Input Tax Credit (ITC) Law: Provisions and Issues

Input Tax Credit (ITC)

Law and issues under ITC

by

CA. Kapil Aggarwal &

CA. Vijay Narayan

1

•

Topics covered:

Input Tax Credit –basic provisions

Eligibility and conditions – Sec-16

Apportionment of credit – 17 (1) to (4)

Blocked Credit – Sec 17 (5)

Some more Issues under ITC

ITC in special circumstances – Sec-18

Job Work and ISD

Open House - Questions

2

INPUT

“Input” has been defined in section 2 (59) of the CGST Act.

Input means

•

ANY

goods

•

Other than

 capital goods

•

Used or intended to be used

•

By a supplier

•

In the course or furtherance of business.

3

“goods” has been defined in section 2 (52) of the CGST Act.

Goods means

•

Every kind of moveable property

•

Other than

 money and securities

•

But includes

•

Actionable claim

•

Growing crop, grass and things attached to or forming part of land which are agreed to be

severed before supply or under a contract of supply

capital goods

4

“Capital goods” has been defined in section 2 (52) of the CGST Act.

Capital Goods means

•

Goods

•

The value of which is 

capitalised in the books of accounts 

of the person claiming ITC

•

And which are 

used or intended to be used

•

In the course or furtherance of business

Issue on availability of ITC

5

Issue on availability of ITC

6

Input service

“Input service” has been defined in section 2 (60) of the CGST Act.

Input service means

•

Any

service

•

Used or intended to be used

•

By a supplier

•

In the course or furtherance of business.

7

“service” has been defined in section 2 (102) of the CGST Act.

Service means

•

Anything other than Goods, money and securities

•

But includes

•

Activities relating to use of money or

•

its conversion by cash or by any other mode, from one form, currency terms or

denomination, to another form, currency or denomination for which a separate

consideration is charged

Conclusion: Money and securities are neither goods, nor services.

INPUT TAX

“Input tax” has been defined in section 2 (62) of the CGST Act.

Input tax in relation to a registered person, means

•

The IGST /CGST/SGST/UTGST charged on

•

any supply 

of

•

goods or services or both

•

made to him

•

and 

includes

•

The IGST charged on Import of Goods

•

the tax payable under sub-section (3) and (4) of of section 9. (RCM)

•

the tax payable under sub-section (3) and (4) of of section 5 of IGST

•

the tax payable under sub-section (3) and (4) of of section 9 of SGST

•

the tax payable under sub-section (3) and (4) of of section 7 of UGST

•

But does not include the tax paid under composition levy

8

INPUT TAX CREDIT

9

“Input tax Credit” has been defined in section 2 (63) of the CGST Act.

Input tax Credit Means



 CREDIT of Input Tax.

Burden of proof on Taxable Person availing ITC (Sec 155) :



Where any person claims that he is eligible for ITC under this Act,



 the burden of proving such claim shall lie on such person.

Eligibility and conditions for

availing Credit –

Sec-16 (1) to (4) and

Rule 36 and 37

10

Eligibility for Taking ITC

11

Section 16 (1): Eligibility and conditions for taking ITC



Every 

registered taxable person

 shall  be entitled to credit of

Input Tax



charged on 

any supply

 of goods or services or both to him



 which are 

used or intended to be used in the course or

furtherance of his business



 and the said amount shall be credited to the electronic credit ledger of

such person

.



conditions and restrictions on taking ITC – prescribed in Rules

Section 16 (1)

Conditions for availing

ITC

Section 16(2)

Possession

of Invoice/

DN/tax

paying

document

Received

the goods

or services

or both

Tax charged on such supply has

been actually paid to the

government either in cash or

through utilization of input tax

credit

Furnishing

of return u/s

39

First Proviso: Receipt of Goods in lots/ installments

In such case, the registered person shall be entitled to 

take credit upon receipt of

last lot or installment.

Explanation to Sec 16 (2) (b): 

Deemed receipt of goods/services

Where 

goods are delivered by the supplier to a recipient or any other person on the

direction of such registered person

, whether acting as an agent or otherwise,

before or during movement of goods, either by way transfer of documents of the

title to goods or otherwise

Where the 

services are provided by the supplier to any person on the direction of

and on account of such registered person

.

12

Documentary Requirement and Conditions of ITC (RULE 36(1) & (2)

)

13

Rule 36 (1):

 The ITC shall be availed by a registered person ( incl. ISD), 

on the basis of 

any 

of the following

documents, namely

:-

(a) an invoice issued by the supplier of goods or services or both in accordance with section 31;

(b) a debit note issued by a supplier in accordance with the provisions of section 34;

(c) a bill of entry;

(d) an invoice issued in accordance with the provisions of Sec 31(3)(f) (Reverse charge invoice);

(e) An ISD invoice/ credit note or any document issued by an ISD in accordance with the provisions of

section 54 (1)



Rule 36 (2):



Such Documents 

should contain all the applicable particulars as specified under Chapter VI.



Provided that if the said document 

does not contain all the details but contains

•

The amount of tax charged

•

Description of goods/services

•

Total value of supply of goods/services

•

GSTIN of the supplier and recipient

•

Place of supply in case of inter-state supply

•

ITC may be availed by the registered person.

Conditions for availing

ITC

Section 16(2)

Second Proviso read with rule 37: non-payment of value of supply along with tax

payable thereon within 180 days from the date of issuance of invoice:

•

In such a case, the registered person

•

shall furnish the details of such supply, the amount of value not paid and the amount of

ITC availed of proportionate to such amount not paid

•

in Form GSTR-2 for the 

month immediately following the period of said 180 days

•

and such 

proportionate amount of ITC shall be added to the output tax liability

 of the

registered person in the said month.

•

along with interest

 at the rate notified u/s 50(1) from the date of availing credit till the date

when the said amount added to output tax liability is paid.

Third proviso

: recipient shall be 

entitled to avail the credit of input tax upon payment made

by him of the amount towards value of goods/services along with tax payable thereon.

Rule 37(4)

: 

time limit of sec 16 (4) (September or Annual return) shall not apply

 to re-

availment of said credit.

14

Conditions for availing

ITC

Section 16

Rule 37 (1): Deemed payment cases:

•

Schedule I supplies 

made without consideration

•

Where any 

amount added to value u/s 15 (2) (b)

 (being supplier liability met by recipient)

15

[2019] 105 taxmann.com 143 (AAR-WEST BENGAL) 

AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL 

Senco Gold Ltd.



FACTS :-



The applicant was 

engaged in the manufacturing and retailing of jewellery 

and

articles made of gold, silver, platinum, diamonds and other precious stones. Apart

from his own retail stores, the applicant also maintained 

a network of franchisee-

operated stores.

 He granted such a franchisee the right and license to operate a

showroom and to use, in connection therewith, certain Proprietary Marks and

System in accordance with a Franchise Agreement (hereinafter the Agreement). The

applicant raised tax invoices on the Franchisee for the supply of jewellery 

and other

articles and also for Franchise Support Services in terms of the Agreement

periodically. 

On its part, the Franchisee also raised tax invoices on the applicant for

the supply of old gold, silver etc., received from the customers.



The applicant 

intends to settle the mutual debts through book adjustments 

and

seeks an advance ruling on whether the input tax credit is admissible when he settles

through book adjustment the debt created on inward supplies from the Franchisee.

16

[2019] 105 taxmann.com 143 (AAR-WEST BENGAL) 

AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL 

Senco Gold Ltd.



HELD :-



In the present context, 

'consideration', as defined under section 2(31), provides the scope and

ambit for modes of payment.

It includes, in relation to the supply of goods or services, any

payment, made or to be made, whether in money or otherwise

, and also the monetary value

of any act or forbearance. 

This definition of 'consideration' cast the net so wide that almost

no form of payment is excluded

. For example, a mix of money and monetary value of the

goods offered together with it is a valid 'consideration'. Similarly, 

if the payee owes the payer a

debt, and accepts a reduction in such a debt liability as a valid form of payment, that should

also be regarded as a valid 'consideration'

 for a supply. In other words, reduction in book debt

(an asset in the payer's books of account) is a valid 'consideration‘



In view of the foregoing, it is ruled that the applicant can pay the consideration for inward

supplies by way of setting off book debt. The GST Act and rules made thereunder 

does not

restrict the recipient from claiming the input tax credit 

when consideration is paid through

book adjustment, subject to the conditions and restrictions as maybe prescribed and in the

manner specified in sections 16 and 49 of the GST Act.

17

Conditions for availing

ITC

Section 16 (3): Depreciation or ITC

•

Where the registered person has claimed depreciation on Tax component of the cost of

capital goods under IT Act 1961,

•

The ITC on the said tax component shall not be allowed.

Section 16 (4): Time limit to claim ITC:

•

Any registered person shall not be entitled to take credit in respect of any invoice/DN

•

after the 

Due date of furnishing the return U/S 39 for the month of September

 following

the end of the financial year to which such invoice/ DN pertains

•

or furnishing of relevant Annual Return,

•

whichever is earlier.

18

Section 16

Conditions for availing

ITC

Rule 36 (3): Demand cases

•

No ITC 

shall be availed

•

In respect of of 

any tax

•

That has been paid in pursuance of any order where any demand has been confirmed on

account of any fraud, willful misstatement or suppression of facts.

Rule 36 (4): 10% Limit on ITC not corroborated by uploaded invoices of suppliers:

•

ITC 

to be availed by a registered person

•

In respect of invoices or debit notes, the details of which have not been uploaded by

suppliers u/s 37 (1)

•

Shall not exceed 10% 

of the eligible credit available in respect of invoices or debit notes

the details of which have been uploaded by the suppliers u/s 37 (1)

•

Provided that the said 

condition for Feb 2020 to August, 2020 shall apply cumulatively

and Sep 2020 return shall be filed with cumulative adjustment of ITC for the said months.

19

Section 16

Apportionment of Credit –

Sec-17 (1) to (4) and Rule 42

20

Apportionment of Credit

21

Section 17 (1):



Where the goods/services are used by the registered person



partly for the purpose of any business and partly for other purposes,



the amount of credit shall be 

restricted to



So much of the input tax as is attributable to the purposes of his business

.

Section 17 (2):



Where the goods/services are used by the registered person



partly for effecting taxable supplies (including zero rated) and partly for effecting

exempt supplies,



the amount of credit shall be 

restricted to



So much of the input tax as is attributable to the said taxable supplies (including

zero rated).

Apportionment of Credit

22

Section 17 (3):



The value of 

exempt supply 

under sec 17 (2) shall be such as may be prescribed



and 

shall include



supplies on which the recipient is liable to pay tax on 

RCM

 basis,



Transaction in 

securities

,



Sale of 

land

 and, subject to clause (b) of para 5 of Schedule II, sale of 

building



Explanation: For the purposes of this sub-section – the expression 

“value of

exempt supply” shall not include the value of activities/ transactions specified

in Schedule III, except those specified in para 5 of schedule III

.

Apportionment of Credit – Rule 42

23

Steps in calculation of eligible credit:

Step 1: Identify input tax attributable to input/input services intended to be used

exclusively for the purposes other than business (T1)

Step2: Identify input tax attributable to input/input services intended to be used

exclusively for effecting exempt supplies (T2)

Step3: Identify Blocked credit u/s 17 (5)

 (T3)

Step4: Identify input tax attributable to input/input services intended to be used

exclusively for effecting taxable supplies (including zero rated) (T4)

Step5: Calculate Common Credit (C)

Common Credit (C) = Total Credit (T) – (T1 + T2 + T3 + T4)

Apportionment of Credit – Rule 42

24

Steps in calculation of eligible credit:

 Step 6: Calculate

 ITC attributable to exempt supplies out of common credit (D1) =

Common Credit * E/F

Where 

E is exempt supplies during the tax period

,

F is total turnover in the State 

of the registered person 

during the tax period

.

For Real Estate sector:

Value of E and F shall be calculated for each project separately.

E = exempted apartments’ carpet Area + Identified apartments’ carpet area to be

sold after completion certificate (CC) or first occupation, whichever is earlier

F = aggregate carpet area of apartments in the project

Apportionment of Credit – Rule 42

25

Steps in calculation of eligible credit:

No turnover cases:

Where the registered person does not have any turnover during a tax period, value of

E and F shall be calculated by taking the previous period values when values of E

and F are available.

Step 7: Calculate

 ITC attributable to non- business purpose out of common credit

(D2) =

5% of Common Credit, 

only where common inputs are used partly for business and

partly for non-business purposes.

Step 8: Calculate 

Eligible common credit = Common Credit – (D1 + D2)

Reversal Required:

D1 and D2 to be reversed monthly through GSTR-3B or GST DRC-03 form. Such

reversal shall be separately for IGST, CGST and SGST.

Apportionment of Credit – Rule 42

26

Steps in calculation of eligible credit:

Yearly final calculations of reversals (D1 and D2) based on yearly figures of

turnover:



If revised calculations exceed the monthly ones –

•

reverse the balance in 3B or DRC-3,

•

not later than Sep month following the FY

•

along with interest u/s 50 (1)

•

from April of succeeding year till date of payment



If revised calculations are lesser than the monthly ones –

•

Avail of balance ITC in 3B,

•

not later than Sep month following the FY

Apportionment of Credit – Rule 42

27

Steps in calculation of eligible credit:

For Real Estate projects:

Final calculations of reversals (D1 and D2) upon completion of the

project/first occupation :



Such final calculations to be made for a period 

from commencement of project/

1

st

 July 2017 to completion

 / first occupation of project, whichever is earlier.



Such final calculations to be made 

before the due date for furnishing the return

for sep month following the end of FY in which completion

/ first occupation of

the project takes place.



If revised calculations exceed the monthly ones –

•

reverse the balance in 3B or DRC-3,

•

not later than the said Sep month

•

along with interest u/s 50 (1)

•

from April of said year till date of payment

Apportionment of Credit – Rule 42

28

Steps in calculation of eligible credit:



If revised calculations are lesser than the monthly ones –

•

Avail of balance ITC in 3B,

•

not later than the said Sep month.

E = 

exempted

 apartments’ carpet Area + 

Unbooked

 apartments’ carpet area till the

date of issuance of completion certificate (CC) or first occupation, whichever is

earlier

F = 

aggregate

 carpet area of apartments in the project



ITC common to more than one pr0ject 

to be assigned to each project on a

reasonable basis 

and thereafter credit reversal calculations to be made.

INPUT TAX

29

BUSINESS

NON-BUSINESS

WHOLLY

TAXABLE SUPPLY

PARTLY TAXABLE

SUPPLY

PARTLY EXEMPT

SUPPLY

WHOLLY EMEMPT

SUPPLY

CLAIMABLE

NON-CLAIMABLE

Issues under Apportionment

30

[2020] 117 taxmann.com 475 (AAAR-MAHARASHTRA) 

APPELLATE AUTHORITY FOR ADVANCE RULING

Ordnance Factory

Facts:

appellant was an organization 

manufacturing propellants and commercial explosives

, a

unit of Ordnance Factories Board functioning under Department of Defence Production

and Supply of Ministry of Defence, Government of India and all its activities including

administrative, executive etc. were carried out for and on behalf of President of India

Question raised:

Whether therefore, 

no ITC is available against expenditure related to maintenance and

upkeep of guest houses

 maintained by appellant in terms of provision of section 17(2)

Issues under Apportionment

31

[2020] 117 taxmann.com 475 (AAAR-MAHARASHTRA) 

APPELLATE AUTHORITY FOR ADVANCE RULING

Ordnance Factory

Decision/Ruling:



Held – Yes (Against the aseesee)



it was to be held that 

appellant was nothing but 'Central Government'

 in accordance

with provision of section 2(53) read with clause(8) of section 3 of General Clauses Act,

read with Articles 53 and 77 of Constitution of India



the appellant 

was charging rent/consideration from their employees for providing

accommodation facility in residential colony

 maintained by it, activity of appellant was supply

of residential services which was an 

exempt supply 

in terms of Sr. No. 12 of Notification No.

12/2017-Central Tax (Rate) dated 28-6-2017



therefore, any inputs or input services 

viz

. expenditure related to maintenance and upkeep of

guest houses 

will not be available to appellant for ITC in accordance with provision of section

17(2 )

Issues under apportionment

32

Issues under apportionment

33

Apportionment of Credit – Sec 17 (4) and Rule 38

34

Banking Company or financial institution including NBFCs:



A banking company or financial institution

•

Engaged in supplying services by way of accepting deposits, extending loans

or advances

•

Shall have the option

•

To either comply with Sec 17 (2) i.e., proportionate reversal system

•

Or avail of, every month, an amount equal to 50% of the eligible ITC

 on

inputs, capital goods and input services in that month 

and the rest shall

lapse

.

•

ITC which can be claimed in second option = 50% of {Total ITC – (ITC wrt

non-business purposes + Blocked Credit u/s 17 (5)+ Branch transfer

cases)}+100% of ITC wrt branch transfers



50% restriction shall not apply for same PAN number cases 

i.e., branch transfers.



Option once exercised can’t be withdrawn during the remaining part of FY

Blocked Credit –

Sec-17 (5)

35

Blocked Credit – Sec 17 (5)

36

Notwithstanding anything contained in section 16 (1) and sec 18 (1)

, ITC shall

not be available in respect of the following

: - clause (a) , (aa) and (ab)

Blocked Credit – Sec 17 (5)

37

Notwithstanding anything contained in section 16 (1) 

and sec 18 (1), ITC shall

not be available in respect of the following: - clause (b)

Blocked Credit – Sec 17 (5)

38

Notwithstanding anything contained in section 16 (1) 

and sec 18 (1), ITC shall

not be available in respect of the following: - clause (c) and (d)

Blocked Credit – Sec 17 (5)

39

Notwithstanding anything contained in section 16 (1)

 and sec 18 (1), ITC shall

not be available in respect of the following: - clause (c) and (d)

e) Goods/ services on which tax has been paid under sec 10 i.e., 

composition

levy

f) Goods/ services used by non-resident taxable person except on goods

imported by him

g) goods/ services used for 

personal consumption

h) 

Goods lost, stolen, destroyed, written off or disposed of by way of gift or

free samples

i) Any tax paid under section 74, 129 and 130 i.e,

 non-compliance cases

[2019] 110 taxmann.com 288 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Wework India Management (P.) Ltd.,

40

[2019] 110 taxmann.com 288 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Wework India Management (P.) Ltd.,  Contd….



HELD :-



The detachable sliding and stacking glass partition 

are fixed to the building

 to create

the office spaces. There cannot be office space unless these are fixed and, hence, it

can be said to be 

permanently fastened to the building

. Hence, the fixing of sliding

and stacking glass partitions 

amounts to addition or alteration to an immovable

property

 and, hence, are used for the construction of an immovable property and

input tax credit shall not be

 available on same.



The wooden flooring in this case 

can be easily detached and reused

. Also the wooden

flooring which is detachable 

can be removed and replaced without affecting the

office space

. Further, there is 

no permanence involved

 in this fastening 

nor any

damage is done

 to the property, either to the building or to the wooden flooring 

at

the time of detachment of this flooring

 and, hence, would not be covered under

'construction of immovable property'. Hence, 

input tax credit

 relating to detachable

14mm Engineered wood with Oak top Wooden flooring is 

not restricted

 under

section 17(5)

41

116 taxmann.com 736 (AAAR-KARNATAKA) – M/s

Wework India Management Private Limited



ISSUE 

:- INPUT TAX CREDIT ON DETACHABLE SLIDINGS AND STACKABLE GLASS

PARTITION



Lower authority denied credit  --   saying that these are fixed to building to create office space

and amounts to immovable property.



Rational by Appellate Authority –



The General Clauses Act, 1987 defines 

"immovable property"

 as to include land,

benefits to arise out of land, and 

things attached to the earth

, or 

permanently

fastened to anything attached to the earth

.



Attached to Earth is defined in Section 3 of Transfer of Property Act as meaning

 “ (a)

rooted in the earth , as in the case of tree and shrubs ; (b) imbedded in the earth, as in

the case of walls and buildings ; or ( c) 

attached to what is so embedded

 for the

permanent beneficial enjoyment

 of that to which it is attached

.



To ascertain 

whether the item is 

permanently attached to earth

, many courts have

used consistently 

two fold test – (1)  The extent of annexation    and (2) The object of

annexation.

42

116 taxmann.com 736 (AAAR-KARNATAKA) – M/s Wework

India Management Private Limited             Contd …..



The object of annexation test lays down that where a movable property gets annexed

with an immovable property,



if the 

intent of annexation is permanent beneficial enjoyment of immovable property 

, then

the fixtures becomes an immovable property.



if the 

intent of annexation is the beneficial enjoyment of movable property 

, then the

property still remains movable.



DECISION :-



Applying the above test, the Authority finds that the glass partitions are not Permanent

and not embedded to earth. They can dismantled without demolishing the civil

structure. There fore DETACHABLE SLIDINGS AND STACKABLE GLASS PARTITION

do not qualify as immovable property and credit allowed.



43

[2019] 105 taxmann.com 324 (Orissa)  HIGH COURT OF ORISSA 

Safari Retreats (P.) Ltd.   

v. 

Chief Commissioner of CGST



FACTS



The petitioners were mainly 

carrying on business activity of constructing shopping malls for

the purpose of letting out of the same to numerous tenants

 and lessees.



The petitioner having accumulated input Credit of GST in respect of purchases of inputs in

the form of goods and services was desirous of availing of the credit of input tax charged on

the purchase/supply of 

goods and services which were consumed and used in the

construction of the said shopping mall in order to utilise the said input credits to discharge

and pay the CGST and OGST payable on the rentals received 

by the petitioner from the

tenants of the said shopping mall and approached the revenue authorities in this regard.



However, the petitioner was advised to deposit the CGST and OGST collected without taking

input credit in view of restrictions placed as per section 17(5)(

d

) and was warned of penal

consequences if it did not do so.



The petitioners filed 

instant writ petition 

challenging the action of the opposite parties.

44

[2019] 105 taxmann.com 324 (Orissa)  HIGH COURT OF ORISSA 

Safari Retreats (P.) Ltd.   

v. 

Chief Commissioner of CGST     Cont….



The 

sale of immovable property post issuance of completion certificate 

does not attract any levy

of GST. Consequently, in such a situation, there is a 

break in the tax chain 

and, therefore, there is

full justification for denial of input tax credit as, on the completion of the transaction, no GST

would at all be payable and, therefore, no set-off of the input tax credit would be required or

warranted or justified.



But the position is totally different 

where the immovable property is constructed for the purpose

of letting out the same, because, in that event, 

the 

tax chain is not broken 

and, on the

contrary, the construction of the 

building will result in a fresh stream of GST revenues to the

Exchequer 

on the rentals generated by the building. 

The 

denial of input tax credit 

in such a

situation would be completely arbitrary, unjust and oppressive and would be directly 

opposed

to the basic rationale of GST

 itself, which is to prevent the cascading effect 

of multi-stage

taxation and the inevitable increase in costs which would have to be borne by the consumer at

the end of the day.



Further, the denial of the input tax credit in respect of a 

building which is meant and

intended to be let out would amount to treat it as identical to a building which is meant

and intended to be sold

.

45

[2019] 105 taxmann.com 324 (Orissa)  HIGH COURT OF ORISSA 

Safari Retreats (P.) Ltd.   

v. 

Chief Commissioner of CGST     Cont….



The treatment of these two different types of buildings as one for the purpose of GST is itself contrary to

the basic principles regarding classification of subject-matter for the levy of tax and, therefore, violative of

Article 14 of the Constitution

. Such a classification also constitutes the treatment of assessees like the

Petitioner on a totally different footing as compared with other assessees who have a continuous business

and an unbroken tax chain like the Petitioner and grant of input tax credit to others while denying it to the

Petitioner. Thus, the same is violative of the 

Petitioners' fundamental right to equality guaranteed by

and under Article 14

 of the Constitution, on this distinct and independent ground also.



Further, such an interpretation of Section 17(5)(d) of both CGST and OGST Act 

leads to double taxation

,

i.e., firstly, on the inputs consumed in the construction of the building and secondly, on the rentals

generated by the same building. It is also a settled principle of interpretation of tax statutes, that

interpretation should be adopted which avoids or obviates double taxation

. This principle is also

directly applicable to the present case. It would also be 

violative of 

the Petitioners' 

fundamental right to

carry on business under Article 19(1)(g)

 of the Constitution 

as it would impose 

a wholly unwarranted

and unreasonable and arbitrary 

restriction which would render buildings now constructed for letting

out uncompetitive

, by imposing the burden of double taxation of GST on such buildings, i.e., firstly, on

the inputs consumed in the construction and, thereafter, on the rentals generated by the building.

46

[2019] 105 taxmann.com 324 (Orissa)  HIGH COURT OF ORISSA 

Safari Retreats (P.) Ltd.   

v. 

Chief Commissioner of CGST     Cont….



it is a well settled law that in constructing fiscal statute and in determining the liability of a

subject to tax, one must have regard to the strict letter of law and 

no words can be added to a

statute

 or read into it which are not there Legislature has also imposed another condition in

Section 17(5) (d) of both the aforesaid Act which reads as when such goods or services or both

are used in the course or furtherance of business' 

this condition is applicable only when the

immovable property is constructed 'on his own account

' as appearing in that sections,

which means that the taxable person on whose account the said immovable property is

constructed. The said condition cannot be applied to any other cases far less when the

construction of the immovable property is intended for letting out.



If the benefit of taking credit of input tax under Section 16 of the Act is denied to the petitioner

by invoking Section 17(5) (d) of the CGST Act and OGST Act, in that event, 

the very object of

enacting CGST Act and OGST Act for reducing the cascading effect

 of various indirect taxes and

reduction of multiplicity, of indirect taxes, will be frustrated even when 

the business of the

petitioner

 is a continuous one and 

there is no break at any point of time

. 

It is a well settled

law that the interpretation which defeat the very intention of the legislature should be avoided

and that interpretation which advances the legislative intent will have to be accepted

.



Finally Held – ITC allowed in the present case.

47

[2020] 116 taxmann.com 203 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS

Vikram Traders



Where applicant engaged in business of renting of immovable

property 

and discharging GST on rental income is seeking advance

ruling on its eligibility to 

claim input tax credit on inputs

attributable to renting of immovable property

, application is to be

rejected as issue is pending in another case before Supreme Court

of India and, hence, is sub-judice.

48

[2020] 113 taxmann.com 56 (AAR - TAMILNADU) 

AUTHORITY FOR ADVANCE RULINGS, TAMILNADU 

Sree Varalakshmi Mahaal LLP



FACTS :-



The applicant has 

constructed a marriage hall on its own account for letting

out to customers for occasions 

on which it charges GST.



It has 

received various materials such as cement, steel, wood, fittings, etc.

along with various services from labour, architect, etc

. which have been used

to construct the marriage hall.

QUESTION :-

Whether 

input tax credit 

against purchases of materials and services used

for 

construction of building 

(constructed by it) can be claimed and utilized to

pay GST on the outward supply of services of renting of the building.

49

[2020] 113 taxmann.com 56 (AAR - TAMILNADU) 

AUTHORITY FOR ADVANCE RULINGS, TAMILNADU 

Sree Varalakshmi Mahaal LLP



HELD:-



No input tax credit 

is available against any goods or services received by the

applicant for construction of the marriage hall 

on its own account 

even if

used in course or furtherance of its business of renting the place.

50

[2019] 110 taxmann.com 285 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Tarun Realtors (P.) Ltd.



FACTS :-



The applicant is 

developing a shopping mall which will include a hypermarket, multiplex cinema

theatre complex, departmental stores, retail shops and food courts

. 

It entered into various lease

agreements with their customers

/tenants (service recipients) and will be leasing all unit(s) at the

mall together with the right to use the staircases, common areas and other common facilities.



To undertake development of the said property, the applicant was and is required to procure

numerous goods and avail numerous services including 

works contract service 

from many

suppliers. Accordingly, the applicant placed purchase order on various suppliers for goods and

work order on various suppliers for services and the suppliers accordingly, raised invoices on the

applicant.



QUESTION

 :-

Applicant has procured goods or services for 

installation of chillers, air handling unit, lift,

escalator, travellator, water treatment plant, sewage treatment plant, high-speed diesel yard,

mechanical car park and indoor/outdoor surveillance system, DG Sets, transformers, electrical

wiring and fixtures, public health engineering, fire-fighting and water-management pump system -

Whether taxes paid on procurement of goods or services for installation of above are regarded as

blocked credits under section 17(5)

51

[2019] 110 taxmann.com 285 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Tarun Realtors (P.) Ltd.



HELD :-



The provision of facilities like transformers, Sewage Treatment Plant, Electrical

Wiring and Fixtures, Surveillance Systems, D.G. Sets, Lifts, Air Handling Units etc.

are 

sine qua non

 for a commercial mall and hence cannot be considered separate

from the building or civil structure. The provision of these are either statutory for a

building or defines the nature of the building as a commercial mall.

 Hence, the input

tax credit on the inward supplies of the goods or services involved in the

construction of an immovable property which is a civil structure or building is 

not

available to the applicant and hence blocked



The taxes paid on the procurement of goods and/or services for installation of the

above facilities as listed in the application are regarded as blocked credits under

section 17(5).

52

[2019] 105 taxmann.com 248 (AAAR-WEST BENGAL) 

APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL 

GGL Hotel and Resort Company Ltd.



FACTS :-



The applicant/appellant for the 

construction of Eco Resort on DBO (Design, Built and

Operate) Mode

l in ECO Park, New Town, Kolkata has taken certain land on lease from West

Bengal Housing Infrastructure Development Corporation Limited (WBHIDCL) 

for 32 years

on a lease premium 

of Rs. 17.20 crores with an annual lease rent at the rate of 10 per cent of

the lease premium for the first two years, which will be escalated at the rate of 5 per cent per

annum in the subsequent years from the start of the third year over the last annual lease rent

per annum. 

The project is proposed to be completed within a period of 2 years and the lease

rent paid during the pre-operative period shall be capitalized 

in the books of account by the

appellant. The WBHIDCL will be charging GST at the rate of 18 per cent on the lease rent.



QUESTION

 :-

'Whether credit is available on input 

tax paid on lease rent during pre-operative period for the

leasehold land

 on which the resort is being constructed to be used for furtherance of business,

when the same is capitalized and treated as capital expenditure.

53

[2019] 105 taxmann.com 248 (AAAR-WEST BENGAL) 

APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL 

GGL Hotel and Resort Company Ltd.



HELD :-



the moot question is whether input tax credit on lease rental paid is available

in the pre-operative period. It transpires from the discussion that the

appellant is constructing the Eco Resort on his own account in course of

furtherance of its business of providing hospitality service, for which one of

the input service availed is lease rental service. 

The ambit of the blocked

credit as per clause (d) of sub-section (5) of section 17 is broad 

as it includes

such goods or services or both when used in the course of furtherance of

business. So clause (d) of sub-section (5) of section 17 restricts the appellant

from availing input tax credit on lease rental paid.

54

[2019] 106 taxmann.com 172 (AAR- RAJASTHAN) 

AUTHORITY FOR ADVANCE RULINGS, RAJASTHAN 

Rambagh Palace Hotels (P.) Ltd.



FACTS :-



The applicant, 

a hotelier, is engaged in supply of various services 

viz.

 short term accommodation service,

Restaurant service, Mandap Keeper service, SPA and other club facilities, Renting of space or lawn, etc.



It in routine manner or as and when required is involved in repair and maintenance of the building and its

components in order to ensure that the high standards of hospitality service are maintained.

QUESTION

 :-



Whether 

GST paid on building materials such as cement, concrete, bricks, cement or marble or stone slabs or

tiles, paint, polish and any other building materials meant for repair of building 

shall be available for input

tax credit [ITC].



Whether 

GST paid on labour supply for carrying out repair of building 

shall be available for ITC, where

material and supervision are provided by the applicant.



Will it make any difference if aforementioned works are carried out in a composite manner as a 

works

contract,

 where material as well as labour are supplied by a contractor as a composite supply under works

contract.



+ cables, switches, NCB, and other electrical consumables meant for repair of existing electrical fittings

+wood, board, mica, tapestry, paint, polish and other consumables meant for repair of existing furniture and

fixtures

55

[2019] 106 taxmann.com 172 (AAR- RAJASTHAN) 

AUTHORITY FOR ADVANCE RULINGS, RAJASTHAN 

Rambagh Palace Hotels (P.) Ltd.



HELD :-



The applicant is paying GST on building materials such as cement, concrete,

bricks, cement or marble or stone slabs or tiles, paint, polish, etc. and on

some services such as labour supply. The activity of repair and maintenance

which encompasses supply of goods for a construction activity is of

immovable nature. The provisions of ITC for the said supply of goods is

covered under 

section 17(5)(d)

 read with 

Explanation

 mentioned therein.

Therefore, 

ITC of GST paid on such goods will not be available to the extent

of capitalisation of the said goods as mentioned in 

Explanation

 of section

17(5).

56

[2019] 102 taxmann.com 295 (AAR-WEST BENGAL) 

AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL 

Tewari Warehousing Co. (P.) Ltd.



FACTS :-



The applicant is engaged in supplying warehousing services. It is 

constructing

a warehouse on leasehold land using pre-fabricated technology.

QUESTION

 :-



Whether the input tax credit is admissible on the 

inward supplies for

construction of the said warehouse.



In the written submission, the applicant describes the property under

construction as 'Pre-fabricated Warehousing System' (the System). It is being

purchased from Pennar Engineering Building System Ltd. (the Vendor).

57

[2019] 102 taxmann.com 295 (AAR-WEST BENGAL) 

AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL 

Tewari Warehousing Co. (P.) Ltd.



HELD :-



it is concluded that the applicant is constructing a warehouse that is intended

to be used as a permanent structure and associated with beneficial enjoyment

of the land on which it is being built. The technology used for the

construction of the warehouse involves the application of pre-fabricated

structures and also civil work for supporting the pre-fabricated structure and

developing the floor of the warehouse. 

The warehouse cannot be conceived

without beneficial enjoyment of the civil structure embedded on earth. The

warehouse being constructed is, therefore, an immovable property 

and the

input tax credit is 

not admissible 

on the inward supplies for its construction,

as the credit of such tax is blocked under section 17(5)(

d

).

58

Issues under ITC

59

Issues under Blocked Credit

60

Issues under Blocked Credit

61

Issues under Blocked Credit

62

Issues under Blocked Credit

63

[2019] 106 taxmann.com 387 (AAR - MAHARASHTRA) 

AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA 

Sanofi India Ltd

64

[2019] 106 taxmann.com 387 (AAR - MAHARASHTRA) 

AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA 

Sanofi India Ltd

65

[2019] 106 taxmann.com 387 (AAR - MAHARASHTRA) 

AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA 

Sanofi India Ltd

66

[2019] 104 taxmann.com 36 (AAR - KERALA) 

AUTHORITY FOR ADVANCE RULINGS, KERALA 

Polycab Wires (P.) Ltd.

67

[2019] 104 taxmann.com 36 (AAR - KERALA) 

AUTHORITY FOR ADVANCE RULINGS, KERALA 

Polycab Wires (P.) Ltd.

68

[2019] 102 taxmann.com 371 (AAAR-ODISHA) 

APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA 

National Aluminium Company Ltd.

69

[2019] 102 taxmann.com 371 (AAAR-ODISHA) 

APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA 

National Aluminium Company Ltd.

70

[2019] 102 taxmann.com 371 (AAAR-ODISHA) 

APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA 

National Aluminium Company Ltd.

71

[2019] 103 taxmann.com 127 (AAR - MAHARASHTRA) 

AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA 

Biostadt India Ltd.

72

[2019] 103 taxmann.com 127 (AAR - MAHARASHTRA) 

AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA 

Biostadt India Ltd.

73

Issues under Blocked Credit

74

Issues under Blocked Credit

75

Issues under Blocked Credit

76

[2019] 108 taxmann.com 412 (AAAR-RAJASTHAN) 

APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN 

IMF Cognitive Technology (P.) Ltd.

77

ITC in certain special

circumstances

Sec 18 and rule 40, 41 and 43

78

Availing ITC In Special Circumstances

Section 18(1)(a)

Section 18(1)(b)

Section 18(1)(c)

Section 18(1)(d)

1.

A person who has

applied for a new

registration within 30 days

from the date he becomes

liable to registration - ITC 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 he

becomes liable to pay tax.

1.

Voluntarily

registration

(U/S 25(3) - ITC 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 of grant of registration.

A person who ceases to pay

tax U/S 10 (

Composition

Levy

) - ITC in respect of

inputs held in stock and

inputs contained in semi-

finished or finished goods

held in stock and on

CAPITAL GOODS 

(credit of

CG to be reduced to the %

as may be specified)

on the

day immediately  preceding

the date from which he

becomes liable to pay tax

under section 9.

Where 

exempt goods

become taxable 

- ITC in

respect of inputs held in

stock and inputs contained

in semi-finished or finished

goods held in stock and on

CAPITAL GOODS 

(credit

of CG to be reduced to the

% as may be specified)

exclusively used for such

exempt supply 

on the day

immediately  preced- ing

the 

date from which such

supply become taxable

.

79

Restriction: Registered person shall 

not be entitled to take ITC under sub-sec (1) where date of issue of relevant invoice is

prior to one year 

from the relevant date above.

Period to Claim Input Tax - Section 18(2) & 16(4)

First input on

opening stock:

 ITC

can be availed within

one year of issuance of

tax  invoice 

by the

supplier

Subsequent Inputs:

 Due date for

Filing of return for the month of

September of the following FY 

to

which invoice pertains 

or filing of

annual return whichever is earlier

ITC

Within 1 year of issuance of

invoice

Due date of next FY Sep. month/

annual rate filing date, which ever is

earlier.

80

Manner of claiming Credit in Special Cases (RULE 40)

81

(1)

ITC claimed under section (18) (1) (a),(b), (c ), (d) shall be subject to the following

conditions –

(a)

The 

ITC on 

capital goods

, in terms Sec. 18(1) (c) and (d), shall be claimed



after reducing 

the tax paid on such capital goods



by 

five percentage

 points 

per quarter

 of a year or part thereof



from the date of invoice 

or such other documents



on which the capital goods were received by the taxable person.

(b) The registered person shall



within 30 days

 from the date of his becoming eligible to avail of ITC under Sec.

18(1)



 shall make a declaration, electronically, on the Common Portal in 

FORM GST

ITC-01



to the effect that he is eligible to avail of input tax credit as aforesaid;



CA Certification required where claim exceeds Rs. Two lakhs.

[2019] 110 taxmann.com 354 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Knowlarity Communications (P.) Ltd.



FACTS :-



The applicant is engaged in the business of providing cloud telephony

internet based communication solutions to its customers in different States

of India.

QUESTION :-



'Whether or not a registered person under the Goods and Services Tax Act,

2017 can claim eligible input tax credit of goods and services tax paid on input

invoices of goods or services procured or availed by a registered person before

its effective date of registration under GST, where such inputs are eligible

input credits and for the purpose of furtherance of business'?

82

[2019] 110 taxmann.com 354 (AAR - KARNATAKA) 

AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

Knowlarity Communications (P.) Ltd.



HELD :-



a person who has been granted registration, where the person has applied for registration within

30 days from the date on which he became liable for registration, would be allowed to take credit

of input tax in respect of goods held in stock which are intended to be used by that person in the

course or furtherance of business. Hence there is no question of allowing credit on the input tax

credit charged on the invoices dated prior to the effective date of registration relating to services

and even in respect of goods, they must be available in stock as on the day prior to the effective

date of registration.



The applicant is not eligible to claim input tax credit of the tax paid on input invoices of goods or

services procured or availed by a registered person before its effective date of registration under

GST.



Further, in case of inputs being goods, the applicant is only eligible to claim input tax credit of the

tax paid on such goods (inputs) lying in stock on the day previous to the effective date of

registration, which are intended to be used in the course or furtherance of business, subject to

other conditions and restrictions prescribed in the GST Act and in rule 40 of the CGST Rules, in

case the application for registration has been filed within thirty days from the date on which the

applicant became liable for registration under the Act.

83

Change in Constitution of business - (Sec 18(3))

84



Where there is a 

change in the constitution



 of a 

registered person



 on account of



sale,



 merger,



 demerger,



 amalgamation,



 lease or transfer



of the business



with the specific provisions for transfer of liabilities,



 the said registered person shall be 

allowed to 

transfer the input tax credit



 which remains 

unutilised in his electronic credit ledger



to such sold, merged , demerged, amalgamated, leased or transferred

business



 in such manner as may be prescribed.

Transfer of Credit – Change in constitution (Rule -41)

85



A registered person shall 

furnish the details of sale, merger, de-merger, amalgamation,

lease or transfer of business, in 

FORM GST ITC-02 

electronically on the Common Portal

along 

with a request to transfer the unutilized input tax credit lying in his electronic

credit ledger to the transferee:

Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of

the value of assets of the new units as specified in the demerger scheme.



The transferor shall also submit a copy of a 

certificate issued by a practicing chartered

account or cost accountant

 certifying that the sale, merger, de-merger, amalgamation, lease or

transfer of business has been done with a specific provision for transfer of liabilities.



 The transferee shall, on the Common Portal, accept the details so furnished by the transferor

and, upon such acceptance, the un-utilized credit specified in 

FORM GST ITC-02 shall be

credited to his electronic credit ledger.



The inputs and capital goods so transferred shall be duly accounted for by the transferee in his

books of account.

[2019] 102 taxmann.com 282 (AAR - HARYANA) 

AUTHORITY FOR ADVANCE RULINGS, HARYANA 

B.M. Industries



FACTS :-



The applicant a Haryana based proprietorship firm involved in manufacturing and

sale of aluminium profiles proposed to merge as a going concern with Bimal

Aluminium Pvt Ltd., another firm of the same city. Consequent to the merger, the

applicant firm will not exist anymore and all its liabilities, assets, rights and claims

will be taken up by Bimal Aluminium Pvt. Ltd.

QUESTION :-



Whether applicant is liable to pay tax under the CGST/SGST Act, on its fixed and

current assets including stocks of raw material, semi-finished and finished goods

after merger of his proprietorship firm as a going concern with a Pvt. Ltd. Company?



Whether ITC available in the credit ledger account or cash ledger account of

proprietorship firm shall be transferred to respective credit ledger and cash ledger

account of the private limited company, consequent upon merger?

86

[2019] 102 taxmann.com 282 (AAR - HARYANA) 

AUTHORITY FOR ADVANCE RULINGS, HARYANA 

B.M. Industries



HELD :-



The applicant, on merger of his proprietorship firm as a going concern with a

private limited company, is not liable to pay tax under CGST/SGST Act on the

fixed assets and currents assets including stocks of raw material, semi-

finished and finished goods. - as per Para 4(c) of Schedule II to the

CGST/HGST Act, 2017, transfer of business as a going concern is not treated

as supply.



The input tax credit available in the credit ledger account proprietorship firm

shall be transferred to the respective credit ledger account of the private

limited company, consequent upon merger, subject to the provisions of

Section 18(3) of the CGST/HGST Act, 2017 and Rule 41 of the CGST/HGST

Rules, 2017.

87

Transfer of Credit – separate registrations (Rule -41A)

88



A 

registered person who has obtained separate registration for multiple places 

of business as

per rule 11

•

And who intends to transfer

, either wholly or partially,

•

The 

unutilised ITC 

to any or all of the newly registered place of business

•

Shall furnish 

within a period of 30 days 

from obtaining such registrations,

•

The details in form 

GST ITC-2A. 

Provided that input tax credit shall be transferred to the newly registered entities 

in the ratio of

the value of assets held by them 

at the time of registration.

Explanation: value of assets means value of entire of assets whether or not ITC availed.



 The newly registered person shall, on the Common Portal, accept the details so furnished by

the registered person (transferor) and, 

upon such acceptance

, the un-utilized credit specified in

FORM GST ITC-02 shall 

be credited to his electronic credit ledger.

Reversal of Credit in Case of Normal dealer converts into Composition

Dealer and in Case Taxable goods become Exempt Goods (Sec 18(4))

89

Where any 

registered person who 

has availed input tax credit 

opts to pay

composition Tax (U/S 10)

OR

where the goods or services or both supplied by him 

become wholly exempt

,



 he 

shall pay an amount

,



 by way of debit in the electronic credit ledger or electronic cash ledger,



equivalent to the credit of input tax in respect of



inputs

 held in stock and inputs contained in semi-finished or finished goods held

in stock and on 

capital goods

, reduced by such percentage points as may be

prescribed,



on the day immediately preceding the date of exercising of such option or

, as the

case may be, 

the date of such exemption

:

Provided that after payment of such amount, 

the 

balance of input tax credit

, if

any,

 lying in his electronic credit ledger 

shall lapse

.

Reversal of Credit in Case of Supply of Capital Goods/Plant or

machinery (Sec 18(6))

90



In case of 

supply

 of 

capital goods or plant and machinery

,



on which input tax credit has been taken,



 the registered person shall pay an amount equal to



the 

input tax credit taken

 on the said capital goods or plant and machinery

reduced by such percentage points 

as may be prescribed

or



the 

tax on the transaction value

of such capital goods or plant and machinery

determined under section 15,



whichever is higher

:

Provided that where 

refractory bricks, moulds and dies, jigs and fixtures are

supplied as scrap

, the taxable person 

may pay tax on the transaction value 

of such

goods determined under section 15.

Reversal of Credit in respect of Capital Goods/Plant or machinery

(Rule (43))

91

Reversal of Credit in respect of Capital Goods/Plant or machinery

(Rule (43))

92



Change of classification of capital goods from clause (a) to

clause (c):

•

In such a case,

•

ITC 

shall be credited to electronic credit ledger

•

And

ineligible credit attributable to the exclusive non-business/exempt

supply period shall be 

added to output tax liability 

of tax period in which

such ITC is claimed.

•

Such ineligible credit is to be calculated based on 5% points for every quarter

or part thereof.



Separate calculations to be done for IGST, CGST, SGST and

UTGST.

Reversal of Credit in respect of Capital Goods/Plant or machinery

(Rule (43))

93

Step 4: Calculation of ITC attributable to a particular tax period

(Tm):

= Aggregate of ITC in respect of common capital goods {i.e., ITC under clause

(c)}

 whose useful life remains during that tax period

  ÷ 60

Step 5: Calculation of ITC attributable to exempt supplies during

a particular tax period (Te):

= Tm * E/ F

Where, E is aggregate value of exempt supplies made during the tax period

F is total turnover in the state of the registered person during the tax period.

Step 6: Add the amount so calculated to output tax liability of

such tax period along with interest

Reversal of Credit in respect of Capital Goods/Plant or machinery

(Rule (43))

94



For Real Estate sector:

Value of E and F shall be calculated for each project separately.

E = exempted apartments’ carpet Area + Identified apartments’ carpet area to be

sold after completion certificate (CC) or first occupation, whichever is earlier

F = aggregate carpet area of apartments in the project



No turnover cases:

Where the registered person does not have any turnover during a tax period, value of

E and F shall be calculated 

by taking the previous period values when values of E

and F are available.

ITC Utilization

95

Permitted Combination

IGST - Input

Any of IGST-

Output or

CGST- output

or SGST-output

SGST - Input

SGST - Output

IGST - Output

CGST - Input

CGST - Output

IGST - Output

SGST - Output

CGST - Output

Note: CGST input or SGST Input can’t be used unless IGST input is fully used.

GOODS AND SERVICES TAX

(GST) IN INDIA

Job Work

96

Relevant Definitions

97

•

A contract

•

For building, construction, fabrication, completion, erection, installation, fitting out, improvement,

modification, repair, maintenance, renovation, alteration or commissioning (14 activities)

•

of any immovable property

•

wherein transfer of property in goods (whether as goods or in some other form) is involved in the

execution of such contract.

Bring Back within

prescribed period

such goods to any

of his place of

business 

without

payment of tax

Exception: moulds,

dies, jigs and

fixtures or tools

Supply within

prescribed period

from job worker

place 

on Payment

of tax 

within India

OR

Export with or

Without payment

of tax therefrom

AND

    shall After

Completion or

otherwise

Section 143 – Job Work Procedure

Section 143 – Job Work Procedure

98

Sec 19 & 143 - 

ITC on goods sent to Job worker

ITC on goods sent to Job worker

Inputs/ Capital Goods

originally sent to job

worker shall not be

deemed to be supply

Yes

Yes

Deemed supply# of Principal

on the date input/ capital

goods were sent to job

worker. Principal shall pay

Tax on such deemed supply

along with interest

No

No

•

*If goods are directly sent to job worker without first bought to the principal palace than the period of 1 year/3

years shall be  counted from the date of receipt of goods by Job worker.

•

#The challan issued shall be deemed to be an invoice in such case. (rule 10 of ITC rules)

•

Mould, dies, jigs and fixtures or tools need not come back to principal.

99

100

Reporting of job-work transactions in ITC-04:

- Goods dispatcher to job worker during a quarter

- Goods received from job worker during a quarter

Responsibility for inputs and capitals goods:

- Responsibility for keeping proper accounts for inputs or capital goods shall lie with

  the principal.

Scrap generated at Job-worker’s place of business:

- Notwithstanding anything contained in sub-section 1 and 2

- Any waste and scrap generated during the job work

- may be supplied by the job-worker from his place of business on payment of tax, if

  such job worker is registered

- or by principal, if job worker is not registered.

No reversal of ITC taken on input/capital goods sent to job worker.

GOODS AND SERVICES TAX

(GST) IN INDIA

ISD

101

Manner & Distribution of ITC BY ISD (Section 20)

102

The Input Service Distributor shall



distribute the credit of



central tax -  as central tax or integrated tax and



integrated tax  - as integrated tax or central tax or State tax ,



State tax -  as State tax or integrated tax and



by way of issue of a document



containing the amount of input tax credit being distributed



in such manner as may be prescribed.

Manner & Distribution of ITC BY ISD Contd….

103

ISD can be distributed subject to following conditions

:-

I.

The credit can be distributed against a 

document 

containing such details as may be prescribed;

II.

The amount of the 

credit distributed shall not exceed the amount of credit available 

for

distribution;

III.

The credit of tax paid on input services 

attributable to a recipient 

of credit shall be distributed

only to that recipient;

IV.

The credit of tax paid on input services 

attributable to more than one recipient

 of credit shall

be distributed amongst such recipients to whom the input service is attributable and such

distribution shall be pro rata 

on the basis of the turnover in a State or turnover in a Union

territory

 of such recipient, during the relevant period, to the aggregate of the turnover of all such

recipients to whom such input service is attributable and which are operational in the current year,

during the said relevant period;

V.

The credit of tax paid on input services 

attributable to all recipients of credit

 shall be

distributed amongst such recipients and such distribution shall be pro rata on the basis of the

turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to

the aggregate of the turnover of all recipients and which are operational in the current year, during

the said relevant period.

Manner & Distribution of ITC BY ISD Contd….

104

For the purpose of Section 20 (ITC distribution by ISD):-

“Relevant period”

 shall be–

(i) if the recipients of credit have turnover in their States or Union territories in the financial year

preceding the year during which credit is to be distributed, the said financial year; or

(ii) if some or all recipients of the credit do not have any turnover in their States or Union territories

in the financial year preceding the year during which the credit is to be distributed, the last quarter

for which details of such turnover of all the recipients are available, previous to the month during

which credit is to be distributed;

“Recipient of credit” means -

the supplier of goods or services or both having the same Permanent Account Number as that of

the Input Service Distributor;

“turnover”

 in relation to any registered person engaged in the supply of taxable goods as well as goods

not taxable under this Act, means -

the value of turnover, reduced by the amount of any duty or tax.

Manner & Distribution of ITC BY ISD (Rule 4 of ITC)

105

An ISD shall distribute ITC in the manner and subject to the conditions specified below-

I.

ITC available for distribution in a month 

shall be 

distributed in the same month

and

II.

 the details thereof shall be furnished in 

FORM GSTR-6

III.

ISD shall, in accordance with the provisions of clause (d), separately distribute the amount 

in-eligible as ITC

under the provisions of sub-section (5) of section 17 and the amount eligible as ITC;

IV.

ITC of 

central tax, State tax, Union territory tax and integrated tax 

shall be distributed separately in

accordance with the provisions of clause (d)

V.

ITC that is required to be distributed to  more than one recipient , shall be distributed as followings to all the

concerned recipients :-

C1 = (t1÷T) × C

where, 

“C” is the amount of credit to be distributed,

“t1” is the turnover, as referred to in section 20, of person R1 during the relevant period,

 and “T” is the aggregate of the turnover of all recipients during the relevant period;

VI.

ITC on account of 

integrated tax 

shall be 

distributed as ITC of integrated tax to every recipient

;

VII.

ITC on account of 

central tax and State tax 

shall,

(i)

in respect of a recipient located in the 

same State 

in which the ISD is located, be distributed as input tax

credit of 

central tax and State tax 

respectively;

(ii)

in respect of a recipient located in a 

State other than that of the ISD

, be distributed as 

integrated tax 

and

the amount to be so distributed shall be equal to the aggregate of the amount of ITC of central tax and

State tax that qualifies for distribution to such recipient in accordance with clause (d);

Manner & Distribution of ITC BY ISD (Rule 4 of ITC)

106

VIII.

ISD shall 

issue an 

ISD invoice

clearly indicating in such invoice that it is issued only for

distribution of ITC.

IX.

The ISD shall issue an 

ISD 

credit note

 for reduction of credit in case the ITC already

distributed gets reduced for any reason.

X.

Any additional amount of ITC on account of issuance of a 

debit note

 to an ISD

 by the supplier

shall be distributed in the manner as provided in clause I to VIII above and such credit shall be

distributed 

in the month in which the debit note has been included in the return in FORM

GSTR-6.

XI.

Any ITC required to be reduced on account of issuance of a 

credit note

 to the ISD 

by the

supplier shall be apportioned to each recipient 

in the same ratio in which input tax credit

contained in the original invoice

 was distributed and the amount so apportioned shall be,-

(i)

reduced from the amount to be distributed in the month in which the credit note is

included

 in the return in FORM GSTR-6; and

(ii)

added to the output tax liability of the recipient 

and where the amount so apportioned is

in the negative by virtue of the amount of credit to be distributed is less than the amount

to be adjusted.

Manner & Distribution of ITC BY ISD (Rule 4 of ITC)

107



If the amount of ITC distributed by an ISD is reduced later on for any other reason



for any of the recipients,



including that it was distributed to a wrong recipient by the ISD,



the process prescribed above in clause XI shall,



mutatis mutandis apply for reduction of credit.

ISD INVOICE AND DETAILS TO BE FILED :-



ISD shall, on the basis of the ISD credit note / ISD Invoice



Issued to the recipient entitled to such credit and



include the details of ISD credit note and the ISD Invoice in the return in 

FORM GSTR-6



for the month in which such credit note and invoice was issued.

Manner & Recovery excess ITC distributed BY ISD (Sec. 21)

108



Where the Input Service 

Distributor distributes the credit



in contravention of the provisions contained in section 20



resulting in 

excess distribution of credit to one or more 

recipients of credit,



the excess credit 

so distributed



shall be recovered from such recipients along with interest

,



and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply

for determination of amount to be recovered.

109

Thanks

Presented by

CA. Kapil Aggarwal &

CA. Vijay Narayan