INPUT TAX CREDIT

Input Tax Credit is the backbone of the GST regime.

Tuesday, July 24, 2018
Amit Ray
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10 Key Amendments Proposed in GST Laws
A whopping 46 amendments have been proposed in the GST Laws. All of these
proposed
amendments have been targeted to make compliances less cumbersome and
to ensure ease
of doing business.
Comments from the stakeholder has been invited on the proposal by July 15,
2018. Once
the amendments are finalized by the Revenue Dept., they shall be moved
to the GST
Council for approval and to the legislators for enactment. These proposals are
relating to
the Supply, Reverse Charge, Composition Scheme, Input Tax credit, returns,
etc. The key
draft proposals for amendments to the GST Laws are enumerated below:
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Amit Ray
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10 Key Amendments Proposed in GST Laws
1. As per Section 9(4),a registered person is liable to pay GST under reverse
charge on
goods or services purchased from unregistered supplier. However, this
provision has
deferred till September 30, 2018. It has been proposed that only notified
registered
persons should be liable to pay GST under reverse charge mechanism to
benefit the
small and medium enterprises.
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Amit Ray
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10 Key Amendments Proposed in GST Laws
2. Presently, registered persons engaged in the supply of services (other
than restaurant
services) are not eligible for the composition scheme. Thus, manufacturers
or traders
couldn't opt for the scheme if they are engaged in supply of allied services
even if they are
negligible. Therefore, it has been proposed that composition scheme should
be allowed
even if proportion of 'Service' is upto 10% of total turnover in the preceding
financial year
or Rs. 5 lakhs, whichever is higher.
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Amit Ray
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10 Key Amendments Proposed in GST Laws
3. Changes in negative list of ITC has been proposed. It is proposed that ITC should
be allowed
for the taxes paid on following:
a) Supply of food, transport and insurance provided to employees if it is
obligatory for the
employer.
b) Purchase of motor vehicle if it used for transportation of money for or by a
banking
company or a financial institution.
4. It is proposed that an e-Commerce operator, who is not required to collect TCS,
should be
exempted from taking compulsory GST registration. In that case, the registration
should be
obtained only if other conditions are fulfilled, inter-alia, turnover exceeding the
threshold limit,
inter-State supply, etc.
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Amit Ray
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10 Key Amendments Proposed in GST Laws
5. At present, a credit or debit note can be issued only against its
underlying invoice,
which is quite cumbersome to correlate. Thus, it is proposed that parties
should be
allowed to issue consolidated credit or debit note to reduce the compliance
burden for
taxpayers.
6. Allow the taxpayers to amend the GST returns. This provision would
enable the
taxpayers to correct inadvertent mistakes by filing an amendment return.
7. Any department of the Central or State Govt. or Local Authority which is
subject to
audit by CAG should not be required to get their books of account audited
by any
Chartered Accountant or Cost Accountant irrespective of prescribed limit of Rs.
2 Crores.
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Amit Ray
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10 Key Amendments Proposed in GST Laws
8. As per the existing provisions, a person seeking registration shall be
granted a single
registration in a State or Union territory. However, if he has multiple business
verticals in a
State or Union territory, he may obtain separate registration for each business
vertical. Now,
it has been proposed that such persons should be allowed to obtain separate
registration for
his each place of business in a State or Union territory.
9. Once a registered person has applied for cancellation of GST registration,
the proper
officer should temporarily suspend its registration till the procedural
formalities for
cancellation are completed. This amendment would relieve the compliance
burden of
taxpayers.
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Amit Ray
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10 Key Amendments Proposed in GST Laws
10. In case of import of goods, by virtue of Circular No. 3/1/2018-IGST, Dated
May 25,
2018, IGST would be payable only at the time of clearance of goods from
Custom bonded
warehouse for home consumption. This deferment of levy of GST is done so
as to avoid
the double taxation. It has been proposed that such situations should be
mentioned as 'No
Supply' in Schedule III of the CGST Act, 2017 itself.
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Amit Ray
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16. Input Tax Credit
ITC is the backbone of the GST regime. GST is nothing but a value-added tax on goods and
services combined.
It is these provisions, ITC makes GST a value-added tax i.e., collection of tax at all points in the
supply chain after allowing credit of taxes paid on inputs/input services and capital goods.
The invoice method of value added taxation will be followed in the GST too, viz., the tax paid at
the time of receipt of goods or services or both will be eligible for set-off against the tax payable
on supply of goods or services or both, based on the invoices with a special emphasis on actual
payment of tax by the supplier.
The procedures and restrictions in these provisions are important to make sure that there is
seamless flow of credit in the whole scheme of taxation without any
misuse.
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Amit Ray
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16. Input Tax Credit
IInnppuutt ttaaxx
"Input tax" in terms of section 2(62) in relation to a registered person, means the central tax,
State tax, integrated tax or Union territory tax charged on any supply of goods or services or both
made to him and includes
— integrated goods and service tax charged on import of goods
— tax payable on reverse charge basis under IGST /SGST /CGST/UTGST Acts.
— but excludes tax paid under composition levy.
Section 9(3) and 9(4) of CGST Act levies tax on goods or services or both on reverse charge.
Therefore, ‘input tax credit’ is the tax paid by a registered person under the Act whether on
forward charge or reverse charge for the use of such goods or services or both in the course or
furtherance of his business.
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Amit Ray
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16. Input Tax Credit
Capital goods” means. -
goods, the value of which is capitalised in the books of account of the person claiming the
input tax credit and which are used or intended to be used in the course or furtherance of
business [Section 2(19)].
Input: “Input” in terms of section 2(59) means
— any goods,
— other than capital goods,
— used or intended to be used by a supplier
— in the course or furtherance of business
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Amit Ray
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16. Input Tax Credit
Input service: “Input service” in terms of section 2(60) means
— any service
— used or intended to be used by a supplier
— in the course or furtherance of business.
“Works Contract” in terms of Section 2(119) 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;
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Amit Ray
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 16. Input Tax Credit
Registered person to take credit:
Every registered person subject to Section 49 (payment of tax),is entitled to take ITC on any
supply of goods or services or both which are used or intended to be used in the course or
furtherance of his business. ITC is credited to the electronic credit ledger.
Rule 36 of the CGST Rules, 2017 provides that ITC can be taken on the basis of any of the
following documents:
(i) Invoice issued under section 31 by supplier of goods or services.
(ii) Debit note issued under section 34 by supplier of goods or services.
(iii) Bill of entry or any similar documents under Custom Act, 1962.
(iv) Invoice prepared in respect of supplies made under RCM issued u/s 31(3)(f).
(v) Invoice/ Credit Note issued by ISD for distribution of credit in accordance with Rule
54(1) of CGST Rules, 2017.
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 16. Input Tax Credit
It is important to observe the words ‘used by him’ and ‘in his business’ are appearing in section
16(1). These words refer to the registered taxable person in question and not the legal entity.
So, input tax paid in a State must not be in relation to the business of a taxable person in another
State albeit belonging to the same person.
For example,
A Company has Branch-A which is a registered taxable person in
Andhra Pradesh conducts
conference in a hotel in Lonavla (Maharashtra) where CGST-SGST is
charged by the hotel. This
Company also has Branch-M which is a registered taxable person in
Mumbai, Now the
provisions of section 16(1) operate as follows:
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16. Input Tax Credit
Example continued :
ü CGST-SGST charged by the hotel in Maharashtra is ‘used in the business of
Branch-A’ in AP and not in
the business of Branch-M in Mumbai.
ü Hotel would not be aware about the above fact and would not resist to issue
the bill in the name of Branch-
M because both are branches of the same Company
ü Since, CGST-SGST has been charged by the hotel, ITC would not be available
to Branch-A as tax paid in
Maharashtra is not a creditable tax in AP
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Amit Ray
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16. Input Tax Credit
Example continued :
ü Branch-M may be compelled to forego the tax paid to the hotel. However,
there may be an urge to save
this loss by informing the hotel the GSTIN of Branch-M. In fact, the Company
is rightly required to obtain
ISD registration in Maharashtra and distribute this credit entirely to AP.
ü But, Branch-M in Mumbai cannot justify this ITC as it is not ‘used by him’ in
‘his business’ but it is ‘used
by another’ in ‘that others business’
ü Care should be taken to verify ‘whose’ business relates to ITC; If nexus is
established between the services
of the hotel and the ‘business’ of Branch-M, ITC may be availed by Branch-
M. Nexus emerges if inter
branch supply of services occurs between Branch-M and Branch-A
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 16. Input Tax Credit
16(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the
credit of any input tax in respect of any supply of goods or services or both to him unless,––
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under
this Act, or such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, 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;
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been
actually paid to the Government, either in cash or through utilization of ITC admissible in respect
of the said supply; and
(d) he has furnished the return under section 39:
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16. Input Tax Credit
PLACE OF SUPPLY OF GOODS OR SERVICES OR BOTH in IGST :
10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India,
shall be as under,––
(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any
other person, the place of supply of such goods shall be the location of the goods at the time at which
the movement of goods terminates for delivery to the recipient;
(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a
third person, whether acting as an agent or otherwise, before or during movement of goods, either by
way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third
person has received the goods and the place of supply of such goods shall be the principal place of
business of such person;
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16. Input Tax Credit
Claim of input tax credit and provisional acceptance thereof :
41. (1) Every registered person shall, subject to such conditions and
restrictions as
may be prescribed, be entitled to take the credit of eligible input tax, as
self-assessed,
in his return and such amount shall be credited on a provisional basis to his
electronic
credit ledger.
(2) The credit referred to in sub-section (1) shall be utilized only for
payment of self
assessed output tax as per the return referred to in the said sub-section.
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16. Input Tax Credit
Matching, reversal and reclaim of input tax credit.
42. (1) The details of every inward supply furnished by “recipient”, in such manner
and within
such time as may be prescribed, be matched––
(a) with the corresponding details of outward supply furnished by the corresponding
registered
“supplier” in his valid return for the same tax period or any preceding tax period;
(b) with the IGST paid under section 3 of the Customs Tarif Act, 1975 in respect
of goods
imported by him; and
(c) for duplication of claims of ITC.
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16. Input Tax Credit
Matching, reversal and reclaim of input tax credit.
(3) Where ITC claimed by recipient is in excess of the tax declared by the supplier for the
same supply or
the outward supply is not declared by the supplier in his valid returns, the discrepancy
shall be
communicated to both such persons
(4) The duplication of claims of ITC shall be communicated to the recipient
(5) The amount in respect of which any discrepancy is communicated, is not rectified by the
supplier in his
valid return for the month in which discrepancy is communicated, shall be added to the output
tax liability of
the recipient, in his return for the month succeeding the month in which the discrepancy is
communicated.
(6) The amount claimed as ITC that is found to be in excess on account of duplication of
claims shall be
added to the output tax liability of the recipient in his return for the month in which the
duplication is
communicated.
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16. Input Tax Credit
Matching, reversal and reclaim of input tax credit.
(7) The recipient shall be eligible to reduce, from his output tax liability (OTL), the amount
added under sub
-section (5), if the supplier declares the details of the invoice or debit note in his valid return
within the time
specified in sub-section (9) of section 39.
(8) A recipient in whose OTL any amount has been added under sub-section (5)/(6), shall be
liable to pay
interest at the rate specified under section 50(1) on the amount so added from the date of
availing of credit
till the corresponding additions are made under the said sub-sections.
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16. Input Tax Credit
Matching, reversal and reclaim of input tax credit.
(9) Where any reduction in OTL is accepted under sub-sec (7), the interest paid under sub-sec
(8) shall be
refunded to the recipient by crediting the amount in the corresponding head of his electronic
cash ledger.
(10) The amount reduced from the OTL in contravention of the provisions of sub-section (7)
shall be added
to the OTL of the recipient in his return for the month in which such contravention takes
place and such
recipient shall be liable to pay interest on the amount so added at the rate specified in section
50(3).
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16. Input Tax Credit
Wastage of inputs in the course of production:
ITC on wastage during the course of production does not cease to be ‘used or intended to be
used’ in the course or furtherance of business. In fact, the full ITC will be available if it is
within normal wastage norms or even exceeds that to be called abnormal wastage of inputs.
Unless there is a diversion of inputs (in respect of which credit has been availed), there is no
embargo on availment and retention of ITC.
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16. Input Tax Credit
Input-Output nexus:
The degree of nexus expected for allowable deal of credit is a tightly knit inextricable nexus, that is,
everything that is ‘used’ in effecting the outward supply will qualify, without going an explanation as to the
rationale for using one or other material or services that may be argued to be unnecessary excessive or even
imprudent in making the outward supply
There is no room for raising questions as to the necessity but sufficient only to examine the fact of its usage
in the outward supply. Accordingly, eligibility of credit will be in respect of capital goods, raw materials,
consumables, packing materials, accessories, spares, taxable marketing and publicity material and taxable
material distributed in the form of incentives and non-returnable trial units.
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 16. Input Tax Credit
Costing: Pricing inter-relationship:
May credit may availed in respect of inputs and cost which may not be included in the pricing of the product
and hence in its transaction value – this may create a concern as to whether this credit is admissible or not.
As explained by the Hon’ble Supreme Court in CCE, Pune v. Dai Ichi Karkaria 1999 (112) ELT 353,
the nature
of Modvat scheme is such that to cost of purchase of inputs will be lowered due to a availment of credit, this
does not immediately, directly and proportionately impact the assessable value of the finished product
manufactured using the inputs.
This ratio continues to be applicable in the context of GST law. As such, neither availment of credit nor its
discontinuation can be alleged to have an immediate, direct and proportionate effect on the transaction value
under section 15.
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16. Input Tax Credit
Conditions for availment of credit by registered person: ITC is
available only if –
(i) Said goods or services or both are used or intended to be used in the course or in the furtherance of his
business;
(ii) Possession of tax invoice/ debit note / tax-paying document issued by a supplier registered under this
Act ;
(iii) Received the said goods or services or both subject to job-work ITC in Section 19;
(iv) The supplier has uploaded the relevant invoice on the GSTN;
(v) Subject to section 41 (claim of ITC and provisional acceptance thereof),the supplier has paid the said
amount of tax (as charged in the invoice) to appropriate Government in cash or by way of utilization of ITC,
as admissible;
(vi) “He” – claimant of input tax credit – has furnished return under section 39 in FORM-GSTR 2;
Goods received in instalments: If goods are received in instalments against a single invoice, credit
can be taken upon receipt of last instalment of goods.
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 16. Input Tax Credit
Failure to pay to supplier of goods or service or both, the value of
supply and tax
thereon:
v If recipient of goods or service or both has not paid the supplier within 180 days from date of invoice,
the amount of ITC availed of proportionate to such amount not paid to supplier along with the interest
will be added to output liability of the recipient.
v Such non-payment of the value of invoice must be admitted in the return filed in FORM-GSTR 2
(Rule 37 of CGST Rules, 2017) for the month immediately following the period of 180 days from the
date of issue of invoice. The said ITC can be re-availed on payment of value of supply and tax
payable thereon.
v This condition does not apply for supplies which are payable under RCM.[second proviso to section 16(2)
of the Act]
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 16. Input Tax Credit
§ This exception for RCM has been expressly created in second proviso to section 16(2) of
the Act.
§ The second proviso to rule 37 that creates this carve out, excludes supplies between
distinct persons under schedule I. Conspicuous by its absence is the inclusion of import
of goods and services within this carve out provision. While reverse charge is excluded
from the condition of having to make payment within 180 days (or lose credit), GST paid
on import of goods and services does not come within reverse charge under section 9(3)
or 9(4) even though the nature of GST paid is by the recipient of the import.
?
The question that now arises is – whether there can be reverse charge liability other than
under section 9(3) and 9(4).
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2(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or
services or both instead of the supplier of such goods or services or both under sub-section (3)
or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the
IGST Tax Act;
The definition in section 2(98) does not permit such extended application. The privilege to
prescribe pre-conditions for vesting of right to ITC credit belongs to section 16, there is other
provision from where any overriding right to claim credit on imports appears to flow. As such,
the condition of non-payment will result in denial of credit already claimed and the only
exceptions are reverse charge and supplies under schedule I and no others.
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IGST : 5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the IGST on all inter-
State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on
the value determined under section 15 of the CGST and at such rates, not exceeding 40%, as may be notified by
the Government on the recommendations of the Council and collected in such manner as may be prescribed and
shall be paid by the taxable person:
Provided that the integrated tax on goods imported into India shall be levied and collected in accordance
with
the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the
point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.
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IGST : 5. (2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification, specify categories of
supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the
recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient
as if he is the person liable for paying the tax in relation to the supply of such goods or services or both .
(4) The integrated tax in respect of the supply of taxable goods or services or both by unregistered
supplier to a registered person shall be paid on RCM and all the provisions of this Act shall apply to
such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or
services or both.
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16. Input Tax Credit
v Capital goods on which depreciation is claimed:
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 ITC shall
not be allowed on the said tax component.
In such cases assesse may decide to capitalize the tax component and may avail depreciation on
tax component also.
Hon’ble Gujrat High Court in the case Genus Electrotech Limited reported in
2013 (296) ELT
175 (Guj.) held that after reversal of entry for deprecation, assesse could have taken credit. This
decision under the Cenvat Credit Rules, 2004 shall equally apply under Goods and Services Tax
Act also.
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 16. Input Tax Credit
(4)Time limit to avail the input tax credit:
§ A registered person shall not be entitled to take ITC on invoice/ debit notes after due date of
furnishing of the
return under section 39 for the month of September of the subsequent financial year to
which such invoice or
invoice relating to such debit note pertains or furnishing of the relevant annual return,
whichever is earlier.
§ This is a very important provision where, unlike claims under earlier laws that – registration
is not a vesting
condition – has been altered in GST. In fact, not only is registration a pre-requisite but filing
of return under
section 39 is also a requirement.
§ After credit availed, it is available without any time limit. Section 18(4) provides a condition
(known at the time of
that this credit will reverse if the outward supplies become exempted. Other
availing credit)
than this situation,
the credit availed is permanently available to the taxable person..
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16. Input Tax Credit
In summary, among others the following facts are crucial for
availment of ITC :
(a) The goods and/ or services must be used “by him” in the course or furtherance “of his” business.
(b) Possession of Output /Supplementary/ISD Invoice/ Debit note/ Bill of Entry etc. is a must.
(c) The said document must comply requirements of Rule 46 of CGST Rules, 2017 relating to Invoice.
(d) Supplier of goods and/ or services must upload the details of such documents in the GSTN portal .
(e) Vesting condition for claiming ITC is the return u/s 39 and not the supply per se.
(f) ITC in case of supplies in installment, would be receipt of last installment of goods.
Contd……
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 16. Input Tax Credit
In summary, among others the following facts are crucial for
availment of ITC:
(g) Payment to the supplier within a period of 180 days from the date of invoice, else, Rule 37 obligates
reversal of ITC leading to consequential levy of tax, interest.
Proviso to section 16(2) provides that the taxable person shall be entitled to
avail ITC after making payment
of the amount towards value of supply of goods or services or both along with
tax payable thereon. Further,
Rule 37(4) provides that the time limit specified under section 16(4) shall
not be applicable for such re-
credit.
(h) Claim of depreciation on tax component disqualifies a recipient of Capital goods from availment of ITC.
(i) ITC cannot be availed after the due date of filing the return for September month of the next Financial
year or on furnishing the Annual Return whichever is earlier.
(j) No registered person is permitted to avail any ITC pursuant to an order of demand on account of fraud,
willful misstatement, or suppression of fact.
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16. Input Tax Credit
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16. Input Tax Credit
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17. Input Tax Credit
ü 2(47) Exempt supply means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the IGST Act, and includes non-taxable
supply;
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17. Input Tax Credit
17. (1) Where the goods or services or both are used by the registered person partly for the
purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of
the input tax as is
attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for efecting
taxable supplies
including zero-rated supplies and partly for efecting exempt supplies, the amount of credit
shall be restricted
to so much of the input tax as is attributable to the said taxable supplies including zero-rated
supplies.
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed,
and shall include
supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in
securities, sale of
land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
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17. Input Tax Credit
(5) Ineligible ITC : ITC shall not be available in respect of the following:
a) Motor vehicle & other conveyance except when used
(i) for making the following taxable supplies, namely-
(A) Further supply of such vehicles or conveyances or
(B) Transportation of passenger or
(C) Imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods
(b) Supply of goods and/or services such as –
i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic
surgery except where such supply of goods or services of each category is used for making an
outward taxable supply of the particular category of goods or services or both or as an element of
a taxable composite or mixed supply
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 17. Input Tax Credit
(5) Ineligible ITC : ITC shall not be available in respect of the following:
ii. membership of a club, health and fitness center.
iii. rent-a-cab, life insurance, health insurance except where it is notified by the Government as
obligatory for an employer to provide to its employees under any law for the time being in force;
or such 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 part of a taxable composite or mixed supply; and
iv.travel benefits to employees on vacation i.e. leave or home travel concession.
c. Works contract services when supplied for construction of immovable property, other
than plant and machinery, except where it is for further supply of works contract service;
It is important to note that credit of GST paid on works contract services will be allowed
only if the output is also works contract services.
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17. Input Tax Credit
Ineligible input tax credit : input tax credit shall not be available in respect of the following:
(d) Goods or services received by a taxable person for construction of an immovable property on his own
account, other than plant and machinery, even though it is used in course or furtherance of business;
“Construction” includes re-construction, renovation, additions or alterations or repairs,
to the extent of
capitalization, to the said immovable property. Please note that ‘alterations’ and
‘repairs’ are also included in this
definition.
(e) Goods or services or both, where the tax paid under composition scheme
(f) goods or services or both received by a non-resident taxable person except on goods imported by him
(g) Goods or services or both used for personal consumption
(h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
(ix) Tax paid in terms of sections 74, 129 and 130
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17. Input Tax Credit
PLACE OF SUPPLY OF SERVICES : IGST
12. (1) The provisions of this section shall apply to determine the place of supply of services
where the location of supplier of services and recipient of services is in India.
(2) The place of supply of services, except the services specified in sub-sections (3) to (14),––
(a) made to a registered person shall be the location of such person;
(b) made to any person other than a registered person shall be,––
(i) the location of the recipient where the address on record exists; and
(ii) the location of the supplier of services in other cases.
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17. Input Tax Credit
PLACE OF SUPPLY OF SERVICES : IGST
12. (3) The place of supply of services,––
(a) directly in relation to an immovable property, including services provided by architects,
interior decorators, surveyors, engineers and other related experts or estate agents, any
service provided by way of grant of rights to use immovable property or for carrying out or
co-ordination of construction work; or
(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or
campsite, by whatever name called, and including a house boat or any other vessel; or
(c) by way of accommodation in any immovable property for organising any marriage or
reception or matters related thereto, official, social, cultural, religious or business function
including services provided in relation to such function at such property; or
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17. Input Tax Credit
PLACE OF SUPPLY OF SERVICES : IGST
12(3)(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the
location at which the immovable property or boat or vessel, as the case may be, is
located or intended to be located:
shall be the location at which the immovable property or boat or vessel, as the case may be,
is located or intended to be located:
Provided that if the location of the immovable property or boat or vessel is located or intended
to be located outside India, the place of supply shall be the location of the recipient.
Explanation.––Where the immovable property or boat or vessel is located in more than one
State or Union
territory, the supply of services shall be treated as made in each of the respective States
or Union
territories, to the value for services separately collected or determined in terms of the
contract or
agreement entered into in this regard or, in the absence of such contract or agreement, on
such other basis
as may be prescribed.
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17. Input Tax Credit
PLACE OF SUPPLY OF SERVICES : IGST
12(4) The place of supply of restaurant and catering services, personal grooming, fitness,
beauty treatment, health service including cosmetic and plastic surgery shall be the location
where the services are actually performed.
(8) The place of supply of services by way of transportation of goods, including by mail or
courier to,––
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location at which such goods are
handed over for their transportation.
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17. Input Tax Credit
Inputs ‘lost’ and ‘loss’ of Inputs.
Credit is not liable to be reversed in case of ‘loss’ of inputs
that does not amount to inputs being ‘lost’ even if such ‘loss‘
were normal or abnormal . Reversal of credit is occasioned
when there is any event that results in inputs being ‘lost’.
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18. Input Tax Credit
Section 18: Availability of credit in special circumstances
Eligibility of ITC on inputs held in stock and contained in semi-finished and finished goods held in stock
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18. Input Tax Credit
Section 18: Availability of credit in special circumstances
Eligibility of ITC on inputs held in stock and contained in semi-finished and finished goods held in stock
§ Declaration in Form GST ITC 1 must be filed within thirty (30) days from the date of becoming eligible to
ITC. Time limit for filing declaration in Form GST ITC – 1 has been extended by govt. from time to time*
§ Rule 40 of CGST Rules, 2017 requires a declaration to be filed containing details of stocks and capital
goods along with a certificate from a Chartered Accountant or Cost Accountant where the credit so claimed
exceeds Rs.2 lakhs.
 The supplier will not be entitled to credit of goods or services or both after expiry of 1 year from date of
issue of tax invoice.
 The credit on capital goods shall be reduced by five (5) % per quarter or part thereof from the date of
invoice.
 Such credits are subject to verification of details furnished by the supplier in GSTR – 1/4 on the common
portal.
To summarize, the credit of input tax can be taken as and when the person applies for the registration but the
entitlement of credit of inputs would be from the day liability to pay tax arises.
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18. Input Tax Credit
Section 18: Availability of credit in special circumstances
Eligibility of ITC on inputs held in stock and contained in semi-finished and finished goods held in stock
Examples:
(i) A person becomes liable to pay tax on 01.08.17 and has obtained registration on 15.08.17.
Such person is eligible for input tax credit on inputs held in stock as on 31 July 2017.
st

(ii) Mr. A applies for voluntary registration on 5 June 2017 and obtained registration on 22 June
th th

2017. Mr. A is eligible for input tax credit on inputs in stock as on 21 June 2017.
st

(iii) Mr. B, registered person was paying tax under composition rate upto 30 July 2017. However,
th

w.e.f. 31 July 2017. Mr. B becomes liable to pay tax under regular scheme. Mr. B is eligible
st

for input tax credit on inputs held in stock as on closure of business hours on 30 July 2017.
th
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18. Input Tax Credit
Rule 40. Manner of claiming credit in special circumstances.
Example
Rule 42. Manner of determination of ITC in respect of inputs or input services and reversal thereof.-
(1) The ITC in respect of inputs or input services, which attract the provisions of sub-section
(1) / (2) of section 17, being partly used for the purposes of business and partly for other
purposes, or partly used for effecting taxable supplies including zero rated supplies and partly
for effecting exempt supplies, shall be attributed to the purposes of business or for effecting
taxable supplies in the following manner.
Example
Rule 43 : Manner of determination of ITC in respect of capital goods and reversal thereof in
certain cases
Example
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 19. Input Tax Credit
19. Taking input tax credit in respect of inputs and capital goods
sent for job work
v Job work: Any treatment or process undertaken by a person on goods belonging to another
registered person - section 2(68).
v Job worker: A person who undertakes any treatment or process on goods belonging to
another registered person.
v Principal: A person on whose behalf an agent carries on the business of supply or receipt of
goods or services or both.
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19. Input Tax Credit
19. Taking input tax credit in respect of inputs and capital goods
sent for job work
Entitlement of credit on inputs: The principal can take credit of ITC on inputs sent to job-worker subject
to
fulfilment of the following conditions:
 Rule 45 of CGST Rules, 2017 provides the following:
• To issue a delivery challan for transfer of inputs to the job-worker including where they are sent directly.
• The details of DC for goods dispatched to job worker or received from job worker or sent from one job
worker to another during the quarter are to be included in Form GST ITC-04 to be furnished on or before
25th day of the month succeeding that quarter.
• DC is to contain all details as required in respect of an invoice prescribed in Rule 55 of CGST Rules, 2017.
All DC issued in respect of inputs sent to job-worker and those received back are to be reported in GSTR-1
• In case of non-receipt of the inputs within the time prescribed, the DC issued will be deemed to be tax
invoice for the implied supply of inputs.
• The inputs, after completion of job-work, to be received back by the principal within 1 year of being sent.
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19. Input Tax Credit
19. Taking input tax credit in respect of inputs and capital goods
sent for job work
• In case of direct supply, the 1 year shall be reckoned from the date the job worker receives such inputs.
• The credit of inputs can be taken even if inputs are sent directly to job-worker’s premises without bringing
it to principal’s place of business.
• If the inputs are not received back within 1 year, it shall be deemed that such inputs had been supplied by
principal to the job worker on the day when the said inputs were sent out
Entitlement to credit on capital goods: The principal can take credit of input tax on capital goods sent
to job-
worker subject to the fulfilment of the following conditions:
• The capital goods, after completion of job-work, are received back by him within 3 years of their being sent .
• The principal can take credit of capital goods even if such capital goods are sent directly to job-worker’s place
without bringing to principal’s place of business.
• If the capital goods are not received back within 3 years, it shall be deemed that such capital goods had been
supplied by principal to the job worker on the day when the said capital goods were sent out.
• Procedures listed in respect of inputs under Rule 45 of the CGST Rules,2017 will apply to capital goods also .
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19. Input Tax Credit
19. Taking input tax credit in respect of inputs and capital goods
sent for job work
It may be noted that unless the Principal is ‘registered’, the activity will not be ‘job-work’. And when the
supply – treatment or process – is not job-work, then it will also not be eligible to be classified under HSN 9988
in the Annexure – Scheme of Classification of Services.
Although the nature of work performed is the same whether the Principal is registered or not, the classification
of supplies will need to be based on another suitable HSN code in chapter 99 because paragraph 3, Schedule II
does not refers to ‘another persons goods’ and not ‘another registered persons goods’. Hence, due to the
registration status of the Principal, the treatment or process may or may not qualify as job-work but in either
case, the work of the supplier will continue to be ‘treated as supply of services’ though not under HSN 9988.
Now, ‘goods belonging to another’ does not mean 100% of the goods required in the job-work must be
provided by the Principal. It is common and often inevitable for the job-worker to apply his own goods. Goods
required for job-work can generally identified as primary, secondary and ancillary material. If the job-worker
applies ancillary material in the course of carrying out the treatment or process, the transaction does not cease to
be job-work
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