Availability of credit in special circumstances

  • Sub Section 1 of Section 18: Subject to such conditions and restrictions as may be prescribed- (a) A person who has applied for registration under the Act within 30 days from the date on which he becomes liable to registration and has been granted such registration 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.     ( Mandatory Registration )

For example Yugs ltd has crossed limit for registration as on 25/11/2017, as on the date stock of material of Rs 100000 on this GST @5% (5000) paid. So if Yugs Ltd apply for registration within 30 days from 25/11/2017 then It is eligible for ITC of rs.5000.

(b) A person, who takes registration under sub-section (3) of section 25 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 of grant of registration.   ( Voluntary Registration )

(c) Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9 PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed  (Composition Scheme to Regular Scheme)

(d) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person 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 relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable:

               PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed.   (Exempt supply becomes a taxable supply)

As Per Rule 40: Manner of claiming credit in special circumstances

(1) Input tax credit claimed in accordance with the provisions of sub-section (1) of section 18 on the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or the credit claimed on capital goods in accordance with the provisions of clauses (c) and (d) of the said sub-section, shall be subject to the following conditions –     [ Composition to Regular  and Exempt supply become Taxable ]

(a) The input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of section 18, shall be claimed after reducing the tax paid on such capital goods by 5% per quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods were received by the taxable person.

(b) The registered person shall within 30 days from the date of his becoming eligible to avail of input tax credit under sub-section (1) of section 18 shall make a declaration, electronically, on the Common Portal in FORM GST ITC-01 to the effect that he is eligible to avail of input tax credit as aforesaid.

(c) The declaration under clause (b) shall clearly specify the details relating to the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or as the case may be, capital goods–

          (i) on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of the Act, in the case of a claim under clause (a) of subsection (1) of section 18,[ Mandatory Registration]

          (ii) on the day immediately preceding the date of grant of registration, in the case of a claim under clause (b) of sub-section (1) of section 18,[ Voluntary Registration]

         (iii) on the day immediately preceding the date from which he becomes liable to pay tax under section 9, in the case of a claim under clause (c) of sub-section (1) of section 18,[Composition to Normal ]

       (iv) on the day immediately preceding the date from which supplies made by the registered person becomes taxable, in the case of a claim under clause (d) of subsection (1) of section 18. [Exempt supply become Taxable ].

(d) The details furnished in the declaration under clause (b) shall be duly certified by a practicing chartered accountant or a cost accountant if the aggregate value of claim on account of central tax, State tax, Union territory tax and integrated tax exceeds Rs.200000.

(e) The input tax credit claimed in accordance with the provisions of clauses (c) and (d) of sub-section (1) of section 18 shall be verified with the corresponding details furnished by the corresponding supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 4, on the Common Portal.

(2) The amount of credit in case of supply of capital goods or plant and machinery, for the purposes of sub-section (6) of section 18, shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter or part thereof from the date of issue of invoice for such goods.

Illustration: Keya smile Pvt Ltd producing polymer and its mixture upto 1.1.2018 it was exempt from tax but w.e.f 1.1.2018 it is liable for tax at 18%. on 1st Jan., 2018 Following Particulars as under:

Particulars Amount
Value of Stock material –“X” 1,00,000
GST Paid on above ( GST @ 18% ) 18,000
Capital Goods procured vide invoice dated 25.11.2017 10,00,000
IGST Paid on above 2,80,000
Out of Material  “X” above was purchase 1.1.2015 10,000
Out of Material “X” above Invoice was missing 15,000

 Ans: 

ITC Available as Per Rule
ITC available only of Rs.75000 @ 18% ( Working-1) 13,500
ITC available  on capital Goods ( Working-2) 2,66,000
Note : 1

·         ITC in respect of Invoice date exceeding 1 year , ITC not available of Rs. 10000

·         ITC in respect of Invoice copy missing ITC not available of Rs. 15000

 

Note : 2

In case of Capital Goods , ITC reduced by 5% per Qtr or part there of. ( 25/11/2017 to 31/12/2018 = 1 Qtr )

So one Qtr i.e. 5% reduced form ITC in case of capital goods.

Eligible ITC

 

 

75000 On which ITC available

 

 

2,80,000

     14,000

2,66,000

Part-1 : https://etaxupdates.com/18part2/

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Yogesh Parmar have vast knowledge in the field of Goods and Services Tax (GST). He is regularly conducting seminars on GST at various location for business personal to provide the knowledge about impact of GST on their business and how compliance should be made. He is founder of "www.etaxupdates.com" through which he is sharing his knowledge and latest amendments, circulars, notifications etc related to all type of taxes. He is also associated with some software development companies and providing advisory service and help to understand technical aspect of GST. He is also serving as functional manager as well as tester to those company which is developing software for GST.

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