FAQ ON CHAPTER 10 RELATING TO INPUT TAX CREDIT PART-II

GST Update 25.10.2016

GST DAILY DOSE OF UPDATION:-

FAQ ON CHAPTER 10 RELATING TO INPUT TAX CREDIT PART-II:- This update covers some more clarifications issued in FAQs pertaining to input tax credit.

Question no. 8:-It clarifies that input tax credit attributable to only taxable supplies can be taken by registered taxable person. It is important to note that credit on capital goods also would now be permitted on proportionate basis. However, presently the cenvat credit of capital goods exclusively used in exempted goods/services is not admissible whereas cenvat credit is available if the capital goods are partly used in exempted goods/services and partly for taxable goods/services. However, in GST regime, the provisions of proportionate cenvat credit will be applicable for capital goods also.

Question no. 10:-This speaks about input tax eligibility when there is change in constitution of a registered taxable person. The transferor shall be allowed to transfer the input tax credit that remains unutilised in its books of accounts to the transferee provided that there is specific provision for transfer of liabilities. The provision is similar to Rule 10 of Cenvat Credit Rules, 2004 which allows transfer of unutilised cenvat credit balance to the amalgamated company in case of amalgamation.

Question no. 16:-This clarifies that input tax credit cannot be availed after expiry of one year from the date of issue of invoice relating to such supply. This provision is presently there for credit availment under Central Excise and Service Tax Laws also but there are practical difficulties of this provision. As it is known that if duty liability is confirmed then consequential benefits should also be allowed but the time limit of one year restricts credit availment in situations where demand is confirmed on account of investigation or interpretational issues.

Question no. 20:-It speaks about the category of supplies which is eligible for credit availment. It clarifies that zero rated supplies are eligible for credit availment but exempt supplies are not eligible. Exports are treated as zero rated supplies and so the credit of inputs used in exports are eligible for credit availment.

Question no. 23:-It is clarified that input tax credit on motor vehicles can be availed only if the taxable person is in the business of transport of passengers or goods or is providing the services of imparting training on motor vehicles. Although it was propagated that there will be seamless flow of credit in GST regime but it appears that the restrictions of credit as contained in present Cenvat Credit Rules, 2004 will be carried forward in the new GST regime.

We will carry some other questions in our next update.

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GST Update 25.10.2016

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