All about availment of Input Tax Credit

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All about availment of Input Tax Credit

Section 18(1) of the CGST Act talks about availment of input tax credit in case a person is switching from composition levy to normal tax payment, exempt supplies becoming a taxable supply or person not registered becomes liable to register or person takes a voluntary registration. We will discuss all these cases in detail in this article:

  1. Person applied for registration within 30 days of becoming liable for registration. In this case where person applies within 30 days of becoming liable he shall be eligible of Input Tax Credit (ITC) on

– Input as such held in stock

– Inputs contained in semi-finished goods

– Inputs contained in finished goods held in stcok

He shall not be entitled to the credit of Capital Goods held.

For this purpose stock shall be the stock lying on the date immediately preceding the date from which he becomes liable to pay tax.

If person fails to apply for ITC within 30 days of being liable to get registered he shall not be eligible to claim ITC. However, he shall be liable to pay output tax liability.

  1. Person obtaining voluntary Registration shall again be eligible to claim ITC as in above case. The benefit in case of Capital Goods shall again not be available here.

For this purpose stock shall be the stock lying on the date immediately preceding the date of registration.

  1. In case of registered person switching from composition levy to normal tax payment system the ITC of the stock shall be claimed as follows:

Person entitled for ITC on

– Input as such held in stock

– Inputs contained in semi finished goods

– Inputs contained in finished goods held in stock

For the purpose Capital Gain the eligible ITC shall be equal to:

 Input tax – 5% per quarter or part these off from the date of invoice.

For this purpose stock shall be the stock lying on the date immediately preceding the date from which person become liable to pay tax under normal scheme shall be considered.

  1. In case of registered person whose exempt supplies becomes taxable supply he shall be eligible for ITC in the same manner as is available to person switching from composition levy to normal tax payment (Point 3). The stock shall be taken on the date immediately preceding the date from which such supply become taxable.

Note:

  1. As per Sec 18(2), person is not entitled to take ITC if supply of input or capital goods after expiry of 1 year from the date of issue of tax invoice.
  2. Important provisions of Rule 40 regarding ITC claiming procedure are as under:
  • Declaration in form GST ITC of within 30 days
  • If the aggregate claim amt is more than Rs. 2,00,000/- it should be duly certified by practicing Chartered Accountant or Cost and Management Accountant.
  • ITC claimed under clause (c) & (d) of Sec 18(1) ( Point 3 and 4 above) shall be cross verified by with details furnished by supplier in form GSTR-1 & GSTR-4 on Common portal.

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