Q 1. What is input tax?
Ans. “Input tax” has been defined in section 2 (57) of the MGL
and section 2 (1) (d) of the IGST Act. Input tax in relation to a taxable
person, means the {IGST and CGST} in respect of CGST Act and {IGST and SGST} in
respect of SGST Act, charged on any supply of goods and/or services to him which
are used, or are intended to be used, in the course or furtherance of his
business and includes the tax payable under sub-section (3) of section 7. Under
the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply
of goods and / or services.
Q 2. What is the implication of different definition of “input
tax” in three acts viz CGST, SGST and IGST Acts?
Ans. It implies that input tax consists of IGST & CGST
in CGST Act and IGST & SGST in SGST Act. In the IGST Act, input tax consists
of all three taxes namely, IGST, CGST and SGST. It further implies that credit
of all three can be used for discharging IGST liability, whereas only credit of
IGST & CGST can be taken in CGST Act and that of IGST & SGST can be
taken under SGST Act. Further the credit of CGST & SGST cannot be
cross-utilized.
Q 3. Can GST paid on reverse charge be considered as input
tax?
Ans. Yes. The definition of input tax includes the tax payable
under sub-section (3) of section 7 (Reverse 92 Charge). The credit can be
availed if such goods and/or services are used, or are intended to be used, in
the course or furtherance of his business.
Q 4. Does input tax includes tax (CGST/ IGST/SGST) paid on
input goods, input services and/ or capital goods?
Ans. Yes, in terms of section 2(54), 2(55) & 2(20) of
the MGL respectively. It may be noted that credit of tax paid on capital goods
also is permitted to be availed in one installment.
Q 5. What is the ITC entitlement of a person who has applied
for registration under the Act within thirty days from the date on which he
becomes liable to registration and has been granted such registration? (Section
16(2))
Ans. He 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 on the day immediately preceding the date from which he becomes liable
to pay tax under the provisions of this Act. It may be noted that the credit on
pre-registration stock would not be admissible if the registration has not been
obtained within a period of 30 days from the date on which he becomes liable to
registration.
Q 6. A person becomes liable to pay tax on 1st August,
2017 and has obtained registration on 15th August, 2017. Such person
is eligible for input tax credit on inputs held in stock as on …….
Ans. 31st July, 2017.
Q 7. What is the eligibility of input tax credit on inputs
in stock for a person who obtains voluntary registration?
Ans. As per section 16(2A) of MGL, the person who obtains
voluntary registration is entitled to take the input tax credit of input tax on
inputs in stock, inputs in semi finished goods and finished goods in stock,
held on the day immediately preceding the date of registration.
Q 8. Where goods and/or services received by a taxable
person are used for effecting both taxable and non-taxable supplies, whether
the input tax credit is available to the registered taxable person?
Ans. As per section 16(6) of MGL, the input tax credit of goods
and / or service attributable to only taxable supplies can be taken by
registered taxable person. The amount of eligible credit would be calculated in
a manner to be prescribed in terms of section 16(7) of the MGL read with GST
ITC Rules (yet to be issued). It is important to note that credit on capital
goods also would now be permitted on proportionate basis.
Q 9. Where goods and/or services received by a taxable
person are used for the purpose of business and non-business supplies, whether
the input tax credit is available to the registered taxable person?
Ans. As per section 16(5) of the MGL, the input tax credit
of goods and / or service attributable to only supplies effected for business
purpose can be taken by registered taxable person. The amount of eligible
credit would be calculated in a manner to be prescribed in terms of section
16(7) of the MGL read with GST ITC Rules (yet to be issued). It is important to
note that credit on capital goods also would now be permitted on proportionate
basis.
Q 10. What would be input tax eligibility in cases where
there is a change in the constitution of a registered taxable person?
Ans. As per section 16(8) of the MGL, the transferor shall be
allowed to transfer the input tax credit that remains unutilized in its books
of accounts to the transferee provided that there is a specific provision for
transfer of liabilities.
Q 11. What would be input tax eligibility in case where the
goods and/or services supplied by a registered taxable person become absolutely
exempt?
Ans. As per section 16(12) of the MGL, the registered taxable
person who supplies goods and / or services which become absolutely exempt, has
to pay an amount equivalent to the input tax credit in respect of inputs held in
stock and inputs contained in semi-finished or finished goods held in stock on
the day immediately preceding the date of such exemption. It has also been
provided that after payment of the amount on such goods, the balance, if any available
in electronic credit ledger would lapse. The amount, required to be paid, is to
be calculated as per GAAP in terms of section 16(13) of the MGL.
Q 12. What would be input tax eligibility in cases where
taxable person paying tax under section 7 opts to pay tax under Compounding
Scheme under Section 8?
Ans. As per section 16(12) of the MGL, the registered
taxable person, who was paying tax under section 7 opts to pay tax under
Compounding Scheme under Section 8, has to pay an amount equivalent to the
input tax credit in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day immediately preceding
the date of such switch over. It has also been provided that after payment of
the amount on such goods, the balance, if any available in electronic credit
ledger would lapse. The amount, required to be paid, is to be calculated as per
GAAP in terms of section 16(13) of the MGL.
Q 13. A dealer paying tax on compounding basis crosses the
compounding threshold and becomes a regular taxable person. Can he avail ITC
and if so from what date?
Ans. As per section 16(3) of the MGL, he can avail ITC in
respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the day immediately preceding the date from
which he becomes liable to pay tax under section 7.
Q 14. Mr. B, a registered taxable person was paying tax
under composition rate up to 30th July, 2017. However, w.e.f 31st July, 2017
Mr. B becomes liable to pay tax under regular scheme. Is he eligible for ITC?
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 30th July,2017.
Q 15. Mr. A applies for voluntary registration on 5th
June, 2017 and obtained registration on 22nd June, 2017. Mr. A is eligible for
input tax credit on inputs in stock as on …………..
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 as
on 21st June, 2017.
Q 16. When shall a taxable person be not entitled to take
input tax credit under sub-section (2), (2A) or sub-section (3) of Section 16
in respect of any supply of goods and / or services to him?
Ans. As per section 16(4) of the MGL, he cannot avail ITC after
the expiry of one year from the date of issue of tax invoice relating to such
supply.
Q 17. Whether the principal is eligible to avail input tax
credit of inputs sent to job worker for job work?
Ans. Yes, the principal is eligible to avail the input tax credit
on inputs sent to job worker for job work in terms of Section 16A(2) of the
MGL.
Q 18. What is the time period within which the inputs sent
for job work has to be received back by the principal?
Ans. 180 days.
Q 19. Whether principal has to reverse the input tax credit
on inputs which have not been received back from the job worker within 180
days?
Ans. Yes, the principal has to reverse the credit along with
interest on inputs which have not been received back from job worker within 180
days but he can reclaim the credit on receipt of inputs.
Q 20. 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 21. What is the time period within which the capital goods
sent for job work has to be received back by the principal?
Ans. Two years.
Q 22. What is the liability of the principal if the capital
goods sent to job worker have not been received within 2 years from the date of
being sent?
Ans. Principal has to pay an amount equal to credit taken on
such capital goods along with interest. But he can reclaim the credit on
receipt of inputs.
Q 23. A Taxable person is in the business of information
technology. He buys a motor vehicle for use of his Executive Directors. Can he
avail the ITC in respect of GST paid on purchase of such motor vehicle?
Ans. No. As per section 16(9)(a) of the MGL, ITC on motor vehicles
can be availed only if the taxable person is in the business of transport of
passengers or goods or is providing the services of imparting training on motor
vehicles.
Q 24. Where the registered taxable person has claimed
depreciation on the tax component of the cost of capital goods under the
provisions of the Income Tax Act, 1961, will ITC be allowed in such cases?
Ans. As per section 16(10) of the MGL, the input tax credit shall
not be allowed on the said tax component.
Q 25. What are the conditions necessary for obtaining ITC?
Ans. As per Section 16(11) of the MGL, following four conditions
are stipulated:
(a) The registered taxable person should be in possession of
tax paying document issued by a supplier;
(b) The taxable person must have received the goods and / or
services;
(c) The tax charged on such supply has been actually paid to
the government either in cash or through utilization of input tax credit; and
(d) The taxable person should have furnished the return under
section 27.
Q 26. Where the goods against an invoice are received in
lots or instalments, how will a registered taxable person be entitled to ITC?
Ans. As per proviso to section 16(11) of the MGL, the registered
taxable person shall be entitled to the credit upon receipt of the last lot or
installment.
Q 27. Who will get the ITC where goods have been delivered
to a person other than taxable person (‘bill to’- ‘ship to’ scenarios)?
Ans. As per explanation clause to section 16(11) of the MGL,
for this purpose of receiving the goods, it would be deemed that the taxable person
has received the goods when the goods have been delivered to a third party on
the direction of such taxable person. So ITC will be available to the person on
whose order the goods are delivered to third person.
Q 28. What is the time limit for taking ITC?
Ans. As per Section 16 (15) of the MGL, ITC cannot be taken
beyond the month of September of the following FY to which invoice pertains or
date of filing of annual return, whichever is earlier. The underlying reasoning
for this restriction is that no change in return is permitted after September
of next FY. If annual return is filed before the month of September then no
change can be made after filing of annual return.
Q 29. Is there any negative list on which ITC is not permitted?
Ans. Section 16 (9) of the MGL provides for the negative
list 100 with respect to the admissibility of ITC. It has been provided that
the ITC on following items cannot be availed:
(a) motor vehicles, except when they are supplied in the usual
course of business or are used for providing the following taxable services— (i)
transportation of passengers, or (ii) transportation of goods, or (iii)
imparting training on motor driving skills;
(b) goods and / or services provided in relation to food and
beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery, membership of a club, health and fitness center, life
insurance, health insurance and travel benefits extended to employees on
vacation such as leave or home travel concession, when such goods and/ or
services are used primarily for personal use or consumption of any employee;
(c) goods and/or services acquired by the principal in the
execution of works contract when such contract results in construction of
immovable property, other than plant and machinery;
(d) goods acquired by a principal, the property in which is
not transferred (whether as goods or in some other form) to any other person,
which are used in the construction of immovable property, other than plant and
machinery;
(e) goods and/or services on which tax has been paid under
section 8; and
(f) goods and/or services used for private or personal consumption,
to the extent they are so consumed.
Q 30. Section 29 of the MGL provides that the ITC would be
confirmed only if the inward details filed by the recipient are matched with
the outward details furnished by the supplier in his valid return. What happens
if there is a mismatch?
Ans. In case of mismatch between the inward and outward
details, the supplier would be required to rectify the mis-match within a period
of two months and if the mis-match continues, the ITC would have to be reversed
by the recipient.
Q 31. What will be the tax impact when capital goods on
which ITC has been taken are supplied by taxable person?
Ans. As per section 16(15) of the MGL, in case of supply of capital
goods on which input tax credit has been taken, the registered taxable person
shall pay an amount equal to the input tax credit taken on the said capital
goods reduced by the percentage points as may be specified in this behalf or
the tax on the transaction value of such capital goods, whichever is higher.
Q 32. What is the recovery mechanism for wrongly availed
credit?
Ans. As per section 16(16) of the MGL, the wrongly availed credit
would be recovered from the registered taxable person in terms of section 51 of
MGL.