Input Tax Credit – CA Inter Tax Study Material

Input Tax Credit – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.

Input Tax Credit – CA Inter Taxation Study Material

Question 1.
Bharat Associates Pvt. Ltd. purchased machinery worth ₹ 9,00,000 (excluding GST) on 20-07-2017 on which it paid GST @ 18%. It availed the ITC. On 05-03-2018 it sold the machinery for ₹ 7,00,000 (excluding GST) to Hindustan Associates Pvt. Ltd. The GST rate on sale is 18%. What will be the course of action for Bharat Associates Pvt. Ltd. to follow under CGST Act, 2017? [May 2018 Old Course, 4 Marks]
Answer:
If capital goods or plant and machinery on which input tax credit (ITC) has been taken are supplied outward by a registered person, he must pay an amount that is higher of the following:
(a) ITC taken on such goods reduced by 5% per quarter of a year or part thereof from the date of issue of invoice for such goods or
(b) tax on transaction value.
Accordingly, the amount payable on supply of machinery by Bharat Associates Pvt. Ltd. Shall be computed as follows:

ITC taken on the machinery (₹ 9,00,000 × 18%)1,62,000

	Amount (₹)
Less: ITC pertaining to the period of usage of the capital goods	24,300
(₹ 1,62,000 × 5%) × 3 quarters
Amount of reduced ITC based on percentage points (A)	1,37,700
Duty leviable on transaction value (₹ 7,00,000 × 18%) (8)	1,26,000
Amount payable towards disposal of machinery is higher of (A) and (8)	1,37,700

Question 2.
Harshgeet Pvt. Ltd. a registered supplier is engaged in the manufacture of taxable goods. The company provides the following information pertaining to GST paid on the purchases made/input services availed by it during the month of July, 2018 :

Sr. No.	Particulars	GST Paid
(1)	Raw Material (To be received in September, 2018)	2,50,000
(2)	Membership of a club availed for employees working in the factory	1,45,000
(3)	Inputs to be received in 5 lots, out of which 3rd lot was received during the month.	80,000
(4)	Trucks used for transport of raw material	40,000
(5)	Capital Goods (out of 3 items, invoice for 2 items is missing and GST paid on that item is ₹ 80,000.)	1,50,000

Determine the amount of Tax Credit available with Harshgeet Pvt. Ltd. for the month of July, 2018 by giving the necessary explanation for treatment of various items. All the conditions necessary for availing the ITC have been fulfilled. [Nov. 2018 Old Course, 5 Marks]
Answer:
Computation of ITC available with Harshgeet Pvt. Ltd. for the month of July, 2018

Particulars	Note	GST Paid
Raw Material	(1)	Nil
Membership of a club availed for employees working in the factory	(2)	Nil
Inputs to be received in 5 lots	(3)	Nil
Trucks used for transport of raw material	(4)	40,000
Capital Goods	(5)	1,50,000
Total ITC available		1,10,000

Notes:

1. ITC not available as raw material is not received in July, 2018
2. Blocked credit in terms of section 17(5) of the CGST Act, 2017
3. In case of goods received in lots, ITC can be taken only upon receipt of the last lot
4. ITC of GST paid on motor vehicles is allowed only when used, interalia, for transportation of goods in terms of section 17(5) of the CGST Act, 2017
5. ITC of GST paid on items for which invoice is missing is not available. So, ITC of ₹ 80,000 is not available

Question 3.
Jamku Ltd. a registered person is engaged in the business of spices. It provides following details for GST paid during October, 2018:

SI. No.	Particulars	GST paid (₹)
1	Raw spices purchased:
	♦ Raw spices used for furtherance of business	50,000
	♦ Raw spices used for personal use of Directors	20,000
2	Electric machinery purchased to be used in the manufacturing process.	25 000
3	Motor vehicle used for transportation of the employee	55,000
4	Payment made for material and to contractor for construction of staff quarter	1,25,000

Determine the amount of ITC available to Jamku Ltd. for the month of October, 2018 with all related workings and explanations.
All the conditions necessary for availing the ITC have been fulfilled. [May 2019 Old Course, 4 Marks]
Answer:
Computation of ITC available with Jamku Ltd. for the month of October, 2018

Particulars	Note	ITC (₹)
Purchase of Raw spices for furtherance of business	(1)	50,000
Purchase of Raw spices for personal use of Directors	(2)	Nil
Electric machinery purchased to be used in the manufacturing process.	(1)	25,000
Motor vehicle used for transportation of the employee	(3)	Nil
Payment made for material and to contractor for construction of staff quarter	(4)	Nil
Total ITC available for the month October, 2018		75,000

Notes:
(1) Every registered person is entitled to take credit of input tax charged on any supply of goods to him which are used or intended to be used in the course or furtherance of his business.

(2) ITC is not available on goods used for personal consumption.

(3) ITC on motor vehicles can be availed, inter alia, when they are used for making the taxable supply of transportation of passengers. In the given case, since the supplier is in the business of spices, it cannot avail credit on motor vehicle used for transportation of the employee. Thus, ITC on motor vehicle used for transportation of the employee is blocked credit.

(4) ITC is not available on goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Question 4.
Dina Ltd., a registered supplier from Maharashtra, is in the manufacturing of Passenger auto. The company provides the following details of purchases made/services availed by it during the month of March 2019:

Sl. No.	Particulars	GST Paid (₹)
i	Purchase of Iron which is as a raw material [Goods were received in two instalments, first one in March 2019 and the second instalment was received in April 2019]	2.50,000
ii	Purchase of accessories which were delivered directly to the Dealers of the company. Only invoice was received by Dina Ltd.	90,000
iii	Purchase of Bus (Seating capacity 15) for the transportation of employees from their residence to company and back	1,97,000
iv	Input tax credit on general insurance taken on a car used by Executives of the company for official purposes	5,200
v	Payment made to M/s Tasty Caterers for providing daily breakfast & lunch to the employees of the company, as a voluntary staff welfare measure	54,700

You are required to determine the eligible Input Tax Credit available to M/s. Dina Ltd. for the month of March 2019, by giving brief explanations for treatment of various items. Subject to the information given above. All the other conditions necessary for availing input tax credit have been fulfilled. [Nov. 2019 Old Course, 5 Marks]
Answer:
Computation of input tax credit (ITC) available with Dina Ltd. for the month of March 2019

Particulars	Note	ITC (₹)
Purchase of Iron which is as a raw material	(1)	‘ Nil
Purchase of accessories which were delivered directly to the Dealers of the company	(2)	90,000
Bus for the transportation of employees from their residence to company and back	(3)	1,97,000
General insurance taken on a car used by Executives of the company for official purposes	(4)	Nil
Payment made to M/s Tasty Caterers for providing daily breakfast & lunch to the employees of the company	(5)	Nil
Total ITC available for the month October, 2018		2,87,000

Notes:
(1) When inputs are received in instalments, ITC can be availed only on j the receipt of last instalment. Hence, since last instalment is received j in April 2019, ITC cannot be availed in March 2019.

(2) Goods delivered to another person on the direction of the registered person by way of transfer of documents of title or otherwise, either ; before or during the movement, are deemed to have been received by such registered person. Thus, ITC is available to the registered person, on whose order/direction the goods are delivered to a third person.

(3) ITC on motor vehicles for transportation of persons with seating capacity more than 13 persons (including the driver) used for any purpose is allowed.

(4) ITC on motor vehicles for transportation of persons with seating capacity less than or equal to 13 persons (including the driver) is blocked except when the same are used for (i) making further taxable supply of such motor vehicles (ii) making taxable supply of transportation of passengers (iii) making taxable supply of imparting training on driving such motor vehicles. Further, ITC is not allowed on services of general insurance relating to such ineligible motor vehicles.

Since, the car is not used for any of the eligible purposes, ITC thereon is blocked and thus, ITC on general insurance taken on such car is also blocked.

(5) ITC on outdoor catering is blocked except (i) in the case of sub-contracting, ie. when such service is used by the taxpayer who is in the same line of business (ii) when such service is provided by the employer to its employees under a statutory obligation.

Since the company is not an outdoor caterer and it is providing such services to its employees as a voluntary staff welfare measure, ITC on such outdoor catering services is blocked.

Question 5.
Documents based on which ITC is taken should contain at least certain details. What are they? [Nov. 2019 Old Course, 4 Marks]
Answer:
The documents based on which ITC is taken should contain at least the following details:

1. Amount of tax charged
2. Description of goods or services
3. Total value of supply of goods and/or services
4. GSTIN of the supplier and recipient
5. Place of supply in case of inter-State supply

Question 6.
Fun Pharma Private Limited, a registered supplier is engaged in the manufacture of taxable goods. The company provides the following information of GST paid on the purchases made/input services availed by it during the month of September 2017:

	Particulars	Amount (₹)
(i)	Purchase of cabs used for the transportation of its employees	Nil
(ii)	Inputs consisting of three lots, out of which first lot was received during the month	Nil
(iii)	Capital Goods	2,50,000
(iv)	Outdoor catering service availed on Women’s day	Nil

Determine the amount of Input Tax Credit available with M/s Fun Pharma Private Limited for the month of September 2017 by giving necessary explanations of treatment of various items. All the conditions necessary for availing the input tax credit have been fulfilled. [May 2018, 4 Marks]
Answer:
Computation of input tax credit (ITC) available with Fun Pharma Private Limited
(for the month of September, 2017)

Particulars	Note	Amount (₹)
Purchase of cabs used for the transportation of its employees	(1)	Nil
Inputs consisting of three lots, out of which first lot was received during the month	(2)	Nil
Capital Goods	(3)	2,50,000
Outdoor catering service availed on Women’s day	(4)	Nil
Total ITC		2,25,000

Notes:
(1) Section 17 of CGST Act, 2017 provides that ITC on motor vehicles can be availed, inter alia, when they are used for making the taxable supply of transportation of passengers ie., if the taxable person is in the business of transport of passengers. In the given case, since the supplier is a manufacturer, it cannot avail credit on cabs used for transportation of its employees.

(2) When inputs are received in instalments, ITC can be availed only on receipt of last instalment in terms of section 16 of CGST Act, 2017.

(3) ITC cannot be taken on missing invoice. The registered person should have the invoice in its possession to claim ITC vide section 16 of CGST Act, 2017.

(4) ITC on outdoor catering is specifically disallowed unless the same is used for making outward taxable supply of the same category or as an element of the taxable composite or mixed supply in terms of section 17 of CGST Act, 2017.

Question 7.
CANWIN Ltd., a registered supplier, is engaged in the manufacture of Tanks. The company provides the following information pertaining to GST paid on the purchases made/input services availed by it during the month of January 2018:

	Particulars	Amount in (₹?)
(i)	Purchase of Machinery where debit note is issued	1,15,000
(ii)	Input purchased was directly delivered to Mr. Joe, a job worker and a registered supplier	80,000
(iii)	Computers purchased (Depreciation was claimed on the said GST portion under the Income-Tax Act, 1961)	50,000
(iv)	Works Contract services availed for construction of Staff quarters within the company premises	4,25,000

Determine the amount of ITC available to M/s. CANWIN Ltd. for the month of January 2018 by giving brief explanations for treatment of various items. Subject to the information given above, all the conditions necessary of availing the ITC have been fulfilled. [Nov. 2018, 4 Marks]
Answer:
Computation of input tax credit (ITC) available with CANWIN Ltd. for the month of January 2018

Particulars	Note	Amount in (₹)
Purchase of Machinery w here debit note is issued	(1)	1,15,000
Input purchased was directly delivered to Mr. Joe, a job worker and a registered supplier	(2)	80,000
Computers purchased and depreciation was claimed on the GST portion	(3)	Nil
Works Contract services availed for construction of Staff quarters within the company premises		Nil
Total ITC		1,95,000

Notes:

1. Input tax credit on goods purchased on the basis of debit note which is a valid document is allowed.
2. Where depreciation has been claimed on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component is not allowed.
3. Input tax credit on works contract services supplied for construction of an immovable property is specifically disallowed except where it is an input service for further supply of works contract service.