GST FAQs Series 26: Input Tax Credit(ITC) under GST

Frequently asked questions on Input Tax Credit(ITC) under GST ….Continue(Refer last post on link 

Q 21. If input tax credit is allowed only in respect of goods or services or both for effecting taxable supplies, would it not lead to loss of input tax credit on exempt supplies when exported?

Ans. Zero-rated supplies have been covered within taxable supplies for the purpose of allowing input tax credit. The scope of zero-rated supply is provided in the Integrated Goods and Services Tax Act which includes even exempt supplies.

Q 22. Which of the following is included for computation of taxable supplies for the purpose of availing credit?
(a) Zero-rated supplies
(b) Exempt supplies
(c) Both

Ans. Zero rated supplies.

Q 23. Where goods or services received by a registered person are used partly for the
purpose of business and partly for other purposes, whether the input tax credit is
available to the person?

Ans. The input tax credit of goods or services or both attributable only to the purpose of business can be taken by registered person. The manner of calculation of eligible
credit would be provided by rules.

Q 24. A person paying tax under composition scheme crosses the composition threshold and becomes a regular taxable person. Can he avail ITC and if so from what date?

Ans. He can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods (reduced by prescribed
percentage points) on the day immediately preceding the date from which he ceases to be eligible for composition scheme. The manner of calculation of eligible credit would be provided by rules.

Q 25. Are there any special provisions in respect of banking companies?

Ans. A banking company or a financial institution including a non-banking financial company engaged in supply of specified services would either avail proportionate credit or avail 50% of the eligible input tax credit.

Q 26. Mr. A, a registered person was paying tax under composition scheme up to 30th July, 2017. However, w.e.f 31st July, 2017, Mr. A becomes liable to pay tax under regular scheme. Is he eligible for ITC?

Ans. Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock and capital goods (reduced by such
percentage points as may be prescribed) as on 30th July, 2017.

Q 27. Mr. B applies for voluntary registration on 5th June, 2017 and obtained registration on 22nd June, 2017. Mr. B is eligible for input tax credit on inputs in stock as on…………..

Ans. Mr. B is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 21st June, 2017. Mr. B cannot take input tax credit in respect of capital goods.

Q 28. What would happen to the input tax credit availed by a registered person who opts for composition scheme or where the goods or services or both supplied by him become wholly exempt?

Ans. The registered person has to pay an amount equal to the input tax credit in respect of stocks held on the day immediately preceding the date of exercise of option or date of exemption. In respect of capital goods, the payable amount would be calculated by reducing by a prescribed percentage point. The payment can be made by debiting electronic credit ledger, if there is sufficient balance in the credit ledger, or by debiting electronic cash ledger. If any balance remains in the credit ledger, it would lapse.

Q 29. Is there any restriction on period for availment of ITC?

Ans. In cases of new registration, change from composition to normal scheme, from exempt to taxable supplies, the concerned person cannot avail ITC after the expiry of one year from the date of issue of tax invoice relating to such supply.

Q 30. What happens where the details of inward supplies furnished by the recipient do not match with the outward supply details furnished by the supplier in his valid return?

Ans. In case of mismatch, the communication would be made to the both parties. If the mismatch is not rectified, then the amount will be added to the output liability of
recipient in the return for the month succeeding the month in which discrepancy is communicated.

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2 thoughts on “GST FAQs Series 26: Input Tax Credit(ITC) under GST

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