The concept of Input tax credit (ITC) was introduced to avoid the cascading effect of indirect taxes. The ITC related provisions are stated in Section 16 of the CGST Act, 2017 and Rule 36 of the CGST Rules, 2017. You can refer to this article for the basic details. In this article we've covered topics like ITC full form in GST, the input tax credit shall be allowed only against, what is input tax credit in GST, input tax credit meaning and we have summarised the ITC related provisions that are currently effective:
|Reversal Of ITC In Case Of Non-Payment Of Consideration:|
|Apportionment And Blocking Of Credit|
|Special Circumstances In Which ITC Is Available|
|Reversal Of Credit Under Special Circumstances - As Per Rule 44 Of The CGST Rules, 2017|
|ITC Provisions In Respect Of inputs And Capital Goods Sent For Job Work|
|Distribution Of Credit By Input Service Distributor|
|Transfer Of ITC After Obtaining Separate Registration For Multiple Places Of Business Within The Same State/Union Territory|
As per Rule 37 of the CGST Rules 2017, if ITC has been availed for the supply of goods or services or both, and the purchaser/recipient has failed to pay to the supplier the due sale consideration within the time limit prescribed in the second proviso of Section 16(2), i.e., 180 days from the date of invoice, the amount of ITC claimed should be reversed. However, there are a few exceptions here. As per the rules:
The relevant taxpayer should furnish the details of the supply, the value/amount not paid, and the amount of ITC availed proportionately in Form GSTR-3B for the month immediately after the period of one hundred and eighty days from the date of invoice. The taxpayer will also be charged interest, not exceeding 18%, for the period starting from the date of availing the ITC until the payment of the output tax liability (liability including the ITC amount). The due date as per Section 16(4) of the Act (date of filing Annual Return for a financial year; or the month of September following the end of the financial year; whichever is earlier), will not be applicable for re-claimed credit (in case of credit reversed earlier).
The associated provisions here are governed by Section 17 of the CGST Act, 2017 and Rule 38, 42 and 43 of the CGST Rules, 2017. You can refer to this article for further details.
The relevant provisions here are governed by Section 18 of the CGST Act, 2017 and Rule 40 & 41 of the CGST Rules, 2017. A GST registered taxpayer can claim ITC in respect of stock and inputs contained in finished goods or semi-finished goods in the following circumstances:
The ITC in respect of stock and inputs contained in the finished goods or semi-finished goods is to be reversed in the following manner:
These provisions are governed by Section 19 of the CGST Act, 2017 and Rule 45 of the CGST Rules, 2017.
In the above two cases, it will result in output tax liability for the principal along with interest and penalty, as applicable.
For job work, capital goods do not include moulds and dyes, jigs and fixtures or tools.
These provisions are governed by Section 20 & 21 of the CGST Act, 2017 and Rule 39 of the CGST Rules, 2017. You can refer to this article for further details. Additionally, it is to be noted that, if the Input Service Distributor distributes the ITC in contravention to the provisions of the CGST Act, 2017, resulting in the excess distribution of ITC to one or more units, then, the excess ITC will be recovered from the units along with interest.
The relevant provisions here are governed by Rule 41A of the CGST Rules, 2017. A taxpayer can obtain separate registrations for multiple places of business under Rule 11 of the CGST Rules, 2017. Such taxpayers may also intend to transfer the unutilised ITC either partly or wholly to the newly registered business. In such cases, the taxpayer must furnish Form GST ITC-02A within thirty days of obtaining the registration, on the GST portal. The ITC transferred must be in the ratio of the value of assets* held by the businesses at the time of registration. Once the form is filed, the newly registered business has to accept the details on the GST portal. Post this; the ITC will be credited to the electronic credit ledger of the newly registered entity. *Here, value of assets means the value of all the assets of the business, irrespective of whether ITC has been availed on them or not.