GST Practice Session 4
Topics Covered : Input Tax Credit / Returns under GST
Illustration 01
Enumerate the conditions necessary for availing ITC under GST law.
[MTP Nov 22]
Solution
No registered person shall be entitled to the credit of any input tax in respect of any
supply of goods or services or both to him unless:
i) he is in possession of tax invoice or debit note or such other tax paying documents as
may be prescribed;
ii) he has received the goods or services or both;
iii) subject to section 41 of the CGST Act, the supplier has actually paid the tax charged in
respect of the supply to the Government;
iv) he has furnished the return under section 39; and
v) the details of the invoice/debit note in respect of said supply has been furnished by the
supplier in the statement of outward supplies (GSTR-1) and such details have been
communicated to the recipient of such invoice/debit note in the manner specified
under section 37.
Illustration 02
Discuss the ITC entitlement of a newly registered person under GST law
[MTP Nov 22]
Solution
A person applying for registration can take input tax credit 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. If the person was liable to take registration
and he has applied for registration within thirty days from the date on which he became
liable to registration, then ITC of inputs held in stock and inputs contained in semi- finished
or finished goods held in stock on the day immediately preceding the date on which he
became liable to pay tax can be taken.
In case of voluntary registration, ITC of such goods held in stock on the day immediately
preceding the date of registration can be taken
Illustration 03
Rajul is a registered software consultant. On account of her ill health, she could not
provide any services during the month of October. However, she had to incur all the
expenses relating to her office. She paid 75,000 to various vendors. The total input tax
involved on the goods and services procured by her is 13,500. Out of the total bills paid by
her, one bill for 15,000 relates to security services availed for security of her office, tax on
which is payable under reverse charge. Input tax involved in such bill is 2,700.
Rajul is of the opinion that for the month of October, no GST is payable from electronic
cash ledger as she has sufficient balance of ITC for payment of GST under reverse charge
on security services.
Do you think Rajul is right? Explain with reasons.
[MTP Nov 22]
Solution
The amount available in the electronic credit ledger, i.e. ITC may be used for making any
payment towards output tax. Output tax in relation to a taxable person, means the tax
chargeable on taxable supply of goods or services or both made by him or by his agent but
excludes tax payable by him on reverse charge basis.
Therefore, ITC cannot be used to pay the tax liability under reverse charge. The same is
always required to be paid through electronic cash ledger and not electronic credit ledger.
Thus, Rajul is wrong and she will need to pay the GST of 2,700 on security service through
electronic cash ledger.
Illustration 04
A registered person must pay to the supplier, the value of the goods and/or services along
with the tax within 180 days from the date of issue of invoice. State the exceptions to said
rule
[MTP May 23]
Solution
The condition of payment of value of supply plus tax within 180 days does not apply in the
following situations:
(a) Supplies on which tax is payable under reverse charge
(b) Deemed supplies without consideration
(c) Additions made to the value of supplies on account of supplier’s liability, in relation to
such supplies, being incurred by the recipient of the supply.
Illustration 05
Restrictions have been imposed on the use of amount available in the electronic credit
ledger vide rule 86B of the CGST Rules, 2017. Is there any exceptions to rule 86B? If yes,
state the exceptions.
[RTP May 22]
Solution
Restrictions have been imposed on the use of amount available in electronic credit ledger
vide rule 86B of the CGST Rules, 2017. Yes, there are exceptions to rule 86B. The
exceptions to rule 86B are as under:-
(i) Payment of Income Tax more than 1 lakh
Rule 86B may not apply in cases whereby person mentioned below have deposited sum of
more than 1 lakh as income tax under the Income-tax Act, 1961 in each of the last 2 financial
years for which the time limit to file return of income under section 139(1) of the said Act
has expired
1. The registered person or
2. The karta/proprietor/the managing director of the registered person;
3. Any of the two partners, whole-time directors, members of Managing Committee of
Associations or Board of Trustees of the registered person, as the case may be.
(ii) Receipt of refund of input tax credit of more than 1 lakh
Rule 86B may not apply whereby registered person has received a refund amount of more
than lakh on account of unutilized input tax credit under the following:
1. zero-rated supplies made without payment of tax
2. Inverted duty structure
It is pertinent to note that refund should have been received in the preceding financial
year.
(iii) Payment of total output tax liability through electronic cash ledger in excess of 1% of
total output tax liability
If the registered person has paid more than 1% of total output tax liability using electronic
cash ledger upto the said month in the current financial year, the restrictions as specified
in Rule 86B shall not apply.
It is pertinent to note that GST liability paid under reverse charge mechanism should not be
taken into account while calculating the total output liability paid through electronic cash
ledger.
(iv) Specified registered person:
Rule 86B would not be applicable in case of below-mentioned registered person:
1. Government Department; or
2. a public sector undertaking; or
3. a local authority; or a statutory body.
However, Commissioner or an officer authorised by him in this behalf may remove the said
restriction after such verifications and such safeguards as he may deem fit.
Illustration 06
Briefly explain the provisions relating to reversal of input tax credit in case of non-payment
of tax by the supplier and re-availment thereof?
[PYQ Nov 23]
Solution
Where a registered person (recipient) avails ITC in GSTR-3B for a tax period in respect of an
invoice/debit note details of which have been furnished by supplier in GSTR-1/using IFF, but
supplier does not furnish his return till 30th September following the end of FY in which the
ITC in respect of invoice/ debit note has been availed, then the amount of ITC shall be
reversed by recipient, while furnishing a return in Form GSTR-3B on or before 30th
November following the end of such FY during which such ITC has been availed.
However, where the said amount of ITC is not so reversed by recipient, such amount shall
be payable by the said person along with interest.
Further, where the said supplier subsequently furnishes the return in Form GSTR-3B for the
said tax period, the said registered person may re-avail the amount of such credit in the
return in Form GSTR-3B for a tax period thereafter
Illustration 07
Rimjhim Sales, a registered supplier, receives 100 invoices (for inward supply of goods/
services) involving GST of 10 lakh, from various suppliers during the month of January,
2022. Out of 100 invoices, details of 80 invoices involving GST of 6 lakh have been
furnished by the suppliers in their respective GSTR-1s filed on the prescribed due date
therefor and such details have also been duly communicated to the recipients of such
invoices in Form GSTR-2B.
Compute the ITC that can be claimed by Rimjhim Sales in its GSTR-3B for the month of
January, 2022 to be filed by 20th February assuming that GST of 10 lakh is otherwise
eligible for ITC
[RTP Nov 22]
Solution
ITC to be claimed by Rimjhim Sales in its GSTR-3B for the month of January to be filed by
20th February will be computed as under-
Invoices Amount of ITC Amount of ITC that can
involved in the be availed
invoices
80 invoices furnished in 6 lakh 6 lakh
GSTR-1 [Refer Note 1]
20 invoices not furnished in 4 lakh Nil
GSTR-1 [Refer Note 2]
Total 10 lakh 6 lakh
Notes:
1. 100% ITC can be availed on invoices furnished by the suppliers in their GSTR-1.
2. Input tax credit in respect of any supply of goods or services or both is available to a
registered person only, inter alia, if the details of the invoice/debit note in respect of said
supply has been furnished by the supplier in the statement of outward supplies (GSTR-1)
and such details have been communicated to the recipient of such invoice/debit note in
the manner specified under section 37. Thus, in respect of 20 invoices not furnished in
GSTR-1s, no ITC is available.
Illustration 08
a) Babla & Bros. is exclusively engaged in making exempt supply of goods and is thus, not
registered under GST. On 1st October, the exemption available on its goods gets
withdrawn. On that day, the turnover of Babla & Bros. was ₹ 50 lakh. Examine the
eligibility of Babla & Bros. for availing ITC, if any.
b) Mamta Sales trades in exempt goods and provides taxable services. It is registered
under GST. On 1st October, the exemption available on its goods gets withdrawn.
Analyze the scenario and determine the eligibility of Mamta Sales for availing ITC, if
any, on inputs and/or capital goods used in the supply of exempt goods.
[RTP Nov 2020]
Solution
(a) Since the exemption available on goods being supplied by Babla & Bros. is withdrawn,
it becomes liable to registration as its turnover has crossed the threshold limit (for
registration) on the day when the exemption is withdrawn.
Assuming that Babla & Bros. applies for registration within 30 days of 1st October and
it obtains such registration, it will 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 it becomes liable to pay
tax, i.e. 30th September [Section 18(1)(a) of the CGST Act, 2017]. Input tax paid on
capital goods will not be available as input tax credit in this case.
(b) If the exempt supply made by a registered person becomes a taxable supply,
provisions of section 18(1)(d) of the CGST Act, 2017 become applicable. In the given
case, since Mamta Sales is a registered person, section 18(1)(d) will be applicable.
As per section 18(1)(d), Mamta Sales will 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, i.e. 30th September. Input tax credit on capital goods will be
reduced by 5% per quarter or part thereof from the date of invoice
Illustration 09
As per the CGST Act 2017, Vishnu Limited was not mandatorily required to get registered,
however it opted for voluntary registration and applied for registration on 12thFebruary
2024. Registration certificate has been granted by the Department on 24th February 2024,
Vishnu Limited is not engaged in making inter-State outward taxable supplies. The CGST
and SGST liability for the month of February, 2024 is ₹ 31,000 each. Vishnu Limited provides
the following information of goods held in stock on 23rd February 2024:
SNo.S SNo. Particulars Amount (₹)
1. Capital goods procured on 5th February 2024, (Rate of 2,00,000
CGST and SGST @ 6% each) being intra State supply
2. Inputs contained in finished goods stock held were 3,00,000
procured on 13th February 2023 (Rate of IGST @18%) being
inter-State supply.
3. Value of Inputs received on 10th October, 2023 contained in 2,50,000
semi–finished goods held in stock (Rate of CGST and SGST
@ 6% each) being intra-State supply.
4. Inputs procured on 1st February 2024 lying in stock of semi 1,50,000
-finished goods (Rate of CGST and SGST @ 7.5 % each)
being intra-State supply.
5. Inputs procured on 8th February 2024 lying in stock of 60,000
finished goods. (Rate of IGST @ 18%) being inter-State
supply.
You are required to determine the eligible ITC available and amount of net minimum GST
to be paid in cash by Vishnu Limited for the month of February 2024.
[PYQ May 24]
Solution
Computation of minimum net GST to be paid in cash by Vishnu Limited for the month of
February 2024
Particulars CGST (₹) SGST (₹)
Output tax liability for the month 31,000 31,000
Less: Input tax credit (ITC) [Refer note below] 5,400(IGST) 5,400(IGST)
IGST credit is utilized first for payment of CGST and SGST 25,600 25,600
liability in equal proportion. CGST credit is utilized for (CGST) (SGST)
payment of CGST liability and SGST credit is utilized for
payment of SGST liability.
Net GST payable (in cash) Nil Nil
Note: Person taking voluntary registration can avail ITC on inputs contained in semi-
finished or finished goods held in stock on the day immediately preceding the date of grant
of registration, i.e. on 23.02.2024, only within 1 year from date of issue of tax invoice by
supplier.
Computation of eligible ITC available
Particulars CGST (₹) SGST (₹) IGST (₹)
Capital goods [Person taking Nil Nil Nil
voluntary registration cannot
avail ITC on capital goods held
on the day immediately
preceding the date of grant of
registration.]
Inputs procured on 13th Nil Nil Nil
February 2023
Inputs procured on 10th October 15,000 15,000 Nil
2023
Inputs procured on 1st February 11,250 11,250 Nil
2024
Inputs procured on 8th February Nil Nil 10,800
2024
Total ITC 26,250 26,250 10,800
Illustration 10
