Input Tax Credit Under Model GST Law-Part1

Who is Eligible to Take Input Tax Credit?

Every registered dealer subject to conditions and restrictions as prescribed in the act is entitled to take credit on any supply of goods or services to him which are used in the course or furtherance of his business and the said amount will be credited to electronic ledger

What Percentage of Credit Can Be Taken In Case of Capital Goods and Other Assets?

Under Cenvat Credit Rules, 50% is allowed first year and 50% in the second year. However, under Model GST Law, the percentages are yet to be notified. For Pipelines and telecommunication fixed to earth, following conditions have been specified

1. Shall not exceed 1/3 of total input credit in first year
2. Shall not exceed 2/3 of total input credit in second year
3. Balance can be claimed in third year

What are the Conditions to Avail Input Tax Credit?

The registered dealer should be comply with following to avail Input Tax Credit

1. Tax Invoice, Debit Note or any other prescribed document in the act
2. Receipt of Goods or Services
3. The tax payment is made
4. Return should be filed on or before 20^th

What if the Amount is not Paid to the Supplier of Services?

In this situation, the provisions of Model GST Law is quite similar to availing Service Tax Input.  If the amount is not paid to the supplier of services, within three months from the date of invoice issued by the supplier then such input tax credit has to be reversed.

What’s the Time Limit to Avail Input Credit?

In normal scenario, time limit to avail input credit is earlier of

input tax credit in respect of any invoice or debit note for supply of goods or services after furnishing of the return under section 34 for the month of September following the end of financial year to which such invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Note: The time limit to file annual return is on or before 31^st December .

What are Restrictions on Availing Input Credit?

On following types of Goods or Services Input Tax Credit are not allowed

1. Motor vehicles and other conveyances except When they are used for supply of such vehicle or conveyance, or transport of passengers, imparting training on activities such as drving, flying, navigating such vehicles or conveyances or for transportation of goods.

Supply of goods and services such as

a)food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where such inward

supply of goods or services of a particular category is used by a registered taxable person for making an outward taxable supply of the same category of goods or service

b) membership of a club, health and fitness centre, rent-a-cab, life insurance, health insurance except where the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession

2.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

3.goods or services received by a taxable person for construction of an immovable  roperty on his own account, other than plant and machinery,even when used in course or furtherance of business

4.goods and/or services on which tax has been paid under section 9

5.goods and/or services used for personal consumption

6.goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples

any tax paid in terms of sections 67, 89 or 90