Idea Transcript
WIRC of Institute of Chartered Accountants of India Event
:
GST Course for CA Students
Subject
:
- Input tax credit including Input Tax Credit Rules
Date & Day
:
25th May, 2017 (Thursday)
- Provisions related to job-work
- Related transitional provisions Venue
:
Presented by
:
May 25, 2017
- Refund
ICAI Tower, Plot No. C-40, ‘G-Block’,
Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 CA Shraddha Mehta
CA Shraddha Mehta
1
Determination of Tax liability Exempt or non-taxable
Supply
Taxable Determine tax liability
No Tax
Transaction Value Tax Payable
Tax paid on purchases
May 25, 2017
Rate of Tax
INPUT TAX CREDIT
CA Shraddha Mehta
Cash Payment
2
Relevance & Purpose of ITC mechanism in indirect taxes
May 25, 2017
CA Shraddha Mehta
3
Input Tax Credit Mechanism – Relevance
Basic principles/objectives of Indirect taxes such as VAT, Excise, Service Tax and GST:
• • • • •
It is a value added tax wherein every player in transaction chain pays tax on value added by him in the transaction Business entities in transaction chain are pass through entities and should not bear indirect tax incidence It is a destination based consumption tax
Tax on goods and services to be borne by ultimate customer
Ultimate consumer to bear tax on final value of goods / services excluding tax incidences in intermediate stages in distribution chain
Two alternative mechanism for achieving above objectives:
• •
No tax at intermediate stages and levy of tax only at last stage of transaction chain i.e. at stage when goods are sold to end consumer
Levy tax on value of goods / service on vendors at each stage of transaction chain with set off input tax paid by such vendors on procurement of goods/service for business/profession
May 25, 2017
CA Shraddha Mehta
4
Transaction Chain
Manufacturer
Price Rs.1,000 GST Rs. 180__ Total Rs. 1,180 ITC = Rs. 0 Tax paid = Rs. 180
Wholesaler
Cost Rs.1,000 Profit Rs. 100 Total Rs. 1,100 GST Rs. 198__ Total Rs. 1,298
Distributer
ITC = Rs. 180 Tax paid = Rs. 18 [198 – 180]
Cost Rs.1,100 Profit Rs. 100 Total Rs. 1,200 GST Rs. 216__ Total Rs. 1,416
Consumer
ITC = Rs. 198 Tax paid = Rs. 18 [216 – 198]
Total Tax Paid = 180 + 18 + 18 = Rs. 216 May 25, 2017
CA Shraddha Mehta
5
GST Input Tax Credit Mechanism – Objectives To ensure fungibility of tax credit To ensure levy of tax on value addition by respective assesse in transaction chain To ensure efficient system of value added tax is in place To eliminate or minimize possibilities of levy of tax on tax To eliminate or minimize cascading effect of indirect taxes To minimize tax incidence on ultimate consumer of goods / services
May 25, 2017
CA Shraddha Mehta
6
ITC under GST - Basic Concepts
May 25, 2017
CA Shraddha Mehta
7
Meaning of Input Tax Credit (‘ITC’) and Input tax Input Tax Credit means credit of ‘input tax’ [Section 2(63)] Input Tax in relation to a registered person: [Sec 2(62)]: Means
• Central tax;
• State tax/ Union territory tax;
• Integrated tax;
Includes
• IGST charged on import of goods
• Tax payable under Reverse charge by recipient:
Central tax/ State tax u/s 9(3) of CGST/SGST Act;
Union territory tax payable u/s 7(3) of UTGST Act
Excludes
Tax paid under
composition levy
Integrated tax u/s 5(3) of IGST Act;
• Tax payable under Reverse Charge by registered person on supply made by unregistered person: Charged on any supply of Central tax/ State tax u/s 9(4) of CGST/SGST Act; goods or services or both made to him May 25, 2017
Integrated tax u/s 5(4) of IGST Act;
Union territory tax payable u/s 7(4) of UTGST Act CA Shraddha Mehta
8
Availability of ITC ITC of tax paid on Capital goods
Inputs
Means
Goods, the value of which is capitalized in the books of accounts of the person claiming the credit
May 25, 2017
Means Any goods other than capital goods
used or intended to be used by a supplier in the course or furtherance of business CA Shraddha Mehta
Input Services Means
Any Service
9
Exclusion from ITC [Section 17(5)] Particulars
Motor vehicles and other conveyance [Section 17(5)(a)]
Credit restricted on
All Motor Vehicle and other conveyance except when they are used for: •
• May 25, 2017
Making the following taxable supplies:
Further supply of such vehicles or conveyances; or
Transportation of passengers ; or
Imparting training on driving, flying, navigating such vehicles or conveyances
Transportation of goods CA Shraddha Mehta
10
Exclusion from ITC [Section 17(5)] Particulars
Specified supply of goods or services
[Section 17(5)(a)]
Credit restricted on
• Food and beverages
Except where said category of inward supply
• Outdoor catering
of goods or services or both are used for
making an outward taxable supply of same
• Beauty treatment
category of goods or services or both or as a
• Health services
• Cosmetic and plastic surgery
part of taxable composite or mixed supply
• Membership of a club, Health and fitness center
• Travel benefits extended to employees on vacation such as leave or home travel concession
May 25, 2017
CA Shraddha Mehta
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Exclusion from ITC [Section 17(4)] Particulars
Credit restricted on
Specified supply
• Rent-a-cab, Life insurance and Health insurance except where:
of goods or services
[Section 17(5)(b)]
May 25, 2017
Government notifies the services which are obligatory for an employer to provide to its
such inward supply of goods or services or both is used by a registered person for
employees under any law time being in force
making an outward taxable supply of same category of goods or services or both or as a part of taxable composite or mixed supply
CA Shraddha Mehta
12
Exclusion from ITC [Section 17(5)] Particulars
Works contract services [Section 17(5)(c)]
Goods or services or both [Section 17(5)(d)]
Credit restricted on
When supplied for construction of immovable property (other than plant and
machinery) except where it is an input service for further supply of works contract service
When it is received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when used in course or furtherance of business
Whether ITC on works contract for completion & finishing services, repairs, maintenance, renovation or
ITC of Works contract resulting into ‘plant and machinery’ is admissible
restoration in respect of immovable property are also excluded from ITC? May 25, 2017
CA Shraddha Mehta
13
Exclusion from ITC [Section 17(5)] Construction includes : Re-Construction
Renovation
Additions
Alterations
To the extent of capitalization to the said immovable property Plant and Machinery means : Apparatus
Equipment
Repairs
Machinery
fixed to earth by foundation or structural support that are used for making outward supply and includes such foundation and structural supports but excludes: •
land, building or any other civil structures
• Telecommunication towers; and
• Pipelines laid outside the factory premises May 25, 2017
CA Shraddha Mehta
14
Exclusion from ITC [Section 17(5)] Particulars Credit restricted on
Goods or
services or both
Tax paid under Section 10 [Composition levy] - [Section 17(5)(e)]
Received by a non-resident taxable person except on goods imported by him [Section 17(5)(f)] Used for personal consumption - [Section 17(5)(g)]
Goods which are lost, stolen, destroyed, written off or disposed of by way of gift or free samples[Section 17(5)(h)]
Any tax paid in terms of the following : [Section 17(5)(i)]
• Tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or
utilized by reason of fraud or any wilful – misstatement or suppression of facts [Section 74]
• Detention or seizure and release of goods and conveyances in transit [Section 129] May 25, 2017
• Confiscation of goods or conveyance and levy of penalty [Section 130] CA Shraddha Mehta
15
Exclusion from ITC [Section 17(5)] Whether services like car insurance, repairs and maintenance of cars, etc. availed for motor vehicles eligible for ITC?
Whether assesse would be entitled to ITC of following :
Pick up and drop facility for employees – section 17(5)(b)(iii) Food provided to employees - section 17(5)(b)(i)
Medical or health kit for employees - section 17(5)(b)(i) Group insurance for employees - section 17(5)(b)(iii)
May 25, 2017
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16
Manner of availment [sec 16(1)] - Every registered
person
- subject to such conditions and
restrictions as may be prescribed; and
- in the manner
specified in section
Entitled to take ITC charged on
used or intended
Said amount to be
course or
electronic credit
business
person
to be used in
any supply of
supply of goods
furtherance of
and/or services
credited to the ledger of such
49
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Persons Eligible for ITC
Person Eligible to take ITC:
Registered Taxable person [Section 16(1) of CGST Act]
•
Person making zero rated supplies [Section 16(2) of IGST Act]
•
Person Not Eligible to take ITC: •
Non-registered taxable person
•
Supplier under Composition Scheme
• • •
Person having aggregate turnover below threshold limit Supplier exclusively engaged in making exempt or non-taxable supplies Agriculturist
May 25, 2017
CA Shraddha Mehta
18
Conditions for availing ITC [Section 16(2)] Registered person shall not be entitled to take credit of any input tax in respect of any supply of goods and/or services to him unless: He is possession of: •
Tax invoice
•
Bill of entry
• • •
Debit note
Receipt of goods and / or services
Invoice by receiver paying under RCM
-
Document issued by ISD
Issued by supplier registered under the Act
ITC cannot be claimed on tax paid on advance
Payment of tax charged in respect of such supply to credit of appropriate government in: • •
Cash; or
Utilization of ITC admissible in respect of said supply
Furnished return u/s 39 - Return to be filed by both: Vendor ; and Assesse
Where goods against an invoice are received in instalments / lots – ITC will be available only after receipt of last lot / instalment [1st proviso to Section 16(2)] May 25, 2017
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Conditions for availing ITC [Section 16(2)] Explanation as to term receipt of goods [Explanation to sec 16(2)(b)]: •
For the purpose of receiving goods 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
Q 9 of Chapter 10 of FAQs released by CBEC on 31.03.2017 clarifies that: •
In ‘Bill to – ship to’ scenario, ITC on goods will be available to person on whose order the goods are delivered to third person
May 25, 2017
CA Shraddha Mehta
20
Conditions for availing ITC [Section 16(2)] Where recipient fails to pay the supplier of goods and/or services within 180 days from the date of
issuance of invoice by the supplier, following consequences follows [2nd proviso to Section 16(2)] r.w. Rule 2 of ITC Rules: •
•
Amount of ITC credit taken proportionate to amount not paid to supplier shall be added to
recipient’s output tax liability for the month immediately following the period of 180 days from date of issue of invoice ; and
Interest thereon will have to be discharged for the period starting from date of availing credit on such supplies till date when such added output tax liability is paid
Recipient will be entitled to avail ITC on payment made by him towards value of supply along with tax payable thereon [3rd proviso to Section 16(2)]
Value of supplies made without consideration as specified in Schedule I shall be deemed to have been paid for the purpose of second proviso to section 16(2)
May 25, 2017
CA Shraddha Mehta
21
Denial of ITC and Time limit [Section 16(3) & 16(4)] Input tax credit will not be allowed to the registered person on the tax component who has already claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of Income Tax Act, 1961 (43 of 1961)
A taxable person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods and/or services after: •
Due date of filing of the return u/s 39 for the month of September following the end of financial year to
•
Furnishing of the relevant annual return
which such invoice or invoice relating to such debit note pertains; or Whichever is earlier
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Time limit for availing ITC [Section 16(4)] Oct-18 Dec-18 Return filing of Sep-18 due date of filing X-X-XF.Y ending --------------- -X-X-X-X-------Invoice date 1st Jan-------------31st March 2018 Due date Annual return 2018 th 20 Oct 2018 291 Days
June-18 Oct-18 Invoice date 1st -------------F.Y ending 31st --------------Annual return filed on -X-X-X--------Return filing of -X-X-X---X-X Sep-18 March 2018 th March 2018 25 June 2018 Due date 20th Oct 2018
117 Days
Dec-18 Oct-18 Return filing of Sep-18 -X-X-X-----X-X due date of filing --X-X Invoice date 1st Apr-------------F.Y ending 31st --------------Annual return Due date 2017 March 2018 20th Oct 2018 --X-X – ITC cannot be claimed for this period
May 25, 2017
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567 Days
23
Apportionment of ITC and blocked credits
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ITC – Business and other purposes [Section 17(1)] Goods or Services or both Used for
Business purpose
Input tax attributable to business purpose allowable
May 25, 2017
Other purpose
Input tax attributable to other purpose NOT allowable
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ITC – Exempt Supplies [section 17(2) and 17(3)] Goods or services or both Used for
For -Taxable supplies - Zero Rated Supplies
Value of following exempt
• For Exempt supplies
It shall include following supplies:
May 25, 2017
•
Where recipient is liable to pay tax under RCM Transactions in securities Sale of land
Input tax attributable to above allowable
supply shall be:
Sale of building [subject to clause 5(b) of schedule II]
land and building :
same as adopted for
the purposes of paying •
stamp duty
security :1% of sale
value of such security
ITC attributable to above not allowable CA Shraddha Mehta
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Manner of determination of ITC and reversal of Inputs and Input services - Rule 7 of ITC Rules Total Input tax credit involved on inputs and inputs services (T)
1,00,000
Less:
Input tax attributable to Input and input services used exclusively for
Less:
Input tax attributable to Input and input services used exclusively for
20,000
Input tax attributable to Input and input services on which credit not
10,000
Less:
Less:
purposes other than business (T 1) effecting exempt supplies (T 2) available u/s 17(5) (T3)
Input tax credited to electronic credit ledger (C 1))
Input tax attributable to Input and input services used exclusively for effecting taxable and zero rated supplies (T 4)
10,000
60,000 40,000
Common credit (C 2 20,000 Registered person will have to declare T1, T 2, T3 and T 4 at invoice level in form GSTR-2
May 25, 2017
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Manner of determination of ITC and reversal of Inputs and Input services - Rule 7 of ITC Rules Amount of common credit (C2) attributable to exempt supplies to calculated as per formula = E/F X C2 Aggregate value of exempt supplies during tax period (E) Total turnover in the State during tax period (F)
Amount to be reversed [ 3,00,000 / 5,00,000 X 20,000]
Rs. 3,00,000
Rs. 5,00,000
[D1] Rs. 12,000
Amount of C2 attributable to non-business purpose shall be 5% of C2 = Rs. 1,000 [D2] Eligible ITC [C3]= C2 – D1 – D2 Rs. 7,000
May 25, 2017
= 20,000 – 12,000 – 1,000
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Manner of determination of ITC and reversal of Inputs and Input services - Rule 7 of ITC Rules Final reversal for a financial year to be done before due date for furnishing return for month of September following the end of financial year to which such credit relates •
If final amount of D1 and D2 exceeds amount of D1 and D2 determined earlier it shall be added to
output tax liability in the month of September following the end of FY to which such credit relates. Also liable to pay interest on such amount
•
If final amount of D1 and D2 is lesser than amount of D1 and D2 determined earlier, it shall be claimed as credit in the month of September following the end of FY to which such credit relates
May 25, 2017
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Manner of determination of ITC and reversal of Capital Goods - Rule 8 of ITC Rules Useful life of common capital goods to be taken as 5 years Year 1
6,00,000
Year 2
3,00,000
Calculation for month of April in Year 5:
Year 3
1,80,000
Year 4
4,80,000
Month of April in Year 5
72,000
Total credit
72,000
Exclusively for taxable supplies and zero rated supplies shall be credited to electronic credit ledger and indicated in Form GSTR-2
12,000
Exclusively for non-business purposes and exempt supplies shall not to be credited to electronic credit ledger and be indicated in Form GSTR-2 Balance Common credit to be first credited to electronic credit ledger
Amount of ITC attributable to tax period [month of April] [Tm = Tc / 60]
Amount of Common ITC on all common capital goods whose useful life remains during a tax period [month of April] [10,000 + 5,000 + 3,000 + 8,000] Total common credit May 25, 2017
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[Tc]
6,000
54,000 900
26,000 [Tr]
26,900 30
Manner of determination of ITC and reversal of Capital Goods - Rule 8 of ITC Rules Amount of common credit attributable to exempted supplies [Tr X E/F]: Aggregate value of exempt supplies made during tax period
30,000
Total turnover during tax period
50,000
Amount attributable to exempted supplies [26,900 X 30,000 / 50,000]
Amount of Te [Rs. 16,140] along with applicable interest will be added to output tax liability
May 25, 2017
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[Te]
16,140
31
ITC – Banking company, Financial institution and NBFC [Section 17(4)] Banking company or a financial institution including a non banking financial company engaged in supplying services by way of accepting deposits, extending loans or advance shall have the following options : • •
Avail ITC in accordance with provisions of Section 17(2) i.e. under normal provisions; or Avail an amount equal to 50% of the eligible input tax credit in that month relating to :
Inputs;
Input services
Capital goods; and
Once option is exercised, it cannot be withdrawn during the remaining part of financial year [1st proviso to section 17(4)]
Restriction of 50% shall not apply to the tax paid on supplies made by a registered person to another registered person having same PAN [2nd proviso to section 17(4)]
May 25, 2017
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ITC – Banking company, Financial institution and NBFC Banking company or a financial institution opting to follow the option of 50% reversal has to follow following procedure (Rule 3 of ITC Rules):
(a) It shall not avail the credit of tax paid on inputs and input services that are used for non-business purposes and the credit attributable to supplies specified in section 17(5) in Form GSTR-2
(b) It shall avail full credit of tax paid on inputs and input services in respect of its transactions between
different branches having same PAN and which are not for non-business purposes or not covered u/s 17(5)
(c ) 50% of the remaining input tax shall be the input tax credit admissible to the company/institution and shall be furnished in Form GSTR-2
The amount referred to in clauses (b) and (c ) shall be credited to electronic credit ledger
May 25, 2017
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ITC availability - Summary Nature of Supply made by taxable person Wholly taxable supplies
Yes
Wholly zero-rated supplies
Yes
Wholly non-taxable or exempt supply
No
Both taxable and zero-rated supplies
Wholly for non-business purpose
Both business and non-business purpose Both taxable and non-taxable supply
May 25, 2017
Credit Admissible
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Yes
No
Proportionate credit
Proportionate credit 34
Job Work - ITC availment
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Job work Registered person (Principal)
Customer
Send inputs/ capital goods* without payment of tax Bring back inputs (within 1 year) or capital goods* (within 3 years) without payment of tax and charging GST on job-work charges • •
Job worker 1
Export – No Tax Other than export – Payment of Tax by Principal in 1 year/ 3 years
* Capital goods other than moulds, dies, jigs and fixtures
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• •
Send inputs/ capital goods* without payment of tax Bring back inputs (within 1 year) or capital goods* (within 3 years) without payment of tax and charging GST on jobwork charges
Job worker 2
Export – No Tax/with tax by principal Other than export – Payment of Tax by principal in 1 year/ 3 years Customer
36
Job work Principal can avail ITC on inputs/ capital goods to the job worker on receipt of inputs/ capital goods by him or directly by job worker
Where the inputs/Capital goods (other than mould, dies, jigs, fixtures or tools) are not received by principal within stipulated time period from job worker or are not supplied from the place of business of job worker within stipulated time period : Particulars
Inputs
Capital goods
May 25, 2017
Time Period
1 year from the date when it is sent out
3 years from the date when it is sent out
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Consequences
It shall be considered to be deemed supply by principal to job worker
37
Job work Any waste or scrap generated during job-work may be supplied on payment of tax: • •
by job-worker if he is registered
By principal if job-worker is not registered
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Job work Principal can directly supply inputs and capital goods (other than mould, dies, jigs and fixtures) from the place of business of a job worker on payment of tax within India or without payment of tax for exports where : • •
Premises of job worker is declared as his additional place of business
Premises of job worker is not declared as his additional place of business where :
Job worker is registered u/s 25 of the Act; or
Principal is engaged in the supply of goods as may be notified by the commissioner in this behalf
Principal is responsible for accountability of inputs / capital goods
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39
Input Service Distributor
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Meaning of Input Service Distributor [Section 20] Office of the supplier of goods and/or services Receives invoice u/s 31 for receipt of input services & Paid Central state, central tax, integrated tax and union territory tax indicated on the invoice
May 25, 2017
Issues document for distributing credit of Central state, central tax, integrated tax and union territory tax
•
•
Having same PAN
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Other offices/units of supplier of goods and / or services in different states
Different business verticals in same state
41
Manner of distribution of credit by ISD – Section 20 (1) Nature of Input tax Central tax or
Integrated tax or
Credit may be
distributed as under
Integrated tax
State tax or
Union territory tax Central tax
Central tax
State tax
State tax
Union territory tax or Union territory tax May 25, 2017
Situation Where the distributor and the recipient are located in different states
Where the distributor and recipient of credit, being a business vertical, are located in the same state
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Conditions/Restrictions For Distribution of ITC –Section 20(2) Credit should be
distributed through
prescribed document
containing prescribed details
Amount of credit
Credit of input services
attributable to more than one
recipient to be
distributed on Pro rata basis i.e.
that recipient
Aggregate T/O of all units
distributed