Overview of input tax credit

Overview of Input Tax Credit
&
Payment of GST
Prepared By –
Indirect Tax Vertical
Asija & Associates LLP | Chartered Accountants
|Lucknow | Gurgaon| www.asija.in
M/s Asija & Associates LLP, Chartered
Accountants

Table of Content
• Conditions for availing Input Tax
Credit
• Apportionment of credit and
blocked credit
• Availability of credit in special
circumstances
• Input Tax Credit on inputs sent for
Job-Work
• Distribution of credit by Input
Service Distributor
• Order of utilization of Input Tax
Credit
• Transfer of Input Tax Credit
• Payment of GST
• Electronic Tax Liability Ledger
• Electronic Cash Ledger
• Electronic Credit Ledger
• Refund of Tax
• Order sanctioning refund
• Time period for filing refund
• Delayed refunds
Accountants.2

Accountants.3
Conditions for availing ITC
Credit of input tax in respect of
pipelines and telecommunication
tower fixed to earth by foundation
or structural support including
foundation and structural support
thereto shall not exceed—
(a) one-third of the total
input tax in the FY in which
the said goods are received,
(b) two-third of the total
input tax, including the
credit availed in the first FY,
in the FY immediately
succeeding the year in which
the said goods are received
(c) the balance of the amount
of credit in any subsequent
FY.

M/s Asija & Associates LLP, Chartered4
Where the goods against an invoice are received in lots or instalments, the
registered taxable person shall be entitled to take credit upon receipt of the
last lot or instalment.
Whereas recipient fails to pay the value of supply of services along with tax
payable within a period of 3 months from the date of invoice issued by the
supplier, an amount equal to the input tax credit availed by the recipient shall
be added to his output tax liability, along with interest.
Where the registered taxable person has claimed depreciation on the tax
component of the cost of capital goods, the input tax credit shall not be allowed
on the said tax component.
A taxable person shall not be entitled to take input tax credit in respect of any
invoice or debit note for supply of goods or services after
furnishing of the return for the month of September following the end of FY to
which such invoice or invoice relating to such debit note pertains or
furnishing of the relevant annual return,
whichever is earlier.

Accountants.
5
No registered taxable person shall
be entitled to take credit of any
input tax unless:
He is in possession of a tax
invoice, debit note or any
other tax paying
document(s).
He has received the goods
and/or services*
Tax has actually been paid in
respect of such supply
He has furnished the
monthly return
*It shall be deemed that the taxable person has received the goods where the goods are delivered by the
supplier to a recipient, 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.

Apportionment of credit and blocked
credits:
Where goods and/or service are used partly for business
purpose & partly for personal use, ITC may be claimed only
for that portion which is for business purpose
Where the goods and / or services are used by the registered taxable person
partly for effecting taxable supplies including zero-rated supplies and partly for
effecting exempt supplies(including supplies payable on reverse charge basis),
the amount of credit shall be restricted to so much of the input tax as is
attributable to the said taxable supplies including zero-rated supplies.
A banking company or a financial institution including a non-banking financial company, engaged
in supplying services by way of accepting deposits, extending loans or advances shall have the
option to either comply with the provisions of, or avail of, every month, an amount equal to fifty
per cent of the eligible input tax credit on inputs, capital goods and input services in that month.
Accountants.6

ITC shall not be available in respect of the following:
Motor vehicles and other conveyances, expect when they are used for:
Transportation of passengers, or
Transportation of goods, or
Further supply of such vehicles or conveyances,
Imparting training on driving, flying, navigating such vehicles or conveyances;
Goods and/or services on which tax has been paid under composition scheme;
Goods and/or services used for private or personal consumption;
Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;
Works contract services 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; M/s Asija & Associates LLP, Chartered
Accountants.
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Apportionment of credit and blocked credits:

Accountants.
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Apportionment of credit and blocked
credits:
ITC shall not be available in respect of the following:
Goods or services received by a taxable person for construction of an immovable
property on his own account, other than plant and machinery, even when used in course
or furtherance of business;
Goods and/or services provided in relation to
 food & beverages, outdoor catering, beauty treatment, health services, cosmetic &
plastic surgery,
membership of a club, health and fitness centre,
Rent-a-cab, life insurance, health insurance &
travel benefits of employees on vacation such as leave or home travel concession

 Every registered taxable person shall, be entitled to take credit of input tax admissible to him &
such amount shall be credited to the electronic credit ledger.
 Every person who has applied for registration under GST within 30 days from the date of
becoming liable for registration; OR
 A person who ceases to be a composition taxpayer; OR
 A person taking voluntary registration,
• Will be entitled to take credit of input tax in respect of inputs held in stock & inputs contained
in semi-finished/finished goods on the day immediately preceding the date of grant of
registration.
 An exempt supply of goods or services by a registered taxable person becomes a taxable supply
Accountants.9
• A taxable person shall not be entitled to take input tax credit in respect of any invoice for supply
of goods and/or services, after filing the return for the month of September following the end of
the F.Y. or filing of annual return whichever is later.
• ITC is to be claimed within period of one year from the date of issue of tax invoice
Availability of credit in special
circumstances-

Where there is a change in the constitution of a registered taxable person, he shall
be allowed to transfer the input tax credit that remains unutilized in its books of
accounts to such sold, merged, demerged, amalgamated, leased or transferred
business
Where any registered taxable person who has availed of ITC switches over as a
taxable person for paying tax under composition scheme or, where the goods
and/ or services supplied by him become exempt, he shall pay an amount by
way of debit in the electronic credit or cash ledger, equivalent to the credit of
input, on the day immediately preceding the date of such switch over or, such
exemption.
In case of supply of capital goods or plant and machinery, on which ITC has been
taken, the registered taxable person shall pay an amount equal to the ITC taken
on the said capital goods.
Accountants.
10
Availability of credit in special
circumstances-

ITC in respect of inputs sent for Job-Work
Accountants.
11
If the input/capital good sent
for job work are not received
back within a specified period
it shall be deemed that such
inputs had been supplied by
the principal to the job-worker
on the day when the said
inputs/capital goods were sent
out
Inputs
•Specified period is
within 1 year of
being sent out
Capital Goods
Specified period is
within 3 years of
being sent out
A registered taxable person shall be allowed to take credit of input tax on input/capital
goods sent to a job-worker for job-work;
Credit is allowed even when inputs/capital goods are directly sent to a job worker for
job-work without their being first brought to his place of business

Distribution of credit by ISD
The distribution of credit will be done subject to the following conditions:
Accountants.
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a) Credit to be distributed only against a tax invoice or any other document as
prescribed;
b) Amount of credit distributed shall not exceed the amount of credit
available;
c) Credit should be distributed only to such suppliers to whom such
services are attributable;
d) Credit in respect of services attributable to more than one supplier shall be
distributed proportionately, on the basis of their turnover during the preceding
F.Y.

Accountants.
13
Distribution of credit by ISD
Credit in respect
of services
attributable to all
the suppliers
shall be
distributed
proportionately,
on the basis of
their turnover
during the
preceding F.Y.and
which are
operational in the
current year,
during the said
relevant period.
The relevant period shall be:-
(a) If the recipients of the credit have turnover in their States in
the FY preceding the year during which credit is to be distributed,
the said financial year; or
(b) if some or all recipients of the credit do not have any turnover
in the FY preceding the year during which the credit is to be
distributed, the last quarter for which details of such turnover of
all the recipients are available, previous to the month during
which credit is to be distributed.
Here,
‘recipient of credit’ means the supplier of goods and / or services
having the same PAN as that of Input Service Distributor.
‘turnover’ means aggregate value of turnover,

Utilization of ITC
Accountants.
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IGST
IGST
CGST
SGSTCGST
SGST
IGST
SGSTCGST
IGST
CGST SGST

Transfer of ITC
On utilization of ITC under the CGST Act for payment of tax dues under IGST Act, the
amount collected as CGST shall stand reduced by an amount equal to the credit so
utilized
• The Central Government shall transfer an amount equal to the amount so reduced
from the CGST account to the IGST account.
On utilization of ITC under the SGST Act for payment of tax dues under IGST Act, the
amount collected as SGST shall stand reduced by an amount equal to the credit so
utilized and shall be apportioned to the central government
• The State Government shall transfer an amount equal to the amount so
apportioned to the IGST account.
Accountants.
15

Payment of GST
 Under GST 3 types of taxes are to be paid : CGST, SGST, IGST.
 Four Modes of Payment :
 Internet Banking;
 Electronic including Credit Card/Debit Card
 Over the Counter Payment (for Payments up to Rs. 10,000/-)
 Payment through RTGS/NEFT
 Every deposit made towards tax, interest, penalty, fees or any other amount, shall be
credited to the electronic cash ledger of such taxable person.
 The date of credit to the account of the Government in the authorized bank shall be
deemed to be the date of deposit .
 The ITC as self-assessed in the return of a person to be credited to his electronic
credit ledger.
 The amount available in the electronic credit ledger to be used only for the payment
of tax, under this Act.
 The amount available in the electronic cash ledger to be used for payment of tax,
interest, penalty, fees or any other amount payable under this Act.
Accountants.
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Electronic Tax Liability Ledger
 The electronic tax liability register shall be maintained in FORM GST PMT-1 and all
amounts payable by a taxable person under this Act shall be debited to the said
register.
The electronic tax liability register shall be debited by:
The amount payable towards tax, interest, late fee or any other amount payable
as per the return filed by the said person;
The amount of tax, interest, penalty or any other amount payable as determined
by a proper officer in pursuance of any proceeding under the Act;
The amount of tax and interest payable as a result of mismatch; or
Any amount of interest that may accrue from time to time.
Accountants.
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Electronic Credit Ledger
The electronic credit ledger shall be maintained in FORM GST PMT-2 for
each registered taxable person and every claim of input tax credit under the
Act shall be credited to the said Ledger.
The electronic credit ledger shall be debited to the extent of discharge of
any liability under this Act.
Where a registered taxable person has claimed refund of any unutilized
amount from the electronic credit ledger , the amount to the extent of the
claim shall be debited in the said ledger.
Accountants.
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Electronic Cash Ledger
 The electronic cash ledger should be maintained in FORM GST PMT – 3.
 It shall be credited by the amount deposited and debited for the payment therefrom
towards tax, interest, penalty, fee or any other amount.
 A challan in FORM GST PMT – 4 shall be generated to enter the details of the
amount to be deposited.
 The deposit can be made from any of the following modes :
 Internet Banking through authorized banks;
 Credit card or Debit card after registering the same with the Common Portal
through the authorised bank;
 National Electronic Fund Transfer (NEFT) or Real Time Gross Settlement
(RTGS) from any bank;
 Over the Counter payment (OTC) through authorized banks for deposits up to
Rs. 10,000 per challan per tax period, by cash, cheque or demand draft.
 The challan in FORM GST PMT - 4 shall be valid for a period of 15 days.
Accountants.
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Refund of Tax
 Any person claiming refund of any tax or interest, paid on such tax shall make an
application in FORM GST RFD-01.
The application shall be accompanied by:-
Documentary evidence that a refund is due,
When refund claimed is more than 5 lac rupees, document or other evidence
claiming incidence of tax has not fallen on any other person
 A taxable person may claim refund of any unutilized input tax credit only in the
following cases:
Where credit has accumulated on account of tax rate on inputs being higher than
tax rate on outputs;
Exports which are not subjected to export duty.
Exports of services.
 The order sanctioning the refund shall be issued within 60 days from the date of
filing the application.
 No refund shall be granted if the amount is less than Rs. 1000/-M/s Asija & Associates LLP, Chartered
Accountants.
20

Refund of Tax
The refundable amount shall be paid to the applicant if such amount is relatable to :
• Refund of tax on goods and/or services exported out of India or on inputs used in the
goods and/or services which are exported out of India;
• Refund of unutilized input tax credit;
• Tax or interest, paid by the applicant the incidence of which has not been passed onto
any other person;
• Tax or interest borne by such other class of applicant as the Central or a State
Government may specify.
• Notified supplies of goods/services received by any specialised agency of United
Nations Organization or any Multilateral Financial Institution and Organization
Consulate or Embassy of foreign countries.
A registered taxable person who has defaulted in furnishing any return or who is required
to pay tax, interest, penalty, which has not been stayed by any Court/Tribunal/Authority,
the Proper Officer may :
• withhold the refund due until the submission of return or tax, interest or penalty has
been paid;
• deduct from the refund due such tax, interest or penalty which is unpaid on his part.
Accountants.
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Order Sanctioning Refund
FORM GST
RFD 5
•If, on receipt of application the Proper Officer is satisfied that a refund is due and
payable, he may make an order for such refund.
FORM GST
RFD 6
•Where the amount of refund is completely adjusted against any outstanding tax liability of
GST or under any earlier law, an order giving details of the adjustment may be issued
FORM GST
RFD 7
• Where the amount claimed as refund is either not admissible or payable to the applicant
an application in FORM GST RFD-7 must be issued to the applicant.
FORM GST
RFD 8
•Where the amount becomes refundable, an order to be issued along with a payment advice
in FORM GST RFD-8 & the amount of refund is credited in applicant’s bank account.
•Where the amount of refund is not payable to the applicant, an order to be issued along
with an advice in FORM GST RFD-8, for the amount of refund which will be credited to
the Consumer Welfare Fund.
Accountants.
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Time Period of filing Refund
 Application for refund of tax or interest paid must be filed in FORM GST RFD-1
within 2 years from the relevant date.
 The limitation of 2 years is not applicable in case tax or interest paid is under any
protest.
 The following dates are recommended as relevant dates for different type of refund
cases:
Accountants.
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S.No. Situation Relevant Date
1 Goods are exported out of India by sea or
air
The date on which the ship or
the aircraft leaves India
2 Goods are exported by land Date on which goods pass the
frontier

Accountants.
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3 Goods are exported by post Date of despatch of goods by Post
Office to a place outside India
4 Deemed exports Date of filing the return
5 Person other than supplier Date of receipt of goods or
services
6 Services exported, where supply of service
had been completed prior to receipt of
payment
Date of receipt of payment

Accountants.
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7 Service exported, where service had been
received in advance of the invoice
Date of issue of invoice
8 Tax becomes refundable as a consequence of
judgement, decree, order or direction of
Appellate Authority/Tribunal/Court
Date of communication of such
judgement
9 Refund of unutilized input tax credit The end of the F.Y. in which
such claim for refund arises
10 Where tax is paid provisionally Date of adjustment of tax after
final assessment thereof
*In any other case date of payment of tax.

Delayed Refunds
 Interest to be paid if the amount to be refunded is not paid to the applicant within 60
days of receipt of the application .
 Interest to be paid from the date immediately after the expiry of the due date for
sanction of refund(60 days) till the date of refund.
 The Proper Officer will make an order for interest on delayed refunds in FORM GST
RFD-9, specifying:
 the amount of refund which is delayed;
 the period of delay for which interest is payable;
 the amount of interest payable;
 the amount of interest shall be credited to his bank account.
Accountants.
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Disclaimer
 This presentation has been prepared by our firm to provide a gist of the
applicable law pertaining to Model GST Law notified by the Government
of India for upcoming GST Act 2016, pending for ratification in
Parliament for applicability on or after 01/07/2017.
For detailed insight and for better understanding of the various provision
of the said law, the said presentation should be read along with related
provision of Model GST Law 2016(amended in November 2016).
Neither our firm nor any partner or employee or article of our firm shall
responsible for any decision taken on the basis of the said presentation
and without obtaining any professional guidance or consultation on the
matter for which reliance was made on this presentation.
Accountants.
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Thank youFor any queries kindly contact our GST Team :
Asija & Associates LLP
Chartered Accountants
H.O. : 34/5 , Gokhale Marg, Lucknow
Ph. No. : 0522-4004652,2205072
CA Rahul Mishra
Partner in Charge
(rahul.mishra@asija.in)
CA Pradumn Pandey
Executive Partner
(pradumn.pandey@asija.in
)
CA Amber Agrawal
Associate Director
(amber.agrawal@asija.in)
M/s Asija & Associates LLP, Chartered28

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