outdoor catering services. You are required to advice XYZ Ltd. if it can avail Input tax credit
of the GST paid on outdoor catering service.
Solution
As per Section 17(5)(b), input tax credit shall not be available in respect of supply of outdoor catering
service unless inward supply of such services 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 or where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force. Hence, XYZ Ltd. is not entitled to avail ITC of GST
paid on outdoor catering services availed from Delicious caterers.
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Section 17(1): Goods/Services Used Partly for Business Partly for
Personal Purposes
As per Section 17(1), when the goods/services are used partly for business and partly for personal
purposes, supplier shall be allowed to take the ITC of only those goods/services which were used for
business purposes.
Section 17(2): Goods/Services Used Partly for Taxable Partly for Exempt
Supplies
•
•
•
•
As per Section 17(2), if the goods/services are used partly for taxable (including zero rated)
supplies and partly for exempt supplies, the supplier shall be allowed to take ITC of only those
goods/services which were used for taxable supplies (including zero rated supplies).
You may recall that even though there’s no GST on zero rated supplies, ITC can still be claimed
on the tax paid on procurement of goods/services which are used to provide zero rated
supplies.
“Zero rated supply” means any of the following supplies of goods or services or both, namely:
o export of goods or services or both; or
o supply of goods or services or both to a Special Economic Zone developer or a Special
Economic Zone unit
Exempt supplies comprise of the following three types of supplies:
o Supplies taxable at a NIL rate of tax
o Supplies that are wholly exempted from CGST or IGST, by way of a notification
o Non-taxable supplies (such as alcoholic liquor for human consumption)
Section 17(3): Value of Exempt Supply in Section 17(2)
•
•
•
•
“Value of Exempt Supply” shall include:
o Supplies under RCM
o Transaction in Securities
“Value of Exempt Supply” shall not include the value of activities or transactions specified in
Schedule III.
However, sale of land, sale of building shall be treated as exempt supply.
Section 17(3) is linked to Rules 42 and 43, which are not in our syllabus.
Section 17(4): Optional Method for Banks, etc.
•
•
•
•
Banks, etc. provide a lot of services, some of which are exempt.
Therefore, as per Sections 17(2) and 17(3), the proportion of eligible ITC needs to be calculated
which is calculated as per Rules 42 and 43 (not in our syllabus).
If a bank doesn’t want to do that, an optional method for finding out the eligible ITC is given
under Section 17(4).
A banking company or a financial institution including a NBFC, which accepts deposits, or
extends loans or advances, has the option to:
o either comply with the provisions of Section 17(2); or
o avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs,
capital goods and input services in that month and the balance amount of input tax
credit shall be reversed in FORM GSTR-3B.
CA NISHANT KUMAR
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•
•
•
The restriction of availing 50% ITC shall not apply to the tax paid on supplies procured from
another registration within the same entity i.e., 100% credit of such tax can be availed.
Credit of tax paid on inputs and input services that are used for non-business purposes and
items mentioned u/s section 17(5) [blocked credits] cannot be availed.
The option once exercised cannot be changed during the remaining part of the financial year.
Question 32
Punjab National Bank provides the following information for the month of November, 2022:
Particulars
CGST Paid
SGST Paid
(₹)
(₹)
Eligible Input tax (CGST and SGST) available on Inputs received
16,020
16,020
Eligible Input tax (CGST and SGST) available on Input Services availed
11,340
11,340
Value of taxable supply of services
11,00,000
Value of exempted supply of services
10,00,000
Determine the amount of Input tax credit available to Punjab National Bank for the month of
November, 2022 and also determine net SGST and CGST liability assuming the bank has opted for
provisions u/s 17(4).
Solution
As per Section 17(4), every banking company or a financial institution, including a non-banking financial
company, engaged in supply of services by way of accepting deposits or extending loans or advances
has the option either to avail of, every month, an amount equal to 50% of the eligible input tax credit
on inputs, capital goods and input services in that month or to comply with the provisions of Section
17(2) of taking credit of inputs and input services used for making taxable supplies.
Computation of ITC Availed and Reversed in Form GSTR-3B
Particulars
CGST Paid SGST Paid
Total Eligible Input tax credit available
27,360
27,360
Less: Amount of input tax credit credited to electronic ledger (50% of
13,680
13,680
eligible input tax on inputs, input services and capital goods) i.e., 50% ×
₹27,360
Remaining Input Tax Credit Reversed in Form GSTR-3B
13,680
13,680
Computation of GST Liability
Particulars
Tax liability of bank before availing eligible Input tax Credit on
taxable supply of services of ₹11,00,000
Less: Net/Eligible CGST Credit available on Inputs/Input Services
Less: Net/Eligible SGST Credit available on Inputs/Input Services
Net Output Tax Liability of Bank after availing Input Tax Credit
CGST
@9%
99,000
SGST
@9%
99,000
Total GST
Liability
1,98,000
13,680
85,320
13,680
13,680
1,70,640
13,680
85,320
Question 33
Yes Bank, having a branch in Jaipur engaged in supply of services by way of accepting deposits and
extending loans opted for the option to avail credit of 50% of input tax of the month to which input
tax relates u/s 17(4). Its head office is in Mumbai and branch in Ahmedabad. Input tax credit (CGST &
SGST) available for the month August, 2022 is ₹90,000 which includes:
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Total Input tax credit includes credit relating to:
Particulars
Input Tax [CGST &
SGST]
18,000
1. Services availed from its distinct establishment i.e., from Mumbai
Head office
2. Outdoor catering services received for its employees (not under
statutory obligation)
3. Goods that have obsolete and whose value has been written off in
books
4. Auditing Services
5. Goods which are used for personal use of employees
Determine the amount of input tax credit of August, 2022 that can be availed by Yes bank.
14,400
2,500
22,500
6,500
Solution
As per Section 17(4), every banking company or a financial institution, including a non-banking financial
company, engaged in supply of services by way of accepting deposits or extending loans or advances
which is not opting for provisions of Section 17(2), has the option to avail of, every month, an amount
equal to 50% of the eligible ITC on inputs, capital goods and input services in that month and the
balance amount of input tax credit shall be reversed in FORM GSTR-3B.
Since, Yes bank has availed an option to avail every month, an amount equal to 50% of the eligible
input tax credit on inputs, capital goods and input services in that month and the balance amount of
input tax credit shall be reversed in FORM GSTR-3B.
Therefore, in given case:
Computation of Total Eligible Input Tax Credit to be Availed and Lapsed
Particulars
Input Tax Credit Available (excluding ITC from Mumbai Head Office) (₹90,000
– ₹18,000)
Less: Outdoor catering services received for its employees (not under
statutory obligation) (Blocked u/s 17(5))
Less: Goods that have obsolete and whose value has been written off in books
(Blocked u/s 17(5))
Less: Auditing Services
Less: Goods which are used for personal use of employees
Total Eligible Input Credit Available
.
50% of Eligible Input Credit (to be availed by Yes Bank)
Input Tax on supply of services from its distinct establishments, i.e., from
Mumbai Branch (50% restriction not applicable hence full input tax credit can
be availed)
Total Eligible Input Tax Credit that can be availed
Eligible Input Tax Credit to be reversed in FORM GSTR-3B (50% × ₹48,600)
₹
72,000
14,400
2,500
6,500
23,400
48,600
24,300
18,000
42,300
24,300
Section 17(6): Government Has the Powers
As per Section 17(6), the Government may prescribe the manner in which the credit referred to in subsections (1) and (2) may be attributed.
CA NISHANT KUMAR
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Utilisation of Input Tax Credit
•
•
•
•
•
•
•
•
•
As per Section 41(1), every registered person shall, subject to such conditions and restrictions
as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his
return and such amount shall be credited to his electronic credit ledger.
The credit of input tax availed by a registered person under sub-section (1) in respect of such
supplies of goods or services or both, the tax payable whereon has not been paid by the
supplier, shall be reversed along with applicable interest, by the said person in such manner
as may be prescribed.
Where the said supplier makes payment of the tax payable in respect of the aforesaid supplies,
the said registered person may re-avail the amount of credit reversed by him in such manner
as may be prescribed
Every registered person gets three electronic ledgers:
o Electronic Cash Ledger: This shows the details of amount of GST deposited in cash to
the Government.
o Electronic Credit Ledger: This shows the balance of Input Tax Credit available.
o Electronic Liability Ledger: The ledger contains the total GST liability and the manner
in which it has been paid – in cash or through credit.
ITC is credited to a registered person’s Electronic Credit Ledger.
The person may use this to pay his output tax liability.
As per Section 49(5) read with Rule 88A,
o Balance of IGST should be utilised first against IGST liability, and then against CGST
liability, or against SGST liability, depending on the choice of the taxable person. IGST
is to be mandatorily utilised to the extent it is possible. In other words, if any IGST ITC
is remaining after discharging IGST liability, it can be utilised:
▪ first towards payment of CGST and then towards payment of SGST; or
▪ first towards payment of SGST and then towards payment of CGST; or
▪ towards payment of CGST and SGST simultaneously in any proportion e.g.,
50:50, 30:70, 40:60 and so on.
o Balance of CGST should be utilised first against CGST liability, and then against IGST
liability.
o Balance of SGST should be utilised first against SGST liability, and then against IGST
liability. However, if any CGST credit is available, then first CGST should be utilised
against IGST liability, and then only SGST should be utilised against IGST liability.
o Balance of UTGST should be utilised first against UTGST liability, and then against IGST
liability. However, if any CGST credit is available, then first CGST should be utilised
against IGST liability, and then only UTGST should be utilised against IGST liability.
o Balance of CGST cannot be utilised against SGST/UTGST liability.
o Balance of SGST/UTGST cannot be utilised against CGST liability.
As per Section 49A, balance of CGST or SGST/UTGST should be utilised against IGST liability
only if IGST credit has been completely utilised.
As per Section 49B, the Government may, on the recommendations of the Council, prescribe
the order and manner of utilisation of the ITC on account of IGST, CGST, SGST or UTGST, as the
case may be, towards payment of any such tax.
CA NISHANT KUMAR
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Summary of Sequence of ITC Utilisation
Input Tax
Credit
IGST
First to be Utilised
for the Payment
of
IGST
Then to be Utilised
for the Payment of
Remarks
CGST
CGST
CGST or SGST/UTGST
at the option of
taxable person
IGST
CGST or SGST/ UTGST credit can be
utilised only after credit of IGST is
fully utilised
CGST credit can be utilised only after
all credit of IGST is utilised
SGST/ UTGST credit can be utilised
only after all credit of IGST is utilised.
Besides this SGST/UTGST credit can
be utilised for payment of IGST only
after the ITC of CGST has been
utilized fully.
SGST/UTGST
SGST/UTGST
IGST
Example
Amount of ITC available and output tax liability under different tax heads:
Head
Output Tax Liability (₹) ITC (₹)
IGST
1,000 1,300
CGST
300
200
SGST/UTGST
300
200
Total
1600
1700
Option 1
ITC of
Discharge of Output Discharge of Output
Discharge of Output
Balance of
IGST Liability (₹)
CGST Liability (₹)
SGST/ UTGST Liability
ITC (₹)
IGST
1,000
200
100
0
In this option, IGST has been utilised to the extent of ₹200 against CGST liability and ₹100 against
SGST/UTGST liability. Now, the IGST credit has been completely utilised.
CGST
0
100
0
100
SGST/UTGST
0
0
100
0
Total
1,000
300
300
100
Option 2
ITC of
Discharge of Output Discharge of Output
Discharge of Output
Balance of
IGST Liability (₹)
CGST Liability (₹)
SGST/ UTGST Liability
ITC (₹)
IGST
1,000
100
200
0
In this option, IGST has been utilised to the extent of ₹200 against CGST liability and ₹100 against
SGST/UTGST liability. Now, the IGST credit has been completely utilised.
CGST
0
200
0
0
SGST/UTGST
0
0
100
100
Total
1,000
300
300
100
CA NISHANT KUMAR
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There could be a lot of other ways as well in which the balance ITC of ₹300 of IGST could be utilised
against CGST and SGST.
Question 34 – November, 2018 – 4 Marks
From the following information, compute the Net GST payable for the month of March 2023:
Particulars
CGST
SGST
IGST
Output GST
2,000
15,000
24,000
Amount in ₹
Opening ITC as per Credit Ledger
NIL
1,000
37,000
Solution
Computation of Net GST Payable
Particulars
CGST SGST
IGST
Output Tax Liability
2,000 15,000 24,000
Less: Input Tax Credit [IGST credit to be used for payment of IGST and 2,000 11,000 24,000
balance for CGST and SGST in any order]
Remaining Liability
- 4,000
Less: ITC of SGST to be utilised against remaining SGST liability
- 1,000
Net Amount of CGST/SGST/IGST Payable
- 3,000
Question 35
Mr. X, a supplier of goods, pays GST under regular scheme. The amount of input tax credit (ITC)
available and output tax liability under different tax heads is as under:
Particulars
Amount in ₹
Output GST Opening ITC as per Credit Ledger
IGST
2,000
4,000
CGST
800
2,000
SGST/UTGST
2,500
500
Compute the minimum GST payable in cash by Mr. X. Make suitable assumptions as required.
Solution
Mr. X can use the ITC to pay his output tax liability. The order of utilisation of ITC is as under:
•
•
•
•
•
IGST credit should first be utilized towards payment of IGST.
Remaining IGST credit, if any, can be utilized towards payment of CGST and SGST/UTGST in any
order and in any proportion.
Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or SGST/UTGST.
ITC of CGST should be utilized for payment of CGST and IGST in that order.
ITC of SGST/UTGST should be utilized for payment of SGST/UTGST and IGST in that order.
However, ITC of SGST/UTGST should be utilized for payment of IGST, only after ITC of CGST has
been utilized fully. CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST
credit cannot be utilized for payment of CGST.
Computation of Net GST Payable
Particulars
Output Tax Liability
Less: Input Tax Credit (Utilisation of IGST)
CGST SGST IGST
800 2,500 2,000
- 2,000 2,000
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Remaining Liability
800
500
Less: Input Tax Credit (Utilisation of SGST)
500
Remaining Liability
800
Less: Input Tax Credit (Utilisation of CGST)
800
Net Amount of CGST/SGST/IGST Payable
Since sufficient balance of ITC of CGST is available for paying CGST liability and cross utilization of ITC
of CGST and SGST is not allowed, it is beneficial to use ITC of IGST to pay SGST (after paying IGST
liability) to minimize cash outflow.
Question 36 – May, 2022 – 5 Marks
Mr. B, a registered supplier of Uttar Pradesh, is doing the trading of taxable goods. He approaches you
to understand the manner of utilisation of available Input Tax Credit (ITC). With reference to provisions
of payment of tax, state the manner of utilisation of ITC under GST law.
Solution
The manner of utilisation of ITC under GST law is as under:
1. IGST credit should first be utilized towards payment of IGST.
2. Remaining IGST credit, if any, can be utilized towards payment of CGST and SGST/UTGST in any
order and in any proportion.
3. Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or SGST/UTGST.
4. Subsequently, ITC of CGST should be utilized for payment of CGST and IGST in that order.
5. ITC of SGST/UTGST should be utilized for payment of SGST/UTGST and IGST in that order.
6. ITC of SGST/UTGST should be utilized for payment of IGST, only after ITC of CGST has been
utilized fully.
7. ITC of SGST/UTGST cannot be utilized for payment of CGST and vice versa.
Rule 86A: Restrictions on Utilisation of ITC
•
•
•
•
•
If the Assistant Commissioner/Commissioner, or any officer above this rank feels that ITC has
been fraudulently availed, or that the ITC is ineligible, he can restrict the utilisation of ITC.
If the ITC has already been availed by the taxable person, then the officer may restrict its
utilisation against the liability.
The restriction can be imposed only for a period upto 1 year from the date of imposing such
restriction.
However, the Commissioner/officer authorised by him, can withdraw such restriction if he is
satisfied that conditions for imposing the restrictions no longer exist.
The restrictions can be imposed in the following circumstances:
o ITC has been availed on the basis of tax invoices/valid documents
▪ issued by a non-existent supplier or by a person not conducting any business
from the registered place of business; or
▪ without receipt of goods or services or both; or
▪ the tax in relation to which has not been paid to the Government
o the registered person availing ITC has been found non-existent or not to be conducting
any business from the registered place of business; or
o the registered person availing ITC is not in possession of tax invoice/valid document.
Question 37 – November, 2020 – 5 Marks
CA NISHANT KUMAR
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Who can impose restrictions on utilization of input tax credit (ITC) available in the electronic credit
ledger and under what circumstances can restrictions be imposed under the CGST Rules 2017?
Solution
The Commissioner or an officer (not below the rank of an Assistant Commissioner) authorised by him
has been empowered to impose restrictions on utilization of ITC available in the electronic credit
ledger. The restrictions can be imposed under the CGST Rules, 2017 in the following circumstances:
1. ITC has been availed on the basis of tax invoices/valid documents:
a. issued by a non-existent supplier or by a person not conducting any business from the
registered place of business; or
b. without receipt of goods and/or services; or
c. the tax in relation to which has not been paid to the Government.
2. Registered person availing ITC has been found non-existent or not to be conducting any
business from the registered place of business; or
3. Registered person availing ITC is not in possession of tax invoice/valid document.
Rule 86B: Restrictions on the Use of Amount Available in Electronic
Credit Ledger
•
•
•
Applicability:
o Rule 86B is applicable to the registered person having value of taxable supply (other
than exempt supply and zero-rated supply) in a month exceeding ₹50 lakh.
o Therefore, in cases wherein value of taxable supply in a month is less than ₹50 lakh,
then this restriction would not be applicable.
Nature of restriction imposed
o The registered person to whom the said rule is applicable cannot utilize input tax credit
in excess of 99% of the output tax liability.
o In other words, input tax liability shall be utilized only to the extent of 99% of the
output tax liability while discharging output tax liability.
o Example: The total value of inter-State supply of Raman & Sons for the month of
February 2021 is of ₹100 lakh. Said supply is taxable @ 18% IGST. Thus, total output
tax liability of Raman & Sons is ₹18 lakh. Amount available in electronic credit ledger
is ₹20 lakh (IGST). In terms of restriction imposed by rule 86B, Raman & Sons can
discharge 99% of its output tax liability, i.e., ₹17,82,000 (99% of ₹18,00,000) from the
amount available in electronic credit ledger. However, it has to mandatorily discharge
the balance 1% of the output tax liability i.e., ₹18,000 (1% of ₹18,00,000) through
electronic cash ledger only.
o Note: This limit is not to be checked with respect to preceding financial year but for
each month for which return is being filed. Therefore, if the turnover in any particular
month does not exceed 50 lakh then this restriction would not be applicable. If
suppose, in the next month, the turnover exceeds ₹50 lakh, then restriction would
have to be checked.
Exceptions to the Rule 86B
o Payment of Income Tax more than ₹1 lakh: Rule 86B may not apply in cases whereby
person mentioned below have deposited sum of more than ₹1 lakh as income tax
under the Income-tax Act, 1961) in each of the last 2 financial years for which the time
limit to file return of income under section 139(1) of the said Act has expired:
CA NISHANT KUMAR
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▪
▪
▪
o
o
o
The registered person or
The karta/proprietor/the managing director of the registered person;
Any of the two partners, whole-time directors, members of Managing
Committee of Associations or Board of Trustees of the registered person, as
the case may be.
Receipt of refund of input tax credit of more than ₹1 lakh: Rule 86B may not apply
whereby registered person has received a refund amount of more than ₹1 lakh on
account of unutilized input tax credit under the following:
▪ zero-rated supplies
▪ inverted tax structure
It is pertinent to note that refund should have been received in the preceding financial
year.
Payment of total output tax liability through electronic cash ledger in excess of 1% of
total output tax liability
▪ If the registered person has paid more than 1% of total output tax liability
using electronic cash ledger upto the said month in the current financial year,
the restrictions as specified in Rule 86B shall not apply.
▪ For example, if in the FY 2022-23 upto August 2022, the total output tax
liability payable is ₹30 lakhs, and such registered person has deposited ₹1 lakh
through electronic cash ledger and balance through electronic credit ledger,
rule 86B would not be applicable in September 2022 [if the turnover during
this month exceeds ₹50 lakh], since payment made in cash is more than 1% of
total output tax liability. (1% of ₹30 lakhs is ₹30,000).
▪ Interestingly, the aforesaid exception needs to be evaluated in ‘current
financial year’, and hence, for the month of April of any financial year, the said
exception will not be applicable.
▪ Accordingly, registered person would be required to pay minimum 1% of
output liability through electronic cash ledger unless the registered person is
covered under any of the other exceptions or if the taxable turnover in a
month is less than ₹50 lakh.
▪ It is pertinent to note that GST liability paid under reverse charge mechanism
should not be taken into account while calculating the total output liability
paid through electronic cash ledger.
Specified registered person:
▪ Rule 86B would not be applicable in case of below-mentioned registered
person:
• Government Department; or
• a public sector undertaking; or
• a local authority; or
• a statutory body.
▪ However, Commissioner or an officer authorised by him in this behalf may
remove the said restriction after such verifications and such safeguards as he
may deem fit.
Question 38
XYZ Ltd. has effected interstate taxable supplies of ₹2 crore in the month of April, 2023, which are
chargeable to 18% GST. His balance in electronic credit ledger as per Rule 36(4) is ₹38,00,000.
CA NISHANT KUMAR
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Determine the amount to be deposited through electronic cash ledger if restrictions of Rule 86B are
applicable.
Solution
Computation of GST Liability to be Discharged through Electronic Cash Ledger
Particulars
₹
Output tax payable under Forward Charge (18% × ₹2 crore)
36,00,000
Less: ITC to be utilised to the extent of 99% of output tax liability (99% × ₹36,00,000)
35,64,000
Amount of GST to be deposited through Electronic Cash Ledger
36,000
Balance in Electronic Credit Ledger to be Carried Forward (₹38,00,000 – ₹35,64,000)
2,36,000
Section 18: Availability of Credit in Special Circumstances
•
•
Section 18 contains 6 subsections.
Each subsection talks about the rules for availability of credit in certain special situations.
Section 18(1)/(2) read with Rule 40: ITC Availment for Newly Registered
Persons and Time Limit
•
•
•
Section 18(1) talks about the availment of ITC For newly registered persons and Section 18(2)
talks about the time limit for availing ITC.
Along with that, we have Rule 40, which prescribes certain other conditions.
A comprehensive reading of Sections 18(1), 18(2), and Rule 40 gives us the following
conclusions:
S.
No.
Persons eligible to take
credit
(1)
1.
(2)
Person who has applied
for registration within 30
days from the date on
which he becomes liable
to registration and has
been granted such
registration
2.
Person who is not
required to register, but
obtains
voluntary
registration
3.
Registered person who
ceases
to
pay
composition tax and
switches to regular
scheme
Goods entitled to ITC
Inputs held in
Stock/Capital
As on
Goods
(3)
(4)
Inputs held in The day immediately
stock
preceding the date
Inputs contained from which he
in semi-finished becomes liable to
pay tax
goods
Inputs contained
in finished goods
held in stock
Inputs held in The day immediately
stock
preceding the date
Inputs contained of registration
in semi-finished
goods
Inputs contained
in finished goods
held in stock
Inputs held in The day immediately
stock
preceding the date
Inputs contained from which he
in semi-finished becomes liable to
goods
Restrictions/
Conditions
(5)
ITC to be availed
within 1 year from the
date of the issue of the
tax invoice by the
supplier.
ITC on capital goods
will be reduced by 5%
per quarter of a year
or part of the year
CA NISHANT KUMAR
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4.
•
•
•
Inputs contained
in finished goods
held in stock
Capital goods
Registered
person Inputs held in
whose exempt supplies stock
become taxable supplies Inputs contained
pay
tax
under from the
regular scheme
invoice.
The day immediately
preceding the date
from which such
becomes
in semi-finished supply
taxable
goods
Inputs contained
in finished goods
held in stock
relatable to such
exempt supply
and
date
of
ITC claimed shall be
verified with the
corresponding details
furnished
by
the
corresponding
supplier.
ITC to be availed
within 1 year from the
date of the issue of the
tax invoice by the
supplier.
Capital
goods
exclusively used
for such exempt
supply
In all the above cases, the registered person has to make an electronic declaration in the
prescribed form (FORM GST ITC-01) on the common portal, clearly specifying the details
relating to the inputs held in stock, inputs contained in semi-finished or finished goods held in
stock and capital goods on the days mentioned in column (4) of table above.
The declaration is to be filed within 30 days (extendable by Commissioner/Commissioner of
State GST/Commissioner of UTGST) from the date when the registered person becomes
eligible to avail ITC.
If the claim of ITC pertaining to CGST, SGST/UTGST, IGST put together exceeds ₹2,00,000, the
declaration needs to be certified by a practicing Chartered Accountant/Cost Accountant.
Question 39
PQR (Pvt.) Ltd. is engaged in supplying taxable goods to its customers within the state and it is not
liable for registration u/s 22 of CGST Act, 2017. From 15-02-2023 onwards, it started inter-state supply
of taxable goods hence it applied for registration on 25-02-2023 and same has been granted to him.
Its CGST, SGST and IGST liability for the month of February, 2023 is ₹19,500, ₹19,500 and ₹40,500
respectively and PQR (Pvt.) Ltd. has to make e-payment of tax on the due date i.e., on 20-03-2023. PQR
(Pvt.) Ltd. has provided the following details of stock of input held on 14-02-2023 and tax paid thereon:
Particulars
CGST
(₹)
3,600
7,500
SGST
(₹)
3,600
7,500
Inputs received on 10-01-2023 (Invoice dated 11-01-2023) lying in stock
Inputs received on 25-10-2022 (Invoice dated 26-10-2022) lying in semifinished stock
Inputs received on 15-01-2023 (Invoice dated 15-01-2023) contained in
9,600
9,600
Finished Goods
Briefly explain the tax payable by PQR (Pvt.) Ltd. in cash, if any. Note: PQR (Pvt.) Ltd. has not opted for
the Composition scheme.
Solution
CA NISHANT KUMAR
42
As per Section 18(1)(a), a person applying for registration within 30 days from date on which he
becomes liable to registration under this Act and has been granted registration shall be entitled to take
credit of input tax in respect of input held in stock, or contained in semi-finished or finished goods in
stock on date immediately preceding the date from which he becomes liable to registration i.e., 14th
February, 2022. As per section 18(2), a registered person shall not be entitled to take input tax credit
in respect of any supply of goods or services or both to him after the expiry of 1 year from the date of
issue of tax invoice relating to such supply.
In view of above provision ITC available to PQR (Pvt.) Ltd. will be computed as follows:
Particulars
Inputs received on 10-01-2023 (Invoice dated 11-01-2023) lying in stock as on
14-02-2023
Inputs received on 25-10-2022 (Invoice dated 26-10-2022) lying in semifinished stock as on 14-02-2023
Inputs received on 15-01-2023 (Invoice dated 15-01-2023) contained in
Finished Goods as on 14-02-2023
Total Eligible Input Tax Credit
CGST @
6%
3,600
SGST @
6%
3,600
7,500
7,500
9,600
9,600
20,700
20,700
Computation of Tax Payable in Cash by PQR Pvt. Ltd. for the month of February, 2023
Particulars
CGST @ 6% SGST @ 6% IGST @ 6%
Out liability for February, 2023
19,500
19,500
40,500
Less: Input Tax Credit
Less: CGST
19,500
1,200
Less: SGST
19,500
1,200
Output tax payable in Cash
38,100
Note: As per Sections 49, 49A and 49B of CGST Act and Rule 88A of CGST Rules, the Central tax shall
first be utilised towards payment of central tax and the amount remaining, if any, may be utilised
towards the payment of integrated tax. Similarly, the State tax shall first be utilised towards payment
of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax.
Question 40
B Ltd. is not required to register under CGST Act, 2017 but it wishes to obtain voluntary registration,
so, it applied for voluntary registration on 18th September, 2022 and registration certificate has been
granted to it on 25th September, 2022. The CGST and SGST liability for the month of September, 2022
is ₹21,000 each. B Ltd. provides the following information of inputs held in stock on 24th September,
2022. It is not engaged in making Inter-state outward taxable supplies.
Particulars
₹
Input procured on 02-09-2022 lying in stock:
CGST @ 6%
4,500
SGST @ 6%
4,500
Input Received on 21-02-2022 contained in semi-finished goods held in stock:
CGST @ 6%
7,500
SGST @ 6%
7,500
Value of inputs contained in finished goods held in stock ₹2,00,000 were procured on 1909-2021:
IGST @ 18%
36,000
CA NISHANT KUMAR
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Inputs valued ₹50,000 procured on 13-09-2022 lying in stock:
IGST @ 18%
9,000
Capital Goods procured on 12-09-2022:
CGST @ 6%
12,000
SGST @ 6%
12,000
You are required to determine the amount of tax to be paid in cash by B Ltd. for the month of
September, 2022.
Solution
As per Section 18(1)(b), in case of a person obtaining voluntary registration he shall be entitled to take
credit of input tax in respect of inputs held in stock, or contained in semi-finished or finished goods in
stock on date immediately preceding the date of grant of registration i.e., 24th September, 2022.
As per Section 18(2), a registered person shall not be entitled to take input tax credit in respect of any
supply of goods or services or both to him after the expiry of 1 year from the date of issue of tax invoice
relating to such supply.
In view of the above provision eligible ITC available to B Ltd. will be computed as follows:
Particulars
Input procured on 02-09-2022 lying in stock on 24th September, 2022
Input received on 21-02-2022 contained in semi-finished goods held
in stock on 24th September, 2022
Inputs valued ₹2,00,000 contained in finished goods held in stock on
24th September, 2022 (Note 1)
Inputs valued ₹50,000 procured on 13-09-2022 lying in stock
Capital Goods procured on 12-09-2022 (Note 2)
Total amount of CGST/SGST/IGST credit eligible for inputs
CGST
@ 6%
4,500
7,500
SGST
@ 6%
4,500
7,500
IGST @
18%
-
-
-
-
12,000
12,000
9,000
9,000
Computation of Tax payable in cash by B Ltd. for the month of September, 2022
Particulars
CGST
SGST
Output tax liability for September, 2022
21,000 21,000
Less: Eligible Input Tax Credit Available:
Less: IGST (Note 3)
9,000
Less: CGST
12,000
Less: SGST
12,000
CGST/SGST Payable in Cash
- 9,000
Notes:
1. Since Inputs of value of ₹2,00,000 has been purchased on 19-09-2021 invoice for same has
been issued on 19-09-2021 hence one year has been elapsed on 18th September, 2022 from
date of issue of invoice so no input tax credit shall be admissible in respect of said input.
2. There is no provision under Section 18(1)(b) to take input tax credit of capital goods lying in
stock by the person who obtains voluntary registration.
3. As per sections 49, 49A and 49B of CGST Act and Rule 88A of CGST Rules, Integrated tax shall
first be utilised towards payment of integrated tax and the amount remaining, if any, may be
utilised towards the payment of central tax and State tax/Union territory tax, in any order
subject to the condition that the entire ITC on account of Integrated tax is completely
exhausted first before the input tax credit on account of Central tax or State tax/Union
CA NISHANT KUMAR
44
territory tax can be utilized. Since B Ltd. is not engaged in inter-state outward supplies,
therefore, the IGST credit is utilised towards payment of CGST first and when credit of IGST is
fully utilised, then credit of CGST and SGST has been utilised.
Question 41
ABC Traders paying tax under composition scheme crosses the threshold and becomes liable to pay
tax under regular scheme on 01-04-2022. Can it avail Input tax credit and if so, calculate the amount
of ITC available?
Break-up of credit available with ABC Traders as on 31-03-2022:
Particulars
Inputs lying in stock (invoice dated 12-03-2022)
Capital goods procured on 25-09-2021 invoice dated 25-09-2021
Inputs lying in semi-finished goods in stock (Invoice dated 12-12-2021)
CGST SGST
3,600 3,600
7,200 7,200
2,400 2,400
Solution
As per Section 18(1)(c), where any registered person ceases to pay tax under Section 10, he shall be
entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished
or finished goods held in stock and on capital goods on the day immediately preceding the date from
which he becomes liable to pay tax u/s 9. Therefore, in given case, ABC traders shall be entitled from
01-04-2022 to avail credit available as on 31-03-2022. As per Rule 40 of the CGST Rules, 2017, the
capital goods credit is to be claimed after reducing the tax paid on such capital goods by 5% points per
quarter of a year or part thereof from the date of invoice or such other documents on which the capital
goods were received by the taxable person.
Input tax credit available to ABC Traders in respect of inputs:
Particulars
Inputs lying in stock
Inputs lying in semi-finished goods in stock (Invoice dated 1212-2021)
Total Input Tax Credit Available
Input Tax (CGST +
SGST)
7,200
4,800
Eligible
Credit
7,200
4,800
12,000
12,000
Input tax credit available to ABC Traders in respect of capital goods:
Particulars
Date of invoice of capital goods
25-09-2021
Date from which ABC traders are liable to pay tax u/s 9
01-04-2022
No. of quarters from date of invoice
3
CGST and SGST paid on capital goods procured on 25-09-2021
14,400
ITC to be reduced by ₹14,400 × 5% × 3 quarters
2,160
Credit (CGST and SGST) available on capital goods
12,240
Note: As per Section 2(92), "quarter" shall mean a period comprising three consecutive calendar
months, ending on the last day of March, June, September and December of a calendar year.
CA NISHANT KUMAR
45
Question 42
M/s. XYZ a registered dealer engaged in supplying exempted goods to its customers. On 17-06-2022,
exemption notification was rescinded, and goods were liable for tax. M/s. XYZ has to make e-payment
of tax on the due date i.e., on 20-07-2022. Determine the eligible credit for the month of June, 2022 if
the following information is provided:
Particulars
Value of Inputs lying in stock as on 16-06-2022.
All inputs were procured after 01-03-2022
Value of inputs contained in semi-finished
goods lying in stock as on 16-06-2022 but only
inputs worth ₹85,000 in semifinished goods
were procured after 16-06-2021
Inputs received on 31-01-2022 lying in finished
goods in stock on 16-06-2022
Capital goods procured in 10-12-2021 which is
exclusively used in supplying exempted goods
Value (exclusive
of CGST/ SGST/
IGST) (₹)
1,00,000
CGST
@ 6%
(₹)
SGST
@ 6%
(₹)
IGST @
12% (₹)
-
-
12,000
1,35,000
8,100
8,100
-
1,55,000
9,300
9,300
-
8,00,000
-
-
96,000
Solution
As per Section 18(1)(d), where an exempt supply of goods or services or both by a registered person
becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs
held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such
exempt supply and on capital goods exclusively used for such exempt supply on the day immediately
preceding the date from which such supply becomes taxable.
As per Rule 40(1)(a) of CGST Rules, 2017, the input tax credit on capital goods, shall be claimed after
reducing the tax paid on such capital goods by 5% points per quarter of a year or part thereof from the
date of invoice or such other documents on which the capital goods were received by the taxable
person.
Computation of Input tax credit relating to CGST/SGST/IGST available to M/s. XYZ in respect of inputs
and capital goods will be as follows:
Particulars
ITC on the value of inputs lying in stock (Note 1)
ITC on the value of inputs contained in semi-finished
goods (Note 2)
Input tax credit on value of inputs lying in stock of
finished goods stock (Note 3)
Credit (IGST) available on capital goods (Note 4)
Total Input Tax Credit Available
Notes:
5,100
5,100
12,000
-
Total
Eligible
Credit (₹)
12,000
10,200
9,300
9,300
-
18,600
14,400
14,400
81,600
93,600
81,600
1,22,400
CGST (₹) SGST (₹) IGST (₹)
1. Since all inputs were acquired within 1 year prior to the effective date on which the goods
became taxable; hence, entire ITC would be allowed.
CA NISHANT KUMAR
46
2. Out of the total stock of ₹1,35,000, inputs totalling to ₹50,000 are older than 1 year from the
effective date on which the goods became taxable. Therefore, ITC to this extent stands
disallowed. ITC on inputs contained in stock of ₹85,000 would be eligible. [Eligible credit =
₹8,100 × ₹85,000 ÷ ₹1,35,000 each in respect of CGST and SGST]
3. Inputs received on 31-01-2022 lying in finished goods in stock on 16-06-2022 as all inputs were
acquired within 1 year prior to the effective date on which the goods become taxable,
therefore, entire ITC would be allowed.
4. Calculation of credit available on Capital Goods
Particulars
Date of invoice of capital goods
10-12-2021
Date from which exempt goods became taxable
17-06-2022
No. of quarters from date of invoice
3
Percentage points to be reduced (5% per Quarter)
15%
IGST paid on the capital goods used exclusively in relation to goods
96,000
exempted up to 16-06-2022
ITC to be reduced by 15% (15% × ₹96,000)
14,400
Amount of input tax credit available in respect of capital goods
81,600
Note: As per Section 2(92), "quarter" shall mean a period comprising three consecutive
calendar months, ending on the last day of March, June, September and December of a
calendar year.
Section 18(4) read with Rule 44: Switching from Normal Scheme to
Composition Scheme or Exiting from GST
•
•
•
•
•
•
•
•
Section 18(4) requires reversal of ITC
o when a registered person who has availed ITC switches to composition levy or
o when his supplies get wholly exempted from tax.
ITC on inputs should be reversed proportionately on the basis of corresponding invoices on
which credit had been availed on such inputs.
If invoices are not available, ITC can be reversed on the basis of the prevailing market price of
such goods on the date of switch over/exemption.
The details furnished on the basis of prevailing market value need to be duly certified by a
practicing Chartered Accountant/ Cost Accountant.
ITC involved in the remaining useful life (in months) of the capital goods should be reversed
on pro-rata basis, taking the useful life as 5 years.
Example: Capital goods have been in use for 4 years, 6 months and 15 days. The remaining
useful life in months = 5 months ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C × 5/60
The registered person has to debit the electronic credit or cash ledger by the reversal amount
in respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock and capital goods on the day immediately preceding the date of switch over/ date of
exemption.
Balance of ITC, if any, lying in the electronic credit ledger lapses.
Cancellation of registration also requires reversal of ITC on inputs held in stock/contained in
semi-finished goods or finished goods held in stock, capital goods or plant and machinery on
the day immediately preceding the cancellation date.
CA NISHANT KUMAR
47
•
•
•
•
The amount to be reversed on inputs and capital goods is computed in the manner as discussed
above.
Such amount is then compared with the output tax payable on such goods, and the higher of
the two amounts is finally paid by the registered person.
ITC to be reversed on inputs and capital goods is calculated separately for ITC of CGST,
SGST/UTGST and IGST.
The reversal amount is added to the output tax liability of the registered person.
Question 43
The goods manufactured by Royal Ltd. have been exempted from GST with effect from 01-05-2022.
Earlier these goods were liable to CGST and SGST @ 6% respectively. The inputs used in manufacturing
were also liable to CGST & SGST @ 6% respectively. Following information is provided on 30-04-2022:
1. The inputs costing ₹1,12,000 (inclusive of CGST & SGST) are lying in stock.
2. The inputs costing ₹80,640 (inclusive of CGST & SGST) are held in process.
3. The finished goods valuing ₹5,60,000 are in stock, the input cost (inclusive of CGST and SGST)
is 50% of the value.
4. The input tax credit on capital goods lying in stock is ₹72,000. These goods were purchased on
1-8-2021.
5. The balance in electronic credit Ledger is ₹1,52,000.
The department has asked Royal Ltd. to reverse the credit taken on inputs referred above. However,
Royal Ltd. contends that credit once validly taken is indefeasible and not required to be reversed.
Decide.
What would your answer be if the balance in electronic credit Ledger account as on 30-04-2022 is
₹1,00,000?
Solution
As per Section 18(4), where any registered person who has availed input tax credit and the goods or
services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in
the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital
goods taking useful life of capital goods 5 years, on the day immediately preceding the date of such
exemption.
The balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.
Accordingly, Royal Ltd. will have to pay an amount computed as follows:
Particulars
₹
Inputs lying in stock (Credit = ₹1,12,000 × 12 ÷ 112) (Net purchase price, exclusive of tax)
12,000
Inputs in process (₹80,640 × 12 ÷ 112)
8,640
Inputs contained in finished goods lying in stock (₹5,60,000 × 50% × 12 ÷ 112)
30,000
Input tax on Capital goods used for 9 months taking residual life as 5 years (₹72,000 × 51
61,200
× 60) (51 months being remaining residual life of capital goods)
Amount to be paid by Royal Ltd.
1,11,840
This amount can be paid by utilising the balance in the electronic credit ledger. The balance credit of
₹1,52,000 – ₹1,11,840 = ₹40,160 shall lapse.
CA NISHANT KUMAR
48
If the balance in the electronic credit ledger as on 01-05-2022 is ₹1,00,000, then Royal Ltd. will have to
pay ₹1,11,840 – ₹1,00,000 = ₹11,840.
Question 44
PQR Ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on composition
scheme under Section 10 with effect from 28-02-2023. It provides following information relating to
balance of input tax credit lying as on 27-02-2023:
1. Inputs lying in stock as such valued at ₹1,68,000 (inclusive of CGST & SGST @ 12%)
2. Inputs contained in finished goods where tax invoice is not available relating to such inputs but
it is known that market price of such inputs (inclusive of CGST & SGST @12%) on 28-02-2023
is ₹89,600.
3. Input tax on capital goods purchased on 25-10-2022 is ₹72,000.
4. Balance in Electronic credit Ledger is ₹1,10,000.
Decide whether PQR Ltd. is eligible for input tax credit lying on 27-02-2023.
Solution
As per Section 18(4), where any registered taxable person who has availed of input tax credit opts to
pay tax under Section 10 i.e. composition scheme, he shall pay an amount, by way of debit in the
electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital
goods, taking useful life of capital goods 5 years, on the day immediately preceding the date of
exercising such option.
Therefore, in given case PQR Ltd. is required to pay following amounts:
Particulars
₹
Inputs lying in stock (Credit = ₹1,68,000 × 12 ÷ 112) (Net purchase price, exclusive of tax) 18,000
Input goods contained in finished goods lying in stock (₹89,600 × 12 ÷ 112) (Note)
9,600
Input tax on Capital goods used for 4 months and 2 days taking residual life as 5 years 66,000
(₹72,000 × 55 × 60) (55 months being remaining residual life of capital goods)
Amount to be paid by PQR Ltd.
93,600
As per Rule 44(3) of CGST Rules, 2017, where the tax invoices related to the inputs lying in stock are
not available, the registered person shall estimate the amount under Rule 44(1) based on the prevailing
market price of goods on the date of opting for composition scheme.
The aforesaid amount can be paid by utilizing the balance in electronic credit Ledger. The balance
credit in electronic credit ledger = ₹1,10,000 – ₹93,600 = ₹16,400 shall lapse.
Section 18(6) read with Rule 40(2) and Rule 44(6): Amount Payable on
Supply of Capital Goods or Plant and Machinery on Which ITC Has Been
Taken
•
If capital goods or plant and machinery on which ITC has been taken are supplied outward by
the registered person, he must pay an amount that is the higher of the following:
CA NISHANT KUMAR
49
o
•
•
•
•
ITC taken on such goods reduced by 5% per quarter of a year or part thereof from the
date of issue of invoice for such goods (i.e., ITC pertaining to remaining useful life of
the capital goods), or
o tax on transaction value
ITC pertaining to remaining useful life of the capital goods should be computed separately for
ITC of CGST, SGST/UTGST and IGST.
Where the amount so determined exceeds the tax payable on the transaction value of the
capital goods, such amount need to be paid and thus, should be added to the output tax
liability.
If refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person
may pay tax on the transaction value.
Note: Under rule 44(6), ITC involved in the remaining useful life (in months) of the capital
goods is reversed on pro rata basis, taking the useful life as 5 years.
Question 45
XYZ Ltd. a supplier of goods has purchased capital goods under cover of invoice dated 01-10-2022 for
₹4,13,000 (inclusive of CGST @ 9% and SGST @ 9%). After taking it for business use, the said capital
goods were supplied for ₹2,85,000 on 26-04-2023. Explain Input tax credit treatment in this case.
Solution
As per Section 18(6) of the CGST Act read with Rule 40(2) of CGST Rules, 2017, in case of supply of
capital goods, on which input tax credit has been taken, the registered person shall pay an amount:
•
•
equal to the input tax credit taken on the said capital goods reduced by an amount calculated
@ 5% for every quarter or part thereof from the date of issue of invoice for such goods; or
the tax on the transaction value of such capital goods or plant and machinery determined
under Section 15,
whichever is higher.
Computation of Amount of Tax Payable by XYZ Ltd.
Particulars
Date of Invoice of purchase of capital goods
Date of Supply of capital goods after taking into use
No. of Quarters from the date of issue of invoice for such goods
CGST and SGST paid on purchase of Capital Goods [₹4,13,000 × 18 ÷ 118]
Reduced by ₹63,000 × 5% × 3 quarters
Amount of CGST and SGST (A)
Transaction Value on supply of Capital Goods u/s 15
CGST and SGST payable on supply of Capital Goods @ 18% (B)
Amount to be payable [Higher of (A) and (B)]
01-10-2022
26-04-2023
3
63,000
9,450
53,550
2,85,000
51,300
53,550
Question 46
What would be your answer if capital goods being Refractory Bricks are removed as scrap at a
transaction value of ₹25,000 on 29-03-2023?
Solution
CA NISHANT KUMAR
50
As per Section 18(6), where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap,
there shall be no requirement for reversal of Input tax credit, taxable person may pay tax on the
transaction value of such goods determined under Section 15. In the given case, Refractory bricks are
cleared as scrap, the manufacturer shall pay an amount equal to the tax leviable on transaction value
i.e., CGST ₹25,000 × 9% = ₹2,250 and SGST ₹25,000 × 9% = ₹2,250.
Question 47
Granites Textiles Ltd. purchased a detecting machine on 8th July, 2021 from Makhija Engineering Works
Ltd. for ₹10,00,000 (excluding GST) paying GST @ 18% on the same. It availed the ITC of the GST paid
on the machine and started using it for manufacture of goods. The machine was sold on 22nd October,
2022 for ₹7,50,000 (excluding GST), as second hand machine to LT. Pvt. Ltd. The GST rate on supply of
machine is 18%.
State the action which Granites Textiles Ltd. is required to take, if any, in accordance with the statutory
GST provisions on the sale of the second-hand machine.
Solution
Section 18 of the CGST Act, 2017 read with the CGST Rules, 2017 provides that if capital goods or plant
and machinery on which input tax credit has been taken are supplied outward by the registered
person, he must pay an amount that is the higher of the following:
•
•
input tax credit taken on such goods reduced by 5% per quarter of a year or part thereof from
the date of issue of invoice for such goods (i.e., input tax credit pertaining to remaining useful
life of the capital goods), or
tax on transaction value.
Accordingly, the amount payable on supply of needle detecting machine shall be computed as follows:
Particulars
₹
Input tax credit taken on the machine (₹10,00,000 × 18%)
1,80,000
Less: Input tax credit to be reversed @ 5% per quarter for the period of use of
machine
Less: For the year 2021-22 (5% × ₹1,80,000) × 3 Quarters
27,000
Less: For the year 2022-23 (5% × ₹1,80,000) × 3 Quarters
27,000
54,000
Amount required to be paid (A)
1,26,000
Duty leviable on transaction value (18% × ₹7,50,000) (B)
1,35,000
Amount payable towards disposal of machine [Higher of (A) and (B)]
1,35,000
Section 18(3) read with Rule 41: Transfer of ITC on Account of Change
in Constitution of Registered Person
•
•
In case of sale, merger, demerger, amalgamation, transfer or change in ownership of business
etc., the ITC that remains unutilized in the electronic credit ledger of the registered person can
be transferred to the new entity, provided there is a specific provision for transfer of liabilities
in such change of constitution.
It has been clarified that transfer or change in the ownership of business includes transfer or
change in the ownership due to death of the sole proprietor.
CA NISHANT KUMAR
51
•
•
•
•
•
In the case of demerger, ITC will be apportioned in the ratio of the value of assets of the new
units as specified in the demerger scheme.
Here, “value of assets” means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.
The registered person should furnish the details of change in constitution on the common
portal in FORM GST ITC-02, and submit a certificate from practicing Chartered Account/Cost
Accountant certifying that the change in constitution has been done with a specific provision
for transfer of liabilities.
Upon acceptance of such details by the transferee on the common portal, the unutilized ITC
gets credited to his electronic credit ledger.
The transferee should record the inputs and capital goods so transferred in his books of
account.
Question 48
R Ltd. a registered company engaged in supplying taxable goods is being sold to X Ltd., with specific
provision for transfer of liabilities. The unutilised credit in respect of CGST and SGST is ₹48,000 and
₹48,000 respectively. Now X Ltd. wants to utilize such credit remaining unutilised. Discuss its eligibility.
Solution
As per Section 18(3), where there is a change in the constitution of a registered person on account of
sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions
for transfer of liabilities, the said registered person shall be allowed to transfer the ITC which remains
unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or
transferred business in such manner as may be prescribed.
Therefore, X Ltd. is entitled to utilize the unutilised credit on input and capital goods lying in account
of R Ltd., provided R Ltd. furnishes details of such transaction on sale of business in form GST ITC-02
electronically in common portal with request to transfer unutilised tax credit in electronic credit ledger
of transferee i.e., X Ltd. A certificate of CA/CMA is to be furnished and the transfer details to be
accepted by the transferee.
Question 49
R Ltd. a registered manufacturer demerged its entity into RX Cement Ltd. and RY Steel Ltd. The total
value of Assets of R Ltd. is ₹25,00,000 and unutilised credit on account of CGST, SGST and IGST
amounted to ₹60,000, ₹45,000 and ₹84,600 respectively. The value of assets of RX Cement Ltd. and RY
Steel Ltd. is ₹12,00,000 and ₹13,00,000 respectively obtained as per the scheme. Discuss the eligibility
of credit transferred to new units on account of Demerger.
Solution
As per Section 18(3), where there is a change in the constitution of a registered person on account of
sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions
for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit
which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated,
leased or transferred business in such manner as may be prescribed.
CA NISHANT KUMAR
52
As per Rule 41 of CGST Rules, 2017, in case of Demerger, input tax credit shall be apportioned in the
ratio of Value of assets of new unit as specified in Demerger scheme. In the given case, credit
transferred to both the new units would be:
Particulars
R Ltd.
Value of Assets
25,00,000
Unutilised credit relating to:
CGST ₹60,000; SGST ₹45,000 & IGST ₹84,600 = 1,89,600
₹1,89,600 (to be apportioned in the ratio of value of
assets of RX Cement and RY Steel Ltd.)
Total apportioned credit
1,89,600
RX Cement Ltd.
12,00,000
RY Steel Ltd.
13,00,000
91,008
98,592
91,008
98,592
Rule 41A: Transfer of ITC on Obtaining Separate Registrations for
Multiple Places of Business Within a State/Union Territory
•
•
•
•
•
Section 25 enables a taxpayer to obtain separate registrations for multiple places of business
in a State/Union territory.
The registered person (transferor), having separate registrations for multiple places of
business within a State/Union Territory, can transfer the unutilised ITC (wholly or partly) lying
in his electronic credit ledger to any or all of the newly registered place(s) of business in the
ratio of the value of assets held by them at the time of registration.
Here, the ‘value of assets’ means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.
The registered person should furnish the prescribed details on the common portal within a
period of 30 days from obtaining such separate registrations.
Upon acceptance of such details by the newly registered person (transferee) on the common
portal, the unutilised ITC gets credited to his electronic credit ledger.
Question 50
Mr. X, a supplier of goods, pays GST under regular scheme. Mr. X is not eligible for any threshold
exemption. He has made the following outward taxable supplies in a tax period:
Particulars
₹
Intra-State supply of goods 16,00,000
Inter-State supply of goods 6,00,000
He has also furnished the following information in respect of purchases made by him in that tax period:
Particulars
₹
Intra-State supply of goods 10,80,000
Inter-State supply of goods 1,50,000
Mr. X has following ITCs with him at the beginning of the tax period:
Particulars
₹
CGST
40,500
SGST
40,500
IGST
90,000
Note:
1. Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively.
2. Both inward and outward supplies are exclusive of taxes, wherever applicable.
3. All the conditions necessary for availing the ITC have been fulfilled.
CA NISHANT KUMAR
53
Compute the net GST payable by Mr. X during the tax period. Make suitable assumptions as required.
Solution
Calculation of Output Tax Liability
Particulars
Output Tax Liability
Inter-state Sale: ₹6,00,000 (IGST leviable @ 18%)
Intra-state Sale: ₹16,00,000 (CGST @ 9% and SGST @ 9%)
Total output tax liability
CGST
SGST
IGST
1,08,000
1,44,000 1,44,000
1,44,000 1,44,000 1,08,000
Computation of Total Input Tax Credit
Particulars
Opening Balance
Purchases during the month:
Intra-state purchases: ₹10,80,000 (CGST @ 9% and SGST @ 9%)
Inter-state purchases: ₹1,50,000 (IGST @ 18%)
Total Input Tax Credit
CGST
40,500
SGST
40,500
97,200
97,200
IGST
90,000
27,000
1,37,700 1,37,700 1,17,000
Computation of GST Payable from Cash Ledger
Particulars
CGST
Total Output Tax Liability
1,44,000
Less: Input Tax Credit (Utilisation of IGST)
Balance
1,44,000
Less: Input Tax Credit (Utilisation of IGST)
6,300
Balance
1,37,700
Less: Input Tax Credit (Utilisation of CGST and SGST)
1,37,700
Balance to be paid
-
SGST
IGST
1,44,000 1,08,000
1,08,000
1,44,000
2,700
1,41,300
1,37,700
3,600
-
Question 51 – May, 2018 – 6 Marks
Mr. Nimit, a supplier of goods, pays GST under regular scheme. He is not eligible for any threshold
exemption. He has made the following outward taxable supplies in the month of August, 2022:
Particulars
₹
Intra-State supply of goods 6,00,000
Inter-State supply of goods 2,00,000
He has also furnished following information in respect of purchases made by him from registered
dealers during August, 2022:
Particulars
₹
Intra-State supply of goods 4,00,000
Inter-State supply of goods
50,000
Balance of ITC available at the beginning of August, 2022:
Particulars
₹
CGST
15,000
SGST
35,000
IGST
20,000
Note:
CA NISHANT KUMAR
54
1. Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively on both inward and outward
supplies.
2. Both inward and outward supplies given above are exclusive of taxes, wherever applicable.
3. All the conditions necessary for availing the ITC have been fulfilled.
Compute the net GST payable by Mr. Nimit for the month of August, 2022.
Solution
Calculation of Output Tax Liability
Particulars
Output Tax Liability
Inter-state Sale: ₹2,00,000 (IGST leviable @ 18%)
Intra-state Sale: ₹6,00,000 (CGST @ 9% and SGST @ 9%)
Total output tax liability
CGST
SGST
IGST
36,000
54,000 54,000
54,000 54,000 36,000
Computation of Total Input Tax Credit
Particulars
Opening Balance
Purchases during the month:
Intra-state purchases: ₹4,00,000 (CGST @ 9% and SGST @ 9%)
Inter-state purchases: ₹50,000 (IGST @ 18%)
Total Input Tax Credit
CGST
SGST
IGST
15,000 35,000 20,000
36,000 36,000
9,000
51,000 71,000 29,000
Computation of GST Payable from Cash Ledger
Particulars
Total Output Tax Liability
Less: Input Tax Credit (Utilisation of IGST)
Balance
Less: Input Tax Credit (Utilisation of CGST)
Balance
Less: Input Tax Credit (Utilisation of SGST)
Net Amount Payable
Balance of CGST/SGST/IGST to be Carried Forward
CGST
SGST
IGST
54,000 54,000 36,000
29,000
54,000 54,000 7,000
51,000
3,000 54,000 7,000
- 54,000 7,000
3,000
- 10,000
-
Question 52 – May, 2018 – 5 Marks
M/s. Pradyumn Corporation Pvt. Ltd., a registered dealer of Mumbai furnishes you following
information for the month of October, 2022:
Particulars
₹
1. Intra-state sale of taxable goods (Out of above ₹50,000 was received as advance 2,00,000
in September, 2022)
2. Goods purchased from unregistered dealer (Purchase on 20th October, 2022)
50,000
(10,000 in case of Inter State & Balance Intra-State)
3. Received for services by way of labour contracts for repairing a single residential
50,000
unit otherwise than as a part of residential complex (It is Intra-State transaction)
4. Professional fees paid to Ms. Udadhi located in a non-taxable territory (It
50,000
amounts to Inter-State transaction)
CA NISHANT KUMAR
55
Compute GST liability (CGST, SGST or IGST, as the case may be) of M/s. Pradyuman Corporation Pvt.
Ltd. for the month of October, 2022. Assume the rates of GST as under: CGST @ 9%, SGST @ 9% and
IGST @ 18%.
Note: Turnover of M/s. Pradyuman Corporation Pvt. Ltd. was ₹2 crore in the Previous F.Y.
Solution
Computation of GST Liability for the month of October, 2021
Particulars
Value
CGST
SGST
IGST
Total
Intra-state sale of taxable goods (Out of above 2,00,000 18,000 18,000
- 36,000
₹50,000 was received as advance in September,
2022) (Note 1)
Goods purchased from unregistered dealer
50,000 Exempt Exempt Exempt
(Note 2)
Received for services by way of labour contracts
50,000
4,500
4,500
- 9,000
for repairing a single residential unit otherwise
than as a part of residential complex (It is IntraState transaction)
Professional fees paid to Ms. Udadhi located in a
50,000
9,000 9,000
non-taxable territory (It amounts to Inter-State
transaction)
Total GST Liability
22,500 22,500
9,000 54,000
Notes:
1. As per Notification No. 66/2017-CT dated 15-11-2017, all taxpayers (except composition
suppliers) are exempted from paying GST at the time of receipt of advance in relation to supply
of goods. The entire GST shall be payable only when the invoice for the supply of such goods
is issued or ought to have been issued. Thus, no GST is payable in respect of advance of ₹50,000
in the month of September, 2022 but the same will be payable in the month of October, 2022
when the supply of goods takes place.
2. All intra-State and inter-State procurements made by a registered person from unregistered
person have been exempted from reverse charge liability, without any upper limit for daily
procurements.
3. Services by way of pure labour contracts of construction, erection, commissioning, or
installation of original works pertaining to a single residential unit otherwise than as a part of
a residential complex are exempt. Labour contracts for repairing are thus, taxable.
4. In case of service supplied by a person located in a non-taxable territory to a person other than
non-taxable online recipient, GST is payable under reverse charge by such recipient.
Question 53 – November, 2018 – 6 Marks
Mr. Thiraj, a registered supplier of service in Bangalore (Karnataka State) has provided the following
information for the month of February 2023:
Particulars
₹
1. Intra-state taxable supply of service
5,20,000
2. Legal fee paid to a Lawyer located within the state
20,000
3. Rent paid to the State Government for his office building
30,000
4. Received for services towards conduct of exams to Loveall University, Pune
16,000
(recognized by law), being an inter-State transaction
CA NISHANT KUMAR
56
Compute the net GST liability (CGST, SGST or IGST) of Mr. Thiraj for the month of February 2023.
Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively. All the amounts given above are
exclusive of taxes.
Solution
Computation of Net GST Liability of Mr. Thiraj
Particulars
Output Tax Liability:
Under Forward Charge:
Intra-state taxable supply of service
Received for services towards conduct of exams to Loveall University,
Pune (recognized by law), being an inter-State transaction
Total Output Liability under Forward Charge (A)
Under Reverse Charge:
Legal fee paid to a Lawyer located within the state
Rent paid to the State Government for his office building
Total GST Liability under Reverse Charge to be deposited through
Electronic Cash Ledger (B)
Total Output Liability [(A) + (B)]
Less: Input Tax Credit (GST paid under reverse charge can be availed as
credit to be used for payment of output tax liability under forward
charge)
Net GST Liability
CGST
SGST
IGST
46,800 46,800
Exempt
46,800 46,800
-
1,800
2,700
4,500
1,800
2,700
4,500
-
51,300 51,300
4,500 4,500
-
46,800 46,800
-
CA NISHANT KUMAR
57