ITC

1. Apportionment of
credit and blocked
credits.

2. What will we cover?
• What is Input Tax Credit.
• Who is eligible to take Input Tax Credit.
• How Business can claim Input Tax Credit.
• Conditions for Availing of ITC.
• Apportionment of Credit on Inputs and Input Services under GST.
• Blocked credit
• Apportionment of Credit on Inputs and Input Services under GST

3. What is Input Tax?
“Input Tax” means the GST Taxes
(CGST, SGST, IGST) charged on
any supply of goods or services or
both made to a registered person
in the course or furtherance of his
business and includes such tax
payable on reverse charge basis—
but excludes tax paid under
composition levy.

4. Who is eligible to take ITC?
Every registered person shall be
entitled to take credit of input tax
charged on any supply of goods or
services to him which are used or
intended to be used in the course
or furtherance of his business.

5. Business can claim Input Tax
Credit on the basis of any one:
1. Tax Invoice issued,
2. Debit note,
3. Bill of entry,
4. Invoice prepared in respect of
reverse charge basis,
5. Document issued by Input Service,
6. Distributor for distribution of
credit.

6. Conditions for Availing of
ITC:
(i) The said goods or services or both are used
or intended to be used in the course or in the
furtherance of his business;
(ii) He is in possession of tax invoice/ debit
note / tax-paying document issued by a
supplier registered under this Act.
(iii) He has received the said goods or
services or both subject to job-work facilities
and restrictions relating to input tax credit.
The above condition does not apply for
supplies which are payable under reverse
charge basis.

7. Example:-
Mr. Annie sells goods worth Rs 1,00,000 to
Mr. Ben. on 01.08.2017 on credit. GST,
assuming, 5 % comes to Rs 5,000. The
invoice value, thus, is Rs. 1,05,000. Mr. Ben
decides to pay the invoice amount later on.
Now, while filing the GST returns for
August 2017, Mr. Ben can claim the input tax
credit of Rs 5000.00. Now 180 days (from
01.08.2017) lapses, the date being 27.01.2018.
If Mr. Ben does not pay the invoice amount
by this date then the ITC of Rs 5000 will be
reversed in the return and added to output
tax liability. If subsequently, he pays the
invoice amount, such ITC will be re-availed.

8. Apportionment of Credit on Inputs and
Input Services under GST.
The entire scheme of taxation under GST is
to reduce the cascading effect. At each
stage of taxation, input tax credit is
allowable to the registered taxable person.
It being a destination based consumption
tax; the burden of tax shall be borne by the
ultimate consumer.

9. Provisions relating to eligibility to input tax
credit are contained in section 16 of CGST Act.
Further, section 17 provides for apportionment
of credit and blocked credits.
Provisions relating to apportionment of
credit are applicable to the cases where
goods or services are partly used for
business purpose and partly for other
purposes. In such cases, credit is available
only to the extent they are used for
business purposes.

10. Blocked credit
For Motor Vehicles:
1. ITC for motor vehicle is
generally not However such ITC is
available only if Motor vehicles are
used for:-
a) Transportation of Goods.
Further supply of such vehicles,
transportation of passengers,
imparting training on driving,
flying, navigating such vehicles or
conveyances.

11. Example:-
Mr. Annie buys a passenger car worth Rs
300000 with GST Rs 80000. He deals in
furniture and electronics and uses the car to
travel to his showroom. In this case, even if
the car is used for his business, ITC Rs 80000
cannot be claimed. In case he deals in
transport business and buys a goods vehicle
(like trucks) for transporting of goods, he can
avail the ITC. If he deals in cars and buys
cars (as stocks) for reselling, he can avail
ITC. In case, he deals in passenger transport
services and gives the car on hire for tourism,
he can claim the ITC.

12. 2. ITC on Supply of goods and/or services
such as – food and beverages, outdoor
catering, beauty treatment, health services,
cosmetic and plastic surgery: Available only
if 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.
Example: a school buys food and edible
items in the canteen for providing food
to the students. In such a case, ITC on
food is not available. Only hotels and
restaurants can avail the ITC.

13. 3. ITC on membership of a club, health and
fitness centre, travel benefits to employees
on vacation i.e. leave or home travel
concession : Never available
4. ITC on Works contract services
when supplied for construction of
immovable property, other than plant
and machinery available only if it is
for further supply of works contract
service.

14. 5. ITC is not available on 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.
Example: If Mr. Annie deals in
construction business and supervises
the construction of an office for his
staff, ITC in relation to that office will
not be available.

15. 6. ITC on rent-a-cab, life insurance,
health insurance allowed only if it is
notified by the Government as
obligatory for an employer to provide
to its employees 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.

16. In case of application for compulsory
registration the input tax credit on
stocks can be availed on the day
immediately preceding the date from which
he becomes liable to pay tax and in case of
application for voluntary registration
the input tax credit on stocks can be
availed on the day immediately preceding
the date of grant of registration under the
provisions of the Act.

17. b. In case of change of scheme from
composition scheme to Regular scheme
whether input tax credit can be claimed on
capital goods?
Under the GST law the composition
dealer is not entitled for ITC and the
scheme granted will stand withdrawn
from the day on which the aggregate
turnover exceeds fifty lakh rupees.

18. Example:-
1. Kunal applies for voluntary
registration on 5th June 2017 and
obtained registration on 22th June 2017.
Mr. Kunal is eligible for input tax credit
on inputs in stock as on 21st June 2017.
2. Gupta, registered person was paying
tax under composition rate upto 30th
July 2017. However, w.e.f 31st July 2017.
Mr. B becomes liable to pay tax under
regular scheme. Mr. Gupta is eligible for
input tax credit on inputs held in stock
as on closure of business hours as on
30th July 2017.

19. Apportionment of Credit on Inputs and Input
Services under GST

20. The details of credit on inputs and input services for
the month of December 2017 are as under:

21. As per Rule 7 of draft Input Tax Credit Rules, out of
aforesaid Rs. 1650 lacs credit, sum of Rs.1223.75 lacs would
be allowable to M/s A & Co. for the month of Dec 2017.