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

GST Update 26.10.2016

GST DAILY DOSE OF UPDATION:-

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

Question no. 24:-This clarifies that where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, input tax credit shall not be allowed on the said tax component. Similar provisions are prevalent in force wherein double benefit cannot be availed by the assessees. If the assessee has claimed depreciation on the tax component under Income Tax Laws, then credit of such tax component cannot be taken. However, there are various decisions wherein it has been held that if the benefit of depreciation is withdrawn by revising the Income Tax Return, then the assessee can take the credit of tax component involved in the capital goods.

Question no. 25:-This speaks about the conditions necessary for claiming input tax credit. The conditions are possession of tax paying document issued by supplier, receipt of goods/services, payment of tax to the government and furnishing of return. If any of the conditions is not satisfied, input tax credit would not be admissible. The condition that tax should have been paid and valid return should be filed are interlinked in the sense that a return filed without payment of taxes will be invalid return and credit would not be allowed to recipient. In contrast, at present, as far as recipient has paid taxes to the seller, credit is admissible irrespective of the fact whether supplier has made payment of tax to government or not. However, in GST regime, if supplier defaults in payment of tax even due to clerical error, his return will be considered as invalid and credit will be denied to all recipients.

Question no. 26:-This clarifies that in case goods are received in lots or instalments against an invoice, registered taxable person shall be entitled to the credit upon receipt of last lot or instalment. However, if the last instalment is received after a period of one year from the date of issue of invoice, there will be dispute as regards availment of input tax credit.

Question no. 29:-This speaks about the negative list with respect to admissibility of input tax credit. The restrictions as regards availment of credit on motor vehicles, outdoor catering, services for personal use of employees, works contract services etc. are being incorporated in the GST regime also. Hence, it appears that the promise of seamless credit has not been kept by the government and the prohibitions prevalent in Cenvat Credit Rules, 2004 are also imported in the new taxation reform.

Question no. 31:- This clarifies that in case of sale of used capital goods on which input tax credit has been taken, the registered taxable person shall pay amount equal to input tax credit reduced by percentage points as specified or the tax on transaction value of such capital goods, whichever is higher. It is pertinent to note that similar provisions are presently in force in Cenvat Credit Rules, 2004.

We will carry some other questions in our next update.

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GST Update 26.10.2016

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