What is input tax credit in GST?
The one thing that really takes the spot light in the topic of GST is input tax credit under GST.
Input credit means that at the time of paying tax on output the tax paid in inputs can be reduced. The input credit in GST means for example: If you are a manufacturer, supplier, agent, e-commerce operator, aggregators or any of the persons mentioned above registered under GST are eligible to claim input credit for tax paid by you on your purchases. If the payable tax on output is Rs.500 the tax paid on input will be 350 and you can claim the input and only pay 150 as tax.
The item on which the credit is not allowed are:
1. Motor vehicles and conveyances except the cases under
2. The mother vehicles as such are further supplied that is sold.
3. Transport of passengers
4. Used for imparting training on driving flying, navigating such vehicles or conveyances
5. Transportation of goods
6. Food and beverage, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery
(If the goods the goods and services are then to deliver the same category of services or as a part of a composite supply, credit will be available)
7. Sale of membership in a club, health, fitness centre.
8. Rent a can, health insurance and life insurance except the following.
• It is made obligatory you the government for employees to provide it to its employees
• Goods or services are taken to deliver the same category of services or as a part of a composite supply the credit will be available.
9. The travel benefits extended to the employees on vacation such as leave or how, every travel concession.
10. Works contract service for construction of an immovable property (except plant and machinery or for providing further supply of works contract service)
11. The goods and services where the tax have been paid under composition scheme
12. Goods and services for construction of an immovable property whether to be used for personal or business use.
13. Goods or services used for personal use.
14. Goods or services both received by a non resident taxable person except for any of the goods imported by him or her.
15. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
16. Input tax credit will not be available in the case of any tax paid due to non payment or short tax payment, excessive refund or input tax credit utilised or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.
Conditions to claim the input tax credit under GST
Only a registered person will been eligible to claim the input tax credit under the following conditions:
1. Receipt of goods or services
2. Furnishing of a return
3. Possession tax invoice or debit note or document evidencing payment
4. Goods delivered by supplier to other person against a document of transfer of title of goods
5. Where the goods are received in huge number or quantity or instalments input to credit will be allowed to be availed when the last lot or instalment is received
6. No input tax credit will be allowed if depreciation have been claimed on tax component of a capital good
7. If invoice or debit note is received later
• The due of filing return for September off next financial year
• Or filing annual return whichever is later
No Input tax credit will be allowed
8. Failure to the supplier towards supply of goods and services within 180 days from the date of invoice input tax credit claimed that it will be added to output liability and interest to and interest to such tax involved. On the payment to supplier input tax credit will again be allowed to be claimed.
9. Common credit of input tax credit used commonly for
• Effecting exempt and taxable supplies
• Business and non business activity
Credit will been allowed as per the rules.
More about Input tax credit
1. You can have an unclaimed input tax credit due to tax on purchased being higher than tax on sale. In such case you can carry forward or claim a refund.
2. If tax on inputs is higher than tax on output you can carry forward input tax credit or ask for a refund
3. If tax on output is higher than tax on input the you have to pay the remaining amount
4. There is no interest paid by the government on input tax balance.
5. The input tax credit cannot be take on purchase invoices which are more than a year old. This period is calculated from the given date of tax invoice.
6. As GST is charged on both goods and services the input tax credit can be availed on both, except those which are on the negative list
7. Input tax credit is also allowed on capital goods
8. Input tax credit will be allowed after GST return has been filed for September following end of the financial year to which such invoice pertains or any filing of relevant annual return depending on whatever is earlier
9. The input tax credit is not allowed for goods and services of any personal use