The document contains information from Sanjay Dwivedi, an advocate, regarding input tax credit under GST. It discusses when credit is available and blocked, how to calculate the available credit, and how to treat capital goods where use changes over time. The document contains guidance on calculating credit attributable to exempted supplies and supplies for non-business purposes. It also provides examples of exempt supplies and contact information for Sanjay Dwivedi.
The document contains information from Sanjay Dwivedi, an advocate, regarding input tax credit under GST. It discusses when credit is available and blocked, how to calculate the available credit, and how to treat capital goods where use changes over time. The document contains guidance on calculating credit attributable to exempted supplies and supplies for non-business purposes. It also provides examples of exempt supplies and contact information for Sanjay Dwivedi.
Original Description:
ITC relating to non-business and exempted supplies needs to be reversed.
The document contains information from Sanjay Dwivedi, an advocate, regarding input tax credit under GST. It discusses when credit is available and blocked, how to calculate the available credit, and how to treat capital goods where use changes over time. The document contains guidance on calculating credit attributable to exempted supplies and supplies for non-business purposes. It also provides examples of exempt supplies and contact information for Sanjay Dwivedi.
The document contains information from Sanjay Dwivedi, an advocate, regarding input tax credit under GST. It discusses when credit is available and blocked, how to calculate the available credit, and how to treat capital goods where use changes over time. The document contains guidance on calculating credit attributable to exempted supplies and supplies for non-business purposes. It also provides examples of exempt supplies and contact information for Sanjay Dwivedi.
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Sanjay Dwivedi, Advocate
06th May, 2018 SRD Legal, Advocates & Consultants
Credit of the tax paid on the inward supply is available only when The inward supply is for use “in the course or furtherance of business” The outward supply is NOT “exempted, nil rated, or non-taxable”.
Zero-rated supply is the only exception.
06th May, 2018 SRD Legal, Advocates & Consultants
Full Credit available where inward supplies are used for zero rated supplies
Credit would be restricted where the goods
and/or services are partly used for business and non- business purposes - section 17 (1) partly used for taxable and non-taxable supplies - section 17 (2) 06th May, 2018 SRD Legal, Advocates & Consultants When tax on my outward supply is payable by receiver under RCM, the supply to be treated as ‘exempted’ – Thus, I won’t get credit. Sec 17(2) If the credit is blocked. If depreciation is claimed on the tax component
06th May, 2018 SRD Legal, Advocates & Consultants
Goods or Services
Business Purpose Credit Available
Other Purposes Cr. Not Available
06th May, 2018 SRD Legal, Advocates & Consultants
Goods or Services
Taxable* Credit Available
Exempt** Cr. Not Available
*’Taxable’ includes zero rated **’Exempt’ includes RCM supplies
06th May, 2018 SRD Legal, Advocates & Consultants
A B C Credit not Credit Cr. Partly Available Available Available • Non-business • Taxable • Common to • Exempted • Zero-rated the two • RCM (even if • Blocked exempted)
06th May, 2018 SRD Legal, Advocates & Consultants
Determine the Common Credits Identify the credits that are clearly not available.. Identify the credits that are fully available Apportion the common credit in ratio of turnover
06th May, 2018 SRD Legal, Advocates & Consultants
a. Total Tax (eligible as well as ineligible credits). T Less: b. Used exclusively for the purposes other than T1 business Less: c. Used exclusively for effecting exempt supplies T2 Less: d. Blocked credits T3 Net e. ITC to be credited to the e-Credit Ledger C1 C1 = T – (T1+T2+T3)
06th May, 2018 SRD Legal, Advocates & Consultants
f. Identify the invoices whose items are intended to T4 be used exclusively for effecting: • supplies other than exempted; and • zero rated supplies
Full amount of this credit (T4) is available.
g. Common Credit C2 = C1- T4 C2
06th May, 2018 SRD Legal, Advocates & Consultants
Exempt Reverse Supplies (D-1) Common Non- Reverse Credit Business (D-2) Balance Eligible Credit
06th May, 2018 SRD Legal, Advocates & Consultants
Credit attributable to exempt supplies :
'E' - aggregate value of exempt
supplies Common D1 = X 'F' - total turnover in the State Credits (C2)
06th May, 2018 SRD Legal, Advocates & Consultants
Credit attributable to non-business purposes
D2 = 5% of Common Credits (C2)
D1 and D2 is to be paid back. Thus, finally the
credit that remains available: C3 = C2 - (D1+D2)
06th May, 2018 SRD Legal, Advocates & Consultants
Long life Use may change over period
• Non- (b) • Common Business • Taxable • Exempted • Zero-rated
(a) (c)
06th May, 2018 SRD Legal, Advocates & Consultants
From To Exempt Taxable Exempt Common Taxable Common Taxable Exempt Common Taxable Common Exempt
06th May, 2018 SRD Legal, Advocates & Consultants
Useful life of Capital Goods is assumed to be 5 years. 5 Years = 20 quarters (each quarter represents 5% of the Credit) 5 Years = 60 months (each month represents 1/60th of the Credit)
06th May, 2018 SRD Legal, Advocates & Consultants
Provision Before After ITC Method of Calculation 18 (1) Exempt Taxable Take credit (if Reduce 5% per quarter (clause a) (clause b) depreciation not (or part). claimed) Take the Balance Credit. Rule 43 Exempt Common Same as above Same as above (clause a) (clause c) Rule 43 Taxable Common Credit already ‘A’ will be derived by (clause b) (clause c) taken. Calculate ‘A’ reducing the credits which shall be part @5% per quarter (or of the common part thereof). credit taken for apportionment.
06th May, 2018 SRD Legal, Advocates & Consultants
Provision Before After ITC Method of Calculation 18 (4) Taxable Exempt Pay back the credit Calculate Credit on the read with (clause (clause a) for the balance life. remaining useful life in rule 44 b) month (ignore part of the month). Credit per month = total tax divided by 60.
06th May, 2018 SRD Legal, Advocates & Consultants
Maintain list of capital goods Record its use (exempt, taxable, common) – every month Find total credit (full tax paid on the capital goods) under common category. The above figure divided by 60 is the common credit for the month (Tr)
06th May, 2018 SRD Legal, Advocates & Consultants
Common credit attributable towards exempted supplies:
'E' - aggregate value of exempt
ITC on supplies Common Te = X 'F' - total turnover in the State Cap. Goods(Tr) Apportioned credit should be calculated separately for CGST, SGST (or UT GST), IGST
06th May, 2018 SRD Legal, Advocates & Consultants
Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees (notification 42/2017-ITR). Services by way of accepting deposits, extending loans or advances (interest or discount is the consideration), except in case of a banking company or a FI, NBFC; and Services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India. 06th May, 2018 SRD Legal, Advocates & Consultants Thanks 512, Ecstasy Business Park, Citi of Joy, J. S. D. Road, Sanjay Dwivedi Mulund (West), Advocate Mumbai - 400 080.
