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8. Input Tax Credit

Chapter 8 – Input Tax Credit

Illustration: 1

From the following information determine the amount of Input tax credit admissible to
ABC Ltd. in respect of various inputs purchased during the month of September, 2023.

Inward supplies GST

(Rs.)
1 Goods purchased without invoice 25,000
2 Goods purchased from PQR Ltd. (Full payment is made by ABC Ltd.). The 1,20,000
credit is restricted as per Section 38 of the CGST Act, 2017.
3 Purchased of goods not be used for business purposes 18,000
4 Purchases of goods from TT Ltd. (Invoice of TT Ltd. is received in month 24,000
of September 2023, but goods were received in month of October 2023)
5 Goods purchased against valid invoice from FF Ltd. Tax has been 36,000
deposited by FF Ltd. ABC Ltd. has made payment to FF Ltd. for such
purchases in the month of October 2023.

Solution:

Computation of admissible ITC to ABC Ltd. for the month of September, 2023 (amount in
Rs.):

(1) Goods purchased without invoice [WN-1]

(2) Goods purchased from PQR Ltd. [WN-2]
(3) Purchases of goods not be used for business purposes [WN-3]
(4) Purchased of goods from TT Ltd. (Invoice of TT Ltd. is received in month
of September 2023, but goods were received in month of October 2023) [WN-
4]
(5) Goods purchased against valid invoice from FF Ltd. tax has been deposited 36,000
by FF Ltd. ABC Ltd. has made payment to FF Ltd. for such purchases in the
month of October 2023. [ WN-5]
Total admissible Input Tax Credit for the month of September 2023 36,000

Working Note:
(1) No Input tax credit will be available since ABC Ltd. is not in possession of valid tax
paying document.
(2) Since the credit is restricted as per the provisions of Section 38 of the CGST Act,
2017, hence the credit cannot be availed in respect of such purchases.

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8. Input Tax Credit

(3) A registered person shall be entitled to take input tax credit on goods which are used
or intended to be used in the course or furtherance of his business. Since ABC Ltd. has
purchased the goods for non-business purpose, hence no credit will be admissible on such
purchases.
(4) Input tax credit is admissible only when registered person has received such goods.
Since the goods are received in the month of October, 2023, input tax credit cannot be
taken in the month of September, 2023.
(5) Input tax credit shall be admissible in month of September, 2023 even if payment is
made by ABC Ltd. in month of October, 2023.

Illustration: 2

S Ltd., a registered manufacturer from Jaipur entered in a contract with a supplier for
supply of Input 'X' in October, 2023. As per contract, it was agreed that 10,000 Kgs of
Input 'X' will be supplied for Rs. 7,28,000 (inclusive of CGST and SGST 6% each) in 4 lots.
Invoice of Rs. 7,28,000 has been issued with supply of first lot of Input 'X'. Following
further information has been provided regarding supply of Input received in subsequent
lots.
Briefly explain whether S Ltd. eligible to take credit on proportionate basis.

Input ‘X’ (in lots) Quantity in Kgs Date of Receipt of supply

First Lot 2,500 19-10-2023
Second Lot 3,000 21-10-2023
Third Lot 1,500 12-11-2023
Fourth Lot 3,000 01-12-2023

Solution:

No, S Ltd. is not eligible to take credit on proportionate basis. As per first proviso to
Section 16(2), where the goods against an invoice are received in lots or installments, the
registered person shall be entitled to take credit upon receipt of the last lot or
installment. Therefore, in the given case Input 'X' has been received in lots hence, the
credit of tax of Rs. 78,000 i.e. (Rs. 7,28,000 x 12/ 112) paid on such input shall be taken
by S Ltd. only after receipt of fourth lot i.e., 01-12-2023.

Illustration: 3

XYZ Ltd. purchased goods valuing Rs. 6,00,000 (exclusive of CGST and SGST @ 9% each)
under the cover of invoice dated 25-12-2023. The company made payment to the supplier
on the same date. Since there was a doubt regarding admissibility of tax credit on such
inputs, the company did not take the input tax credit at the time of receipt of input. The
company obtained clarification from a legal consultant who opined that the goods were

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8. Input Tax Credit

eligible as inputs under Input tax Credit Rules. The opinion was received on 05-05-2024.
The company now wants to avail Input tax credit of the tax paid on such inputs. Can it do
so? The company has filed its annual return for the year 2023-24 on 12-08-2024.

Solution:

As per Section 16(4), a registered person shall not be entitled to take input tax credit in
respect of any invoice or debit note for supply of goods or services or both after
(a) 30th day of November following the end of financial year to which such invoice debit
note pertains;
Or
(b) Furnishing of the relevant annual return,
Whichever is earlier.
In this case the inputs were purchased by invoice dated 25-12-2023, hence Input tax
credit in respect of such inputs can be taken on earlier of following dates
30-11-2024; or
XYZ Ltd. can avail credit of input tax paid on inputs 12-08-2024. Therefore, it can avail
credit of CGST Rs. 54,000 and SGST of Rs. 54,000 on 05-05-2024.

Illustration: 4

A registered supplier of taxable goods supplied goods valued at Rs. 2,24,000 (inclusive of
CGST Rs. 12,000 and SGST Rs. 12,000) to Mohan Ltd. under the forward charge on 15-08-
2023 for which tax invoice was also issued on the same date. The inputs were received by
Mohan Ltd. on 15-08-2023. Mohan Ltd. availed credit of Rs. 24,000 on 18-08-2023. But
Mohan Ltd. did not make any payment towards such supply along with tax thereon to the
supplier. Is Mohan Ltd. eligible to avail input tax credit on such supply? What are the
consequences of such non-payment by Mohan Ltd.?
Discuss input tax credit provisions if Mohan Ltd. makes the payment of Rs. 2,24,000 to
the supplier on 18-03-2024.

Solution:

As per section 16 of the CGST Act, 2017, Mohan Ltd. is eligible to avail input tax credit
(ITC) of the tax paid on inputs received by it on the basis of the invoice issued by the
supplier provided other conditions for availing ITC are fulfilled.
Payment of value of the goods along with the tax to the supplier is not a pre-requisite at
the time of availing credit, but Mohan Ltd. has to pay the said amount within 180 days
from the date of issue of invoice.
If Mohan Ltd. does not make payment within 180 days from the date of invoice: A
registered person, who has availed of input tax credit on any inward supply of goods or
services or both, but fails to pay to the supplier thereof, the amount towards the value of

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8. Input Tax Credit

such supply along with the tax payable thereon, within 180 days from the date of invoice,
shall pay an amount equal to the input tax credit availed in respect of such supply along
with interest payable @18% p.a., while furnishing the return in FORM GSTR-3B for the
tax period immediately following the period of 180 days from the date of the issue of the
invoice. Thus, Mohan Ltd. will be liable to pay Rs. 24,000 along with interest @ 18% p.a.
while furnishing GSTR-3B for the month of February 2024.
Mohan Ltd liable to general penalty not exceeding Rs. 25,000: If Mohan Ltd. does not
pay the supplier as mentioned above, subject to the provisions of section 126 of the CGST
Act, 2017, a general penalty which may extend to Rs. 25,000 may also be levied for such
contravention by Mohan Ltd. u/s 125 of the CGST Act, 2017.
Re-credit of input tax if payment made after 180 days: Where the said registered
person subsequently makes the payment of the amount towards the value of such supply
along with tax payable thereon to the supplier thereof, he shall be entitled to re-avail the
input tax credit paid earlier. Thus he will be entitled to re-avail the input tax credit of
Rs.24,000 in the month of March, 2024.

Illustration: 5

X Ltd., a registered manufacturer engaged in taxable supply of goods procured the

following goods during the month of October. The same has been capitalized in the books
of account of X Ltd. Determine the amount of Input tax credit available by giving
necessary explanations for treatment of various items.

Inward supplies GST

(Rs.)
1 Electrical transformers used in the factory 2,16,000
2 Moulds and dies used in the factory 26,000
3 Pollution control equipment used in the factory 2,34,000
4 Capital goods purchased on which depreciation has been taken on full 1,35,000
value including input tax thereon
5 Capital goods used as parts purchased from supplier who paid of Rs.
10,000 under composition scheme and the composite tax has not been
collected from X Ltd.

Solution:

Computation of Input tax credit available to X Ltd. (amount in Rs.):

Electrical transformers used in the factory [WN-1] 2,16,000

Moulds and dies used in the factory [WN-1] 26,000
Pollution control equipment used in the factory [WN-1] 2,34,000

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8. Input Tax Credit

Capital goods purchased on which depreciation has been taken on full value Nil
including input tax thereon [WN-2]
Capital goods used as parts purchased from supplier who paid tax under Nil
composition scheme and the composite tax has not been collected from X
Ltd. [WN-3]
Total Input tax credit available 4,76,000

Working Notes:

(1) As per Section 2(19) "Capital goods" means goods, the value of which is capitalized in
the books of account of the person claiming the input tax credit and which are used or
intended to be used in the course or furtherance of business. Hence,-
(a) Electrical transformers
(b) Moulds and dies,
(c) Pollution control equipment,
Which are used or intended to be used in the course or furtherance of business are
eligible for ITC as capital goods.
(2) As per Section 16(3), no input tax credit shall be admissible where registered person
has claimed depreciation on the tax component of the cost of capital goods and plant and
machinery under the provisions of the Income-tax Act, 1961.
(3) As per Section 17(5)(e), input tax credit shall not be available in respect of goods or
services or both on which tax has been paid u/s 10. Thus, no ITC shall be allowed of tax
paid under composition scheme by the supplier.

Illustration: 6

Determine the amount of Input tax credit available to Kalyan Ltd. in respect of the
following goods and services procured by them in the month of April 2023:

Inward supplies GST

(Rs.)
(i) Motor vehicles for transportation of persons having approved seating 70,000
capacity of 7 persons (including driver)
(ii) Motor bus for transportation of persons having approved seating 1,40,000
capacity of 14 persons (including driver)
(iii) Motor lorries for transportation of goods 2,80,000
(iv) Food and Beverages procured from Sweet Caterers for being used in 48,000
dealer’s meet
(V) Services of repair and maintenance of motor lorries used for 36,000
transportation
(vi) Services of general insurance of motor vehicles for transportation of 18,000

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8. Input Tax Credit

persons having approved seating capacity of 7 persons (including

driver)
(vii) Services of servicing of motor vehicles for transportation of persons 54,000
having approved seating capacity of 14 persons (including driver)

Solution:

Computation of ITC available with Posco Ltd. (amounts in Rs.)

Motor vehicles for transportation of persons having approved seating Nil

capacity of 7 persons (including driver) [WN-1]
Motor bus for transportation of persons having approved seating capacity of 1,40,000
14 persons ( including driver) [WN-2]
Motor lorries for transportation of goods [WN-3] 2,80,000
Food and Beverages procured from Sweet Caterers for being used in dealer’s Nil
meet [WN-4]
Services of repair and maintenance of motor lorries used for transportation 36,000
of goods [WN-5]
Services of general insurance of motor vehicles for transportation of Nil
persons having approved seating capacity of 7 persons (including driver)
[WN-6]
Services of servicing of motor vehicles for transportation of persons having 54,000
approved seating capacity of 14 persons (including driver) [WN-7]
Total Input tax credit available 5,10,000

Working Notes:

(1) As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(including the driver), unless they are used for making the following taxable supplies,
namely: (A) further supply of such motor vehicles; or (B) transportation of passengers; or
(C) imparting training on driving such motor vehicles. Hence, no input tax credit is available
on the said motor vehicles.
(2) As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles
for transportation of persons having approved seating capacity of not more than 13
persons (including the driver). Thus, input tax credit shall be admissible on motor bus.
(3) In respect of motor vehicle used for the purpose of transportation of goods, the same
is not be covered under the ambit of blocked credit, hence input tax credit shall be
admissible in respect of such motor vehicles.
(4) As per Section 17(5)(b), no Input tax credit is available in respect of food and
beverages except where an inward supply of goods or services or both of a particular

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8. Input Tax Credit

category is used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or mixed
supply or if provision of such goods or services is obligatory for an employer to provide to
its employees under any law for the time being in force. Hence, no input tax credit is
available on food and beverages procured from Sweet Caterers for being used in dealer's
meet.
(5) Since motor lorries meant for transportation of goods is not covered under the ambit
of blocked credit, hence services of repair and maintenance of motor lorries is also eligible
for credit.
(6) Services of general insurance of motor vehicles for transportation of persons having
approved seating capacity of 7 persons (including driver) shall not be eligible for input tax
credit since the same is covered under the ambit of blocked credit under Section
17(5)(ab) of the CGST Act, 2017.
(7) Since Input tax credit is eligible for motor vehicles for transportation of persons
having approved seating capacity of 14 persons, hence services of servicing of such motor
vehicles shall be eligible for input tax credit.

Illustration: 7

Determine the amount of Input tax credit available to Posco Ltd. in respect of the
following items procured by them in the month of February:
Inward supplies GST(Rs.)
(i) Input used for the manufacture of the final product 72,000
(ii) Food and Beverages procured from Sweet Caterers for employees 48,000
Under statutory obligation
(iii) Goods used for providing services during warranty period 12,000
(iv) Goods used for setting up Telecommunication Towers being 90,000
Immovable property
(v) Inputs stolen from the factory store 13,200

Solution:

Computation of Input credit available with Posco Ltd. (amount in Rs.):

Input used for the manufacture of the final product 72,000

Food and Beverages procured from Sweet Caterers for employees under 48,000
statutory obligation [WN-1]
Goods used for providing services during warranty period (Since used in 12,000
course of business hence, input tax credit shall be available)
Goods used for setting up Telecommunication Towers being immovable Nil
property [WN-2]
Inputs stolen from the factory store [WN-3] Nil

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8. Input Tax Credit

Total Input tax credit available 1,32,000

Working Notes:

(1) As per Section 17(5)(b), no Input tax credit is available in respect of food and
beverages except where an inward supply of goods or services or both of a particular
category is used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or mixed
supply or if provision of such goods or services is obligatory for an employer to provide to
its employees under any law for the time being in force. Since in this case food and
beverages are provided to employees under statutory obligation, hence, input tax credit is
available.
(2) As per Section 17(5)(d), Goods received by taxable person for construction of an
immovable property (other than Plant and Machinery) on his own account including when
such goods used in course or furtherance of business shall be considered as ineligible input
and no credit shall be allowed of tax paid on such goods. Since Telecommunication tower is
an immovable property, hence, no input tax credit shall be allowed in respect of goods used
for setting it up.
(3) As per Section 17(5)(h), Goods lost, stolen, destroyed, written off or disposed of by
way of gift or free samples are considered as ineligible input and credit of GST paid on
such goods cannot be taken.

Illustration: 8

Determine the amount of Input tax credit admissible to PQR Ltd. in respect of the
following goods procured by it in the month of January:

Inward supplies GST

(Rs.)
1 Goods used in constructing an additional floor of office building 28,800
2 Packing Materials used in a factory 6,000
3 Goods destroyed due to natural calamities 12,500
4 Goods used for repairing the office building and cost of such repairs is 12,000
debited to profit and loss account
5 Paper for photocopying machine used in Administrative office 950
6 Goods given as gifts 25,000
7 Inputs used for tests or quality control check 15,600

Note: (i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) Registered Person is not eligible for any threshold exemption.

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8. Input Tax Credit

Solution:

Computation of Input tax credit available with PQR Ltd. (amount in Rs.):

Goods used in construction of an additional floor of office building [WN-1] Nil

Packing Materials used in a factory (Since used in course of business hence, 6,000
ITC shall be available)
Goods destroyed due to natural calamities [WN-2] Nil
Goods used for repairing the office building and cost of such repairs is debited 12,000
to P& L account [WN-3]
Paper for photocopying machine used in Administrative Office (Since used in 950
course of business hence, ITC shall be available)
Goods given as gifts Nil
Inputs used for tests or quality control check (Since used in course of business 15,600
hence, ITC shall be available)
Total ITC available 34,550

Working Note:
(1) As per Section 17(5)(d), input tax credit shall not be available in respect of 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. Hence, input tax credit shall
not be available in respect of goods used in construction of an additional floor of office
building.
(2) Section 17(5)(h), input tax credit shall not be available in respect of goods lost, stolen,
destroyed, written off or disposed of by way of gift or free samples. Hence, no ITC shall
be available in respect of goods destroyed due to natural calamities.
(3) As per the explanation, the expression "Construction" includes re-construction,
renovation, additions or alterations or repairs, to the extent of capitalisation, to the
immovable property. Goods used for revenue repairs are considered as an eligible input and
credit shall be allowed on the same.

Illustration: 9

Determine the amount of Input tax credit admissible to P Ltd. in respect of the following
items procured by them in the month of March 2024:

Inward supplies GST

(Rs.)
1 Goods supplied for captive consumption in a factory 9,800
2 Goods purchased for being used in repairing the factory shed and same 18,000

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8. Input Tax Credit

has been capitalized in books

3 Cement used for making foundation and structural support to Plant and 14,000
Machinery
4 Inputs used in trial runs 14,560
5 Food and beverages purchased for the employees during office hours not 8,400
under statutory obligation

Note: (i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) Registered Person is not eligible for any threshold exemption.

Solution:

Computation of Input tax credit available with P Ltd. (amount in Rs.)

Goods used for captive consumption (Since, used in course of Business hence, 9,800
ITC on same shall be admissible)
Goods purchased for being used in repairing the factory shed and same has Nil
been capitalized to the cost of factory Shed [WN-1]
Cement used for making foundation and structural support to Plant and 14,000
Machinery [WN-2]
Inputs used in trial runs (Since used in course of business hence, input tax 14,560
credit shall be available)
Food and beverages purchased for the employees during office hours not under Nil
statutory obligation [WN-3]
Total Input tax credit available 38,360

Working Note:
(1) As per Section 17(5)(d), input tax credit shall not be available in respect of 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. Construction includes re-
construction, renovation, additions or alterations or repairs, to the extent of
capitalisation, to the said immovable property. Since the cost of repairs is capitalized in
books, no credit of input tax paid on goods used shall be allowed.
(2) As per Explanation to Section 17, "plant and machinery" means apparatus, equipment,
and machinery fixed to earth by foundation or structural support that are used for making
outward supply of goods or services or both and includes such foundation and structural
supports. Input tax credit is admissible in respect of goods or services or both received
by a taxable person for construction of plant or machinery. Hence, tax paid on cement
shall be available for input tax credit.
(3) As per Section 17(5)(b), No input tax credit is available in respect of food and

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8. Input Tax Credit

beverages except where an inward supply of goods or services or both of a particular

category is used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or mixed
supply or where it is obligatory for an employer to provide the same to its employees under
any law for the time being in force. Hence, no input tax credit is available on food and
beverages for use of employees during office hours.

Illustration: 10

A Ltd. procured the following goods in the month of December, 2023.

Inward Supplies GST

(Rs.)
1 Goods used in constructing an additional floor of office building 18,450
2 Goods given as free sample to prospective customers 15,000
3 Trucks used for transportation of inputs in the factory 11,000
4 Inputs used in trail runs 9,850
5 Confectionary items for consumption of employees working in the factory 3,250
6 Cement used for making foundation and structural support to plant and 8,050
machinery

Compute the amount of ITC available with A Ltd. for the month of December 2023 by
giving necessary explanations. Assume that all the other conditions necessary for availing
ITC have been fulfilled.

Solution:

Computation of amount of ITC available for the month of December 2023:

Particulars GST
(Rs.)
1 Goods used in construction of additional floor of office building [ITC on Nil
goods received by a taxable person for construction of an immovable
property on his own account is blocked even if the same is used in the
course or furtherance of business. It has been assumed that cost of
construction of additional floor has been capitalized.]
2 Goods given as free samples to prospective customers [ITC on goods Nil
disposed of by way of free samples is blocked.]
3 Trucks used for transportation of inputs in the factory [ITC on motor 11,000
vehicles used for transportation of goods is not blocked.]
4 Inputs used in trial runs [Being used in trial runs, inputs are used in the 9,850

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8. Input Tax Credit

course of furtherance of business and hence ITC thereon is allowed.]

5 Confectionary items for consumption of employees working in the factory Nil
[ITC on food or beverages is blocked unless the same is used in same line
of business or as an element of the taxable composite or mixed supply.
Further, ITC on goods and/or service used for personal consumption is
blocked.
6 Cement used for making foundation and structural support to plant and 8,050
machinery [ITC on goods used for construction of plant and machinery is
not blocked. Plant and machinery includes foundation and structural
supports through which the same is fixed to earth.
Total eligible ITC 28,900

Illustration: 11

An Elite Training institute provides Service of training pilot in flying commercial aircraft
so that candidates become eligible for obtaining Aviation license. Determine whether the
institute is eligible to take credit on aircraft purchased for imparting training.

Solution:

As per Section 17(5)(aa), no credit of input tax shall be allowed on vessels and aircraft
except when they are used-
(i) For making the following taxable supplies, namely:
(a) Further supply of such vessels or aircraft; or
(b) Transportation of passengers; or
(c) Imparting training on navigating such vessels; or
(d) Imparting training on flying such aircraft;
(ii) For transportation of goods.
Since, Aircraft is used to impart training on flying, therefore credit of input tax paid on
purchase of aircraft shall be available to Elite Institute.

Illustration: 12

Krishna Motors is a car dealer selling cars of an international car company having seating
capacity of 7 persons (excluding driver). It also provides maintenance and repair services
of the cars sold by it as also of other cars. It seeks your advice on availability of ITC in
respect of the following expenses incurred by it during the course of its business
operations:
(i) Cars purchased from the manufacturer for making further supply of such cars. Two of
such cars are destroyed in accidents while being used for test drive by potential
customers.
(ii) Works contract services availed for constructing a car washing shed in its premises.

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8. Input Tax Credit

Solution:

As per Section 16(1) of the CGST Act, 2017, every registered person can take 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. However, Section 17(5)
of CGST Act, 2017 specifies certain goods and services on which the input tax credit is
not available.
In the light of the foregoing provisions, the availability of input tax credit (ITC) in
respect of the various expenses incurred by Krishna Motors is discussed below:
(i) Section 17(5)(a) specifically blocks ITC on motor vehicles for transportation of persons
having approved seating capacity of not more than thirteen persons (including the driver),.
However, the same is allowed when the motor vehicles are used, inter cilia, for further
supply of such motor vehicles. Thus, ITC on cars purchased from the manufacturer for
making further supply of such cars will be allowed.
However, ITC on the cars destroyed in accident will not be allowed as the ITC on goods
destroyed for whichever reason is specifically blocked under Section 17(5)(h) of CGST
Act.
(ii) Section 17(5)(c) specifically blocks ITC on works contract services when supplied for
construction of an immovable property (other than plant and machinery) except where it is
an input service for further supply of works contract service. Since, in this case the car
washing shed is not a plant and machinery and the works contract service is not used for
further supply of works contract service, ITC thereon will not be allowed.

Illustration: 13

ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the following
items during the month of July.
Inward supplies GST (Rs.)
(i) Electrical transformers to be used in the manufacturing process 3,60,000
(ii) Truck used for transportation of inputs in the factory 2,24,000
(iii) Raw material 2,00,000
(iv) Confectionery items for consumption of employees working in 25,000
The factory under statutory obligation
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving
necessary explanations for treatment of various items.
Note: (1) All the conditions necessary for availing the ITC have been fulfilled.
(2) ABC Co. Ltd. is not eligible for any threshold exemption.

Solution:

Computation of ITC available with ABC Co. Ltd. for the month of July (amount in Rs.):

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8. Input Tax Credit

(i) Electrical transformers [WN-1] 3,60,000

(ii) Trucks used for the transport of inputs in the factory [WN-2] 2,24,000
(iii) Raw material [WN-3] 2,00,000
(iv) Confectionery items for consumption of employees working in the 25,000
factory under statutory obligation [WN-4]
Total Inputs tax credit available 8,09,000

Working Notes:
(1) As per Section 16(1), ITC is admissible in respect of any goods used in the course or
furtherance of business. Hence, ITC is admissible in case of electrical transformers and
raw materials used in course or furtherance of business.
(2) Motor vehicles used for transportation of goods do not fall under the ambit of blocked
credit. Hence, input tax credit shall be allowed on same.
(3) Being goods used in the course or furtherance of business, ITC thereon is available in
terms of Section 16(1).
(4) As per Section 17(5)(b), ITC on food or beverages 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 or where it is obligatory for an employer to provide
the same to its employees under any law for the time being in force. Hence, input tax
credit is available on Confectionery items for consumption of employees working in the
factory, since the same is provided under statutory obligation.

Illustration: 14

XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available with XYZ
Ltd. for the month of October, 2023 from the following particulars:

S.No. Inward GST (T) Remarks

supplies
(i) Input ‘X’ 1,20,000 One invoice on which GST payable was Rs. 10,000, is
missing
(ii) Input ‘Y’ 1,00,000 Inputs are to be received in two installments. First
installment has been received in October, 2023.
(iii) Capital 1,80,000 XYZ Ltd. has capitalized the capital goods at full
Goods invoice value inclusive of GST as it will avail
depreciation on the full invoice value.
(iv) Input 2,50,000 One invoice dated 20-01-2023 on which GST payable
services was Rs. 50,000 has been received in October, 2023.

Note:

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 15
8. Input Tax Credit

(i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) XYZ Co. Ltd. is not eligible for any threshold exemption.
(iii) The annual return for the financial year 2022-23 was filed on 15thSeptember, 2023.

Solution:

Computation of ITC available with XYZ Ltd. for the month of October, 2023:

S. No. Inward supplies GST(Rs.)

1 Inputs ‘X’ [WN-1] 1,10,000
2 Inputs ‘Y’ Nil
3 Capital goods Nil
4 Input services 2,00,000
Total 3,10,000

Working Notes:

(1) ITC cannot be taken on missing invoice. The registered person should have the invoice
in its possession to claim ITC-Section 16(2)(a).
(2) When inputs are received in installments, ITC can be availed only on receipt of last
installment- First proviso to Section 16(2).
(3) Input tax paid on capital goods cannot be availed as ITC, if depreciation has been
claimed on such tax component Section 16(3).
(4) As per section 16(4), ITC on an invoice cannot be availed after the due date of
furnishing of the return for the month of September following the end of financial year to
which such invoice pertains or the date of filing annual return, whichever is earlier.
Since the annual return for the FY. 2022-23 has been filed on 15th September, 2023
(prior to 30th November 2023), ITC on the invoice pertaining to FY. 2022-23 cannot be
availed after 15th September, 2023.

Illustration: 15

Compute the Input tax credit available with Ujjwal Motors Ltd., manufacturer of cars, in
respect of the following services availed by it in the month of October, 2023:

Inward supplies GST

(Rs.)
(i) Accounting and Auditing Services 7,200
(ii) Health insurance services for employees 16,200
(Service are not provided under Government obligation)
(iii) Routine maintenance of the cars manufactured by Ujjwal Motors Ltd. 18,000

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 16
8. Input Tax Credit

(iv) Repair service for office building (Cost of repairs is charged to profit 14,400
and loss account)
(V) Travel benefits extended to employees on vacation under statutory 3,360
obligation
(vi) Testing services availed for car engines 9,000

Note:
(1) All the conditions necessary for availing the ITC have been fulfilled.
(2) Registered Person is not eligible for any threshold exemption.

Solution:

Computation of Input tax credit available with Ujjwal Motors Ltd. (amounts in Rs.)

Accounting and Auditing Services 7,200

(ITC is eligible since such services are used in course of business)
Health insurance services to employees Nil
(Service are not provided under Government obligation) [WN-1]
Routine maintenance of the cars manufactured by Ujjwal Motors Ltd. 18,000
(ITC eligible since such services are used in course of business
Repair service for office building, cost of which is charged to profit and loss 14,400
account
(Repairs are revenue in nature, hence, credit of tax credit of tax paid shall be
available)
Travel benefits extended to employees on vacation under statutory obligation 3,360
[WN-2]
Testing services availed for car engines 9,000
(ITC is eligible since such services are used in course of business)
Total Input tax credit available 51,960

Working Note:

(1) As per section 17(5)(b)(i), No ITC shall be available in respect of health insurance
services availed for employees since the Government has not notified the said services as
obligatory services to be provided to employees.
(2) As per section 17(5)(b)(iii), ITC shall be allowed on travel benefits extended to
employees on vacation since it is obligatory for an employer to provide the same to its
employees under any law for the time being in force.

Illustration: 16 [imp]

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 17
8. Input Tax Credit

XYZ Ltd. engaged in supplying taxable goods has availed following services in month of
September, 2023. Compute the input tax credit admissible on such input services.

Inward supplies GST

(Rs.)
(1) Sales promotion services 16,200
(2) Health and fitness services availed from Physique Club for upkeep of 10,800
health of their employees. The said services are not availed under
Government obligation
(3) Hiring of motor bus for transportation of employees. Seating capacity of 4,500
motor bus is 40 Passengers
(4) Market research services 10,080
(5) Quality control services 18,000
(6) Work contract services for construction of office building 45,000

Note:
(i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) Registered Person is not eligible for any threshold exemption.

Solution:

Computation of Input tax credit available with XYZ Ltd. (amount in Rs.):

Sales promotion services [WN-1] 16,200

Health and fitness services availed from Physique Club for upkeep of health of Nil
their employees, not under Government obligation. [WN-2]
Hiring of motor bus on rent for transportation of employees. Seating capacity 4,500
of motor bus is 40 passengers. [WN-3]
Market research services [WN-1] 10,080
Quality control services [WN-1] 18,000
Work contract services for construction of office building (Not considered as Nil
eligible input Service)
Total Input tax credit available 48,780

Working Note:
(1) As per the Section 2(60), "Input service" means any service used or intended to be
used by a supplier in the course or furtherance of business. So, services like - (a) Sales
promotion services; (b) Market research services; (c) Quality control services, are used by
supplier in course or furtherance of business. Hence, the credit of the tax paid on the
aforesaid supply of services is available.
(2) As per Section 17(5)(b), No input tax credit is available in respect of health and

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 18
8. Input Tax Credit

fitness centre services where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force. Thus, no input tax credit shall be
admissible on health and fitness services provided to employees.
(3) As per Section 17(5)(b)(i), Input tax credit is not allowed in respect of leasing, renting
or hiring of motor vehicles referred to in clause (a) except when used for the purposes
specified therein. Since bus having seating capacity of 40 passengers do not fall under the
ambit of motor vehicles specified in Section 17(5)(a), hence input tax credit shall be
admissible.

Illustration: 17

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 2023:

Particulars Rs.
(i) Purchase of cabs used for the transportation of its employees 3,30,000
(ii) Inputs consisting of three lots, out of which first lot was received 1,25,000
during the month
(iii) Capital Goods (out of three items, invoice for one item was missing and 2,50,000
GST Paid on that item was Rs. 25,0000
(iv) Outdoor catering service availed on Women’s day 72,000

Determine the amount of Input Tax Credit available with M/s. Fun Pharma Private Limited
for the month of September 2023 by giving necessary explanations for treatment of
various items. All the conditions necessary for availing the input tax credit have been
fulfilled.

Solution:

Computation of ITC available with Fun Pharma Private Limited for the month of
September, 2023:

S. Inward supplies GST

No. (Rs.)
(i) Purchase of cabs used for the transportation of its employees [WN-1] 0
Inputs consisting of three lots, out of which first lot was received
during the month [WN-2] 0
Capital goods (Rs. 2,50,000 – Rs. 25,000) [WN-3] 2,25,000
Outdoor catering service availed on Women’s Day [WN-4] 0
Total 2,25,000

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 19
8. Input Tax Credit

Working Note:
(1) As per Section 17(5)(a), no Input tax credit is available in respect of motor vehicles for
transportation of persons having approved seating capacity of not more than 13 persons
(Including the driver), unless they are used for making the following taxable supplies,
namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or
(C) imparting training on driving such motor vehicles. Hence, no input tax credit is available
on the said motor vehicles.
(2) When inputs are received in lots/installments, ITC can be availed only on receipt of
last lot/installment- First proviso to Section 16(2).
(3) ITC cannot be taken on missing invoice. The registered person should have the invoice
in its possession to claim ITC – Section 16(2)(a).
(4) As per section 17 (5) (b), input tax credit cannot be availed in respect of supply of
outdoor catering service.

Illustration: 18

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 2024:

Particulars GST Paid

Rs.
(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 80,000
a registered supplier
(iii) Computers purchased (Depreciation was claimed on the said GST 50,000
portion under the ITA, 1961)
(iv) Works Contract services availed for construction of Staff quarters 4,25,000
within the company premises

Determine the amount of ITC available to M/s. CANWIN Ltd. for the month of January
2024 by giving brief explanations for treatment of various items. Subject to the
information given above, all the conditions necessary for availing the ITC have been
fulfilled.

Solution:

Determination of the amount of ITC available of ITC available to M/s. CANWIN Ltd.:

Particulars GST Paid

Rs.

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 20
8. Input Tax Credit

(i) Purchase of Machinery where debit note is issued [ITC can be availed 1,15,000
on the basis of debit note issued by the supplier in accordance with
Rule 36 of CGST Rules, 2017]
(ii) Input purchased was directly delivered to Mr. Joe, a job worker and a 80,000
registered supplier [As per Explanation to Section 16(2), it shall be
deemed that the registered person has received the goods where the
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 of
transfer of documents of title to goods or otherwise, Thus, ITC can be
availed in case the goods are directly delivered to job-worker on
direction of CANWIN Ltd.]
(iii) Computers purchased (Depreciation was claimed on the said GST
portion under the Act, 1961) [As per Section 16(3), where the
registered person has claimed depreciation on the tax component of
the cost of capital goods and plant and machinery under the provisions
of the Income-tax Income-Act, 1961, the input tax credit on the said
tax component shall not be allowed.]
(iv) Works Contract services availed for construction of Staff quarters
within the company premises [The same comes under the ambit of
blocked credit u/s 17(5)(c), hence ITC shall not be admissible]
Total Input tax credit available 1,95,000

Illustration: 19

Cloud Seven Private Limited, 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 February, 2024:

Particulars GST Paid (Rs.)

(i) Trucks used for the transport of raw material 1,20,000
(ii) Food and beverages for consumption of employees working in 40,000
the factory
(iii) Inputs are to be received in five lots, out which third lot was 80,000
received during the month
(iv) Membership of a club availed for employees working in the 1,50,000
factory
(v) Capital goods (Out of five items, invoice for one item was 4,00,000
missing and GST paid on that item was Rs. 50,000)
(vi) Raw material (to be received in March, 2024) 1,50,000

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 21
8. Input Tax Credit

Determine the amount of input tax credit available with Cloud Seven Private Limited for
the month of February, 2024 by giving necessary explanations for treatment of various
items. All the conditions necessary for availing the input tax credit have been fulfilled.

Solution:

Computation of ITC available with Cloud Seven Private Limited for the month of February
2024 (amt. in Rs.):

Trucks used for the transport of raw material [WN-1] 1,20,000

Food and beverages for consumption of employees working in the factory Nil
[WN-2]
Inputs are to be received in five lots, out of which third lot was received Nil
during the month [WN-3]
Membership of a club availed for employees working in the factory [WN-4] Nil
Capital goods (out of five items, invoice for one item was missing and GST 3,50,000
paid on that item was 50,000] [WN-5]
Raw material (to be received in March, 2024) [WN-6] Nil
Total ITC 4,70,000

Working Note:
(1) ITC on motor vehicles used for transport of goods is not blocked u/s 17(5) of the
CGST Act, 2017.
(2) As per Section 17(5)(b), ITC on food or beverages 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 or where it is obligatory for an employer to provide
the same to its employees under any law for the time being in force.
(3) When inputs are received in installments, ITC can be availed only on receipt of last
installment [Section 16(2)].
(4) Membership of a club is specifically disallowed under section 17(5) of the CGST Act,
2017.
(5) ITC cannot be taken on missing invoice. The registered person should have the invoice
in its possession to claim ITC [Section 16(2) of CGST Act, 2017].
(6) Input tax credit is available only upon the receipt of goods in terms of section 16(2) of
CGST Act, 2017.

Illustration: 20

Le Marc Ltd. of Nashik, Maharashtra, a registered supplier, is engaged in manufacturing

taxable goods. It provides the following details of items purchased and services availed by
it from Gujarat, for the amount of March, 2024:

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 22
8. Input Tax Credit

Particulars IGST
(Rs.)
1 Motor vehicle seating capacity 5 persons (including driver) purchased for 1,50,000
employees to be used for personal as well as business purposes
2 Motor vehicle purchased for transportation of goods within the factory 2,00,000
3 Food items for consumption of employees. These items were supplied 2,000
free of cost to the employees in lieu of services rendered by them to the
manufacturer in the course of employment.
4 Rent-a-cab facility availed for employees to fulfill a statutory obligation 36,000
in this regard. The Government has notified such service under section
17(5) of the CGST Act, 2017.

Calculate the amount of eligible input tax credit for the month of March, 2024.

Solution:

Computation of eligible input tax credit (amount in Rs.):

Particulars IGST
(Rs.)
Motor vehicle seating capacity 5 persons (including driver) purchased for
employees to be used for personal as well as business purposes [WN-1]
Motor vehicle purchased for transportation of goods within the factory 2,00,000
[WN-4]
Food items for consumption of employees [WN-2]
Rent-a-cab facility given to employees [WN-3] 36,000
Total eligible input tax credit 2,36,000

Working Notes:
As per section 17(5) CGST Act, 2017:
(1) As per Section 17(5)(a), not input tax credit is available in respect of motor vehicles
for transportation of persons having approved seating capacity of not more than 13 person
(including the driver), unless they are used for making the following taxable supplies,
namely:- (A) further supply of such motor vehicles or (B) transportation of passengers; or
(C) imparting training on driving such motor vehicles. Hence, no input tax credit is available
on the motor vehicles.
(2) As per Section 17(5)(6), ITC on food or beverages is specifically disallowed unless the
same is used for making outward taxable supply of the same category of as an element of
the taxable composite or mixed supply or where it is obligatory for an employer to provide
the same to its employees under any law for the time being in force.
(3) ITC on supply of rent-a cab services is not blocked where the Government notifies the

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 23
8. Input Tax Credit

services which obligatory for an employer to provide such service to its employees. Thus,
ITC is available on said service.
(4) ITC on motor vehicles used for transport of goods is not blocked u/s 17(5) of the
CGST Act, 2017.

Illustration: 21

XYZ Ltd., a manufacturer, which is engaged in supply of taxable goods has purchased
10,000 kg of inputs for Rs. 10,00,000 (exclusive of CGST @ 6% and SGST @ 6%) on which
input tax credit has been taken. Due to technical changes in manufacturing process, the
said inputs became obsolete and their value has been written off in the books of accounts.
Explain Input tax credit treatment in above case.

Solution:

As per Section 17(5)(h) of the CGST Act, 2017, if the value of any goods is written off in
the books of account, then no input tax credit shall be allowed in respect of the said input.
Where input tax credit has been taken respect of the said goods, the same has to be paid
by recipient of input goods. Since in the given case, XYZ Ltd. has availed input tax credit,
thus it has to pay Rs. 60,000 (Rs. 10,00,000 @ 6%) towards CGST and Rs. 60,000 towards
SGST liability.

Illustration: 22

XYZ Ltd. is engaged in supply of works contract services for construction of immovable
property. It gives a part of the construction work to a sub-contractor. The sub-contractor
charges GST in his invoice to XYZ Ltd. You are required to advice XYZ Ltd. if it can avail
Input tax credit of the GST charged to it by the sub-contractor.

Solution:

As per Section 17(5)(c), input tax credit shall not be available in respect of works contract
services when supplied for construction of an immovable property. However, Credit is
allowed where it is an input service for further supply of works contract service. In the
given case, the services supplied by the sub-contractor have been used by the XYZ Ltd.
for supply of works contact service. Hence, XYZ Ltd. can avail the Input tax credit of the
GST charged on the input service provided by the sub-contractor.

Illustration: 23

XYZ Ltd. is engaged in the supply of passenger transportation services. In the month of
September, 2023 it has purchased if 10 motor cabs for Rs. 36,00,000 plus GST @ 28%.

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 24
8. Input Tax Credit

You are required to advice XYZ Ltd. if it can avail Input tax credit of the GST paid by it
on motor cabs.

Solution:

As per Sections 17(5)(a), input tax credit shall not be available in respect of motor
vehicles for transportation of persons having approved seating capacity of not more than
13 persons (including the driver). However, credit will be available when they are used for
making the taxable supplies of transportation of passengers. In this case XYZ Ltd. is
engaged in the transportation of passengers it will be entitled to take credit of GST
amounting Rs. 10,08,000 i.e. [Rs. 36,00,000 x 28%]

Illustration: 24

XYZ Ltd. conducted its 50th Annual General meeting at its head office in New Delhi and
availed services of Delicious caterers on that occasion. Delicious caterers charged Rs.
15,00,000 plus GST @ 18% for the supply of outdoor catering services. You are required
to advice XYZ Ltd. if it can avail Input tax credit of the GST paid on outdoor catering
service.

Solution:

As per Section 17(5)(b), input tax credit shall not be available in respect of supply of
outdoor catering service unless inward supply of such services is used by a registered
person for making an outward taxable supply of the same category of goods or services or
both or as an element of a taxable composite or mixed supply or where it is obligatory for
an employer to provide the same to its employees under any law for the time being in
force. Hence, XYZ Ltd. is not entitled to avail ITC of GST paid on outdoor catering
services availed from Delicious caterers.

Illustration: 25

Computation of Net GST payable: From the following information, compute the Net GST
Payable for the month of March 2023:

Amount in (Rs.)
Output GST Opening ITC as per credit ledger
CGST 2,000 Nil
SGST 15,000 1,000
IGST 24,000 37,000

Solution:

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 25
8. Input Tax Credit

Computation of Net GST payable (amount in Rs.):

Particulars CGST SGST IGST

Output tax liability 2,000 15,000 24,000
Less: Input tax credit IGST credit to be used for payment of - 11,000 -
IGST and balance for CGST and SGST in any order] 2,000 24,000
Remaining Liability Nil 4,000 Nil
Less: Extra credit of SGST can be used for payment of -1,000
SGST
Net amount of CGST/SGST/IGST payable Nil 3,000 Nil

Illustration: 26

Mr. X, a supplier of goods, pays GST under regular scheme. The amount of input tax credit
(ITC) available and output tax liability under different tax heads is as under:-

Head Output tax liability ITC

IGST 2,000 4,000
CGST 800 2,000
SGST/UGST 2,500 500

Compute the minimum GST payable in cash by Mr. X, make suitable assumptions as
required.

Solution:

Mr. X can use the ITC to pay his output tax liability. The order of utilization of ITC is as
under-
(i) IGST credit should first be utilized towards payment of IGST.
(ii) Remaining IGST credit, if any, in any can be utilized towards payment of CGST and
SGST/UTGST in any order and in any proportion.
(ii) Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or
SGST/UTGST.
(iv) ITC of CGST should be utilized for payment of CGST and IGST in that order.
(v) ITC of SGST/UTGST should be utilized for payment of SGST/UTGST and IGST in
that order. However, ITC of SGST/UTGST should be utilized for payment of IGST, only
after ITC of CGST has been utilized fully.
CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit
cannot be utilized for payment of CGST.

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 26
8. Input Tax Credit

Computation of minimum GST payable in cash:

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)

GST payable 800 2,500 2,000
Less: ITC (2,000)-IGST (2,000)-IGST
(800)-CGST (500)-SGST
Net GST payable in cash Nil Nil Nil

Since sufficient balance of ITC of CGST ITC is available for paying CGST liability and
cross utilization of ITC of CGST and SGST is not allowed, it is beneficial to use ITC of
IGST to pay SGST (after paying IGST liability) to minimize cash outflow.

Illustration: 27

XYZ Ltd. has effected interstate taxable supplies of Rs. 2 crore in the month of April
2023, which are chargeable to 18% GST. His balance in electronic credit ledger as per Rule
36(4) is Rs. 38,00,000. Determine the amount to be deposited through Electronic cash
ledger if restrictions of Rule 86B are applicable.

Solution:

The amount of GST liability to be discharged through Electronic cash ledger will be
worked out as under

Particulars Rs.
Output tax payable under forward charge [Rs. 2 crore x 18% ] 36,00,000
Less: ITC to be utilised to the extent of 99% of output tax liability [Rs. 35,64,000
36,00,000 x 99%]
Amount of GST to be deposited through Electronic cash Ledger 36,000
Balance in electronic credit ledger to be carried forward [Rs. 38,00,000 – 2,36,000
Rs. 35,64,000]

Illustration: 28

PQR (Pvt.) Ltd. is engaged in supplying taxable goods to its customers within the state and
it is not liable for registration under Section 22 of CGST Act, 2017. From 15-02-2024
onwards, it started inter-state supply of taxable goods hence it applied for registration on
25-02-2024 and same has been granted to him. Its CGST, SGST and IGST liability for the
month of February, 2024 is Rs. 19,500, Rs. 19,500 and Rs. 40,500 respectively and PQR
(Pvt.) Ltd. has to make e-payment of tax on the due date i.e., on 20-03-2024.
PQR (Pvt.) Ltd. has provided the following details of stock of input held on 14-02-2024 and

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 27
8. Input Tax Credit

tax paid thereon

Particulars CGST SGST

(Rs.) (Rs.)
Inputs received on 10-01-2024 (Invoice dated 11-01-2024) lying 3,600 3,600
in stock
Inputs received on 25-10-2023 (Invoice dated 26-10-2023) 7,500 7,500
lying in semi-finished stock
Inputs received on 15-01-2024 ( Invoice dated 15-01-2024) 9,600 9,600
contained in Finished Goods

Briefly explain the tax payable by PQR (Pvt.) Ltd. in cash, if any. Note: PQR (Pvt.) Ltd. has
not opted for the Composition scheme.

Solution:

As per Section 18(1)(a), a person applying for registration within 30 days from date on
which he becomes liable to registration under this Act and has been granted registration
shall be entitled to take credit of input tax in respect of input held in stock, or contained
in semi-finished or finished goods in stock on date immediately preceding the date from
which he becomes liable to registration i.e., 14th February, 2024.
As per section 18(2), a registered person shall not be entitled to take input tax credit in
respect of any supply of goods or services or both to him after the expiry of 1 year from
the date of issue of tax invoice relating to such supply.
In view of above provision ITC available to PQR (Pvt.) Ltd. will be computed as fellows
(amount in Rs.):

Particulars CGST @ SGST @

6% 6%
Inputs received on 10-01-2024 (Invoice dated 11-01-2024) lying 3,600 3,600
in stock as on 14-02-2024
Inputs received on 25-10-2023 (Invoice dated 26-10-2023) 7,500 7,500
lying in semi-finished stock as on 14-02-2024
Inputs received on 15-01-2024 (Invoice dated 15-01-2024) 9,600 9,600
Contained in Finished Goods as on 14-02-2024
Total Eligible Input tax credit 20,700 20,700

Computation of Tax payable in cash by PQR (Pvt.) Ltd. for month of February, 2024
(amount in Rs.):

Particulars CGST@ SGST@ IGST@

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 28
8. Input Tax Credit

Output tax liability for February, 2024 19,500 19,500 40,500

Less: Eligible input tax Credit available on inputs in respect
of
CGST [See Note] 19,500 19,500 1,200
SGST [See Note] 19,500 1,200
Output Tax payable in Cash Nil Nil 38,100

Note: As per Sections 49, 49A and 49B of CGST Act and Rule 88A of CGST Rules, the
Central tax shall first be utilised towards payment of central tax and the amount
remaining, if any, may be utilised towards the payment of integrated tax and the State tax
shall first be utilised towards payment of State tax and the amount remaining, if any, may
be utilised towards payment of integrated tax.

Illustration: 29

B Ltd. is not required to register under CGST Act, 2017 but it wishes to obtain voluntary
registration so, it applied for voluntary registration on 18th September, 2023 and
registration certificate has been granted to it on 25th September, 2023. The CGST and
SGST liability for the month of September, 2023 is Rs. 21,000 each. B Ltd. provides the
following information of inputs held in stock on 24th September, 2023. It is not engaged
in making Inter-state outward taxable supplies.

Particulars Rs.
Input procured on 02-09-2023 lying in stock:
CGST @ 6% 4,500
SGST @ 6% 4,500
Input Received on 21-02-2023 contained in semi-Finished goods held in stock:
CGST @ 6% 7,500
SGST @ 6% 7,500
Value of inputs contained in finished goods held in stock Rs. 2,00,000 were
procured on 19-09-2022:
IGST @ 18% 36,000
Inputs valued Rs. 50,000 procured on 13-09-2023 lying in stock:
IGST @ 18% 36,000
Inputs valued Rs. 50,000 procured on 13-09-2023 lying in stock:
IGST @ 18% 9,000
Capital Goods procured on 12-09-2023:
CGST @ 6% 12,000
SGST @ 6% 12,000

You are required to determine the amount of tax to be paid in cash by B Ltd. for the

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 29
8. Input Tax Credit

month of September, 2023.

Solution:

As per Section 18(1)(b), in case of a person obtaining voluntary registration he shall be

entitled to take credit of input tax in respect of input held in stock, or contained in semi-
finished or finished goods in stock on date immediately preceding the date of grant of
registration i.e., 24th September, 2023. A registered person shall not be entitled to take
input tax credit in respect of any supply of goods or services or both to him after the
expiry of 1 year from the date of issue of tax invoice relating to such supply. [Section
18(2)]
In view of the above provision eligible ITC available to B Ltd. will be computed as follows
(amount in Rs.)-

Particulars CGST @ SGST @ IGST @

6% 6% 18%
Input procured on 02-09-2023 lying in stock on 24th 4,500 4,500
September, 2023
Input Received on 21-02-2023 contained in semi- 7,500 7,500
Finished goods held in stock on 24th September, 2023
Inputs valued Rs. 2,00,000 contained in finished
goods held in stock on 24th September, 2023 [WN-1]
Inputs valued Rs. 50,000 procured on 13-09-2023 9,000
lying in stock
Capital Goods procured on 12-09-2023 [WN-2]
Total amount of CGST/SGST/ IGST credit eligible on 12,000 12,000 9,000
inputs

Computation of Tax payable in cash by B Ltd. for the month of September, 2023 (amount
in Rs.):

Particulars CGST SGST

Output tax liability for September, 2023 21,000 21,000
Less: Eligible input tax Credit available on inputs in respect of
IGST [WN-3] 9,000
CGST 12,000
SGST 12,000
CGST/SGST payable in Cash Nil 9,000

Working Notes:
(1) Since Inputs of value of Rs. 2,00,000 has been purchased on 19-09-2022 invoice for

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 30
8. Input Tax Credit

same has been issued on 19-09-2022 hence one year has been elapsed on 18th September,
2023 from date of issue of invoice so on input tax credit shall be admissible in respect of
said input.
(2) There is no provision under Section 18(1)(b) to take input tax credit of capital goods
lying in stock by the person who obtains voluntary registration.
(3) As per sections 49, 49A and 49B of CGST Act and Rule 88A of CGST Rules,
Integrated tax shall first be utilised towards payment of integrated tax and the amount
remaining, if any, may be utilised towards the payment of central tax and State tax/Union
territory tax, in any order subject to the condition that the entire ITC on account of
Integrated tax is completely exhausted first before the input tax credit on account of
Central tax or State tax/ Union territory tax can be utilized. Since B Ltd. is not engaged
in inter-state outward supplies, therefore, the IGST credit is utilised towards payment of
CGST first and when credit of IGST is fully utilised, then credit of CGST and SGST has
been utilised.

Illustration: 30

ABC Traders paying tax under composition scheme crosses the threshold and becomes
liable to pay tax under regular scheme on 01-04-2023. Can it avail Input tax credit and if
so calculate the amount of ITC available?
Break-up of credit available with ABC Traders as on 31-03-2023:

Particulars CGST SGST

Inputs lying in stock (invoice dated 12-03-2023) 3,600 3,600
Capital goods procured on 25-09-2022 invoice dated 25-09-2022 7,200 7,200
Inputs lying in semi-finished goods in stock (Invoice dated 12-12-2022) 2,400 2,400

Solution:

As per Section 18(1)(c), where any registered person ceases to pay tax under Section 10,
he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs
contained in semi-finished or finished goods held in stock and on capital goods on the day
immediately preceding the date from which he becomes liable to pay tax u/s 9.
Therefore, in given case, ABC traders shall be entitled from 01-04-2023 to avail credit
available as on 31-03-2023.
As per Rule 40 of the CGST Rules, 2017, the capital goods credit is to be claimed after
reducing the tax paid on such capital goods by 5% 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.
Input tax credit available to ABC Traders in respect of inputs (amount in):

Particulars Input Tax Eligible

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 31
8. Input Tax Credit

(CGST + Credit
SGST)
Inputs lying in stock 7,200 7,200
Inputs lying in Semi-Finished goods in stock (Invoice
dated 12-12-2022) 4,800 4,800
Total Input tax credit available 12,000 12,000

Input tax credit available to ABC Traders in respect of capital goods (amount in Rs):

Date of invoice of capital goods 25-09-2022

Date from which ABC traders are liable to pay tax under section 9 01-04-2023
No. of quarters from date of invoice 3
CGST and SGST paid on capital goods procured on 25-09-2022 14,400
ITC to be reduced by Rs. 14,400 x 5% x 3 quarters 2,160
Credit (CGST and SGST) available on capital goods 12,240

Note: As per Section 2 (92), “quarter” shall mean a period comprising three consecutive
calendar months, ending on the last days of March, June, September and December of a
calendar year.

Illustration: 31

M/s. XYZ a registered dealer engaged in supplying exempted goods to its customers. On
17-06-2023, exemption notification was rescinded and goods were liable for tax. M/s. XYZ
has to make e-payment of tax on the due date i.e., on 20-07-2023. Determine the eligible
credit for the month of June, 2023 if the following information is provided:

Particulars Value (exclusive of CGST SGST IGST @

CGST/SGST/IGST) @ 6% @ 6% 12%
(Rs.) (Rs.) (Rs.) (Rs.)
Value of Inputs lying in stock as 1,00,000 12,000
on 16-06-2023. All inputs were
procured after 01-03-2023
Value of inputs contained in 1,35,000 8,100 8,100
semi-finished goods lying in
stock as on 16-06-2023 but only
inputs worth Rs. 85,000 in semi-
finished goods were procured
after 16-06-2022
Inputs received on 31-01-2023 1,55,000 9,300 9,300
lying in finished goods in stock

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8. Input Tax Credit

on 16-06-2023
Capital goods procured in 10-12- 8,00,000 96,000
2022 which is exclusively used
in supplying exempted goods

Solution:

As per Section 18 (1) (d), where an exempt supply of goods or services or both by a
registered person becomes a taxable supply, such person shall be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock relatable to such exempt supply and on capital goods
exclusively used for such exempt supply on the day immediately preceding the date from
which such supply becomes taxable.
As per Rule 40(1)(a) of COST Rules, 2017, the Input tax credit on capital goods, shall be
claimed after reducing the tax paid on such capital goods by 5% 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.
Computation of Input tax credit relating to CGST/SGST/IGST available to Ms. XYZ in
respect of inputs and capital goods will be as follows:

Particulars CGST SGST IGST Total

(Rs.) (Rs.) (Rs.) Eligible
Credit
(Rs.)
ITC on the value of inputs lying in stock (Since 12,000 12,000
all inputs were acquired within 1 year prior to
the effective date on which the goods became
taxable, hence, entire ITC would be allowed.]
ITC on the value of inputs contained in semi- 5,100 5,100 10,200
finished goods [WN-1]
Input tax credit on value of inputs lying in 9,300 9,300 18,600
stock of finished goods stock [Inputs received
on 31-01-2023 lying in stock on 16-06-2023 as
all inputs were acquired within 1 year prior to
the effective date on which the goods become
taxable, therefore, entire ITC would be
allowed]
Credit (IGST) available on capitals goods 81,600 81,600
[WN-2]
Total Input tax credit available 14,400 14,400 93,600 1,22,400

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 33
8. Input Tax Credit

Working Notes:
(1) ITC on the value of inputs contained in semi-finished goods – Out of the total stock of
Rs. 1,35,000, inputs totaling Rs. 50,000 are older than 1 year from the effective date on
which the goods became taxable. Therefore, ITC to this extent stands disallowed. ITC on
inputs contained in stock of Rs. 85,000 would be eligible. [Eligible credit = 8,100 x 85,000/
Rs. 1,35,000 each in respect of CGST and SGST]
(2) Credit available in respect of capital goods (amount in Rs.):

Date of invoice of capitals goods 10-12-2022

Date from which the exempt goods become taxable 17-06-2023
No. of quarters or part thereof from date of invoice 3
Percentage points to be reduced (5% per quarter) 15%
IGST paid on the capital goods used exclusively in relation to goods 96,000
exempted up to 16-06-2023
ITC to be reduced by 15 % 14,400
Amount of Input tax credit available in respect of capital goods 81,600

Note: As per Section 2 (92), “quarter” shall mean a period comprising three consecutive
calendar months, ending on the last day March, June, September and December of a
calendar year.

Illustration: 32

The goods manufactured by Royal Ltd. have been exempted from GST with effect from
01-05-2023. Earlier these goods were liable to CGST and SGST @ 6% respectively. The
inputs used in manufacturing were also liable to CGST & SGST @ 6% respectively.
Following information is provided on 30-04-2023:
(1) The inputs costing Rs. 1,12,000 (inclusive of CGST & SGST) are lying in stock.
(2) The inputs costing Rs. 80,640 (inclusive of CGST & SGST) are held in process.
(3) The finished goods valuing Rs. 5,60,000 are in stock, the input cost (inclusive of CGST
and SGST) is 50% of the value.
(4) The input tax credit on capital goods lying in stock is 72,000. These goods were
purchased on 1-8-2022.
(5) The balance in Electronic credit Ledger is Rs. 1,52,000.
The department has asked Royal Ltd. to reverse the credit taken on inputs referred
above. However, Royal Ltd. contends that credit once validly taken is indefeasible and not
required to be reversed. Decide.
What would your answer be if the balance in Electronic credit Ledger account as on 30-04-
2023 is Rs. 1,00,000?

Solution:

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 34
8. Input Tax Credit

As per Section 18(4), where any registered person who has availed input tax credit and 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 taking useful life of capital goods 5
years, on the day immediately preceding the date of such exemption.
The balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

Accordingly, Royal Ltd. will have to pay an amount computed as fellows (amount in Rs.):

Inputs lying in stock (Credit = Rs. 1,12,000 x 12/ 112) (Net purchased price, 12,000
exclusive of tax)
Inputs in process (Rs. 80,640 x 12/ 112) 8,640
Inputs contained in finished goods lying in stock (Rs. 5,60,000 x 50% x 12/112) 30,000
Input tax on Capital goods used for 9 months taking residual life as 5 years 61,200
(Rs. 72,000 x 51/60) (51 months being remaining residual life of capital goods)
(Rule 44 of CGST Rules, 2017)
Amount to be paid by Royal Ltd. 1,11,840

The aforesaid amount can be paid by utilizing the balance in Electronic credit Ledger. The
balance credit = Rs.1,52,000 - Rs. 1,11,840 = Rs.40,160 shall lapse.
If balance in Electronic credit Ledger is Rs. 1,00,000: If the balance Electronic credit
Ledger as on 01-05-2023 is Rs. 1,00,000, then, Royal Ltd. will have to pay in cash an
amount of Rs. 1,11,840 - Rs. 1,00,000 = Rs. 11,840.

Illustration: 33

PQR Ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on
composition scheme under Section 10 with effect from 28-02-2024. It provides following
information relating to balance of input tax credit lying as on 27-02-2024:
(1) Inputs lying in stock as such valued at Rs. 1,68,000 (inclusive of CGST & SGST @ 12%)
(2) Inputs contained in finished goods where tax invoice is not available relating to such
inputs but it is known that market price of such inputs (inclusive of CGST & SGST @ 12%)
on 28-02-2024 is Rs. 89,600.
(3) Input tax on capital goods purchased on 25-10-2023 is Rs. 72,000.
(4) Balance in Electronic credit Ledger is Rs. 1,10,000.
Decide whether PQR Ltd. is eligible for input tax credit lying on 27-02-2024.

Solution:

As per section 18(4), where any registered taxable person who has availed of input tax
credit opts to pay tax under Section 10 i.e. composition scheme, he shall pay an amount, by

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 35
8. Input Tax Credit

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, taking useful life of capital goods 5
years, on the day immediately preceding the date of exercising such option.
Therefore, in given case PQR Ltd. is required to pay following amounts (amount in Rs.):

Inputs lying in stock (Rs. 1,68,000 x 12/112) 18,000

Inputs contained in finished goods lying in stock (Rs. 89,600 x 12/112) [WN] 9,600
Input tax on Capital goods used for 4 months and 2 days, taking residual life as 66,000
5 years (Rs. 72,000 x 55/60)
(55 months being remaining residual life of capital goods)
Amount to be paid by PQR Ltd. (CGST + SGST) 93,600

Working Note:

As per Rule 44(3) of CGST Rules, 2017, where the tax invoices related to the inputs lying
m stock are not available, the registered person shall estimate the amount under Rule
44(1) based on the prevailing market price of goods on the date of opting for composition
scheme.
The aforesaid amount can be paid by utilizing the balance in Electronic credit Ledger. The
balance credit in Electronic credit ledger= Rs. 1,10,000 -Rs. 93,600 = Rs. 16,400 shall
lapse.

Illustration: 34

XYZ Ltd, a supplier of goods has purchased capital goods under cover of invoice dated 01-
10-2023 for Rs. 4,13,000 (inclusive of CGST @ 9% and SGST @9%). After taking it for
business use, the said capital goods were supplied for Rs. 2,85,000 on 26-04-2024. Explain
Input tax credit treatment in this case.

Solution:

As per Section 18(6) of the CGST Act read with Rule 40(2) of CGST Rules, 2017, in case
of supply of capital goods, on which input tax credit has been taken, the registered person
shall pay an amount
(i) Equal to the input tax credit taken on the said capital goods reduced by an amount
calculated @ 5% for every quarter or part thereof from the date of issue of invoice for
such goods; or
(ii) The tax on the transaction value of such capital goods or plant and machinery
determined under Section 15, whichever is higher.

Computation of amount of tax payable by XYZ Ltd. (amount in Rs.):

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 36
8. Input Tax Credit

Date of Invoice of purchase of capital goods 01-10-2023

Date of Supply of capital goods after taking into use 26-04-2024
No. of Quarters from the date of issue of invoice for such goods 3
CGST and SGST paid on purchase of Capital Goods [Rs. 4,13,000 x 63,000
18/118]
Reduced by Rs. 63,000 x 5% x 3 quarters 9,450
Amount of CGST and SGST [A] 53,550
Transaction Value on supply of Capital Goods u/s 15 2,85,000
CGST and SGST payable on supply of capital Goods @ 18% [B] 51,300
Amount to be payable (higher of A or B) 53,550

Illustration: 35

What would be your answer if capital goods being Refractory Bricks are removed as scrap
at a transaction value of 25,000 on 29-03-2024?

Solution:

As per Section 18(6), where refractory bricks, moulds and dies, jigs and fixtures are
supplied as scrap, there shall be no requirement for reversal of Input tax credit, taxable
person may pay tax on the transaction value of such goods determined under Section 15.
In the given case, Refractory bricks are cleared as scrap, the manufacturer shall pay an
amount equal to the tax leviable on transaction value i.e. CGST Rs. 25,000 x 9% Rs. 2,250
and SGST Rs. 25,000 x 9% Rs. 2,250.

Illustration: 36

Granites Textiles Ltd. purchased a needle detecting machine on 8th July, 2022 from
Makhija Engineering Works Ltd. for Rs. 10,00,000 (excluding GST) paying GST @ 18% on
the same. It availed the ITC of the GST paid on the machine and started using it for
manufacture of goods. The machine was sold on 22nd October, 2023 for Rs. 7,50,000
(excluding GST), as second hand machine to LT. Pvt. Ltd. The GST rate on supply of
machine is 18%.
State the action which Granites Textiles Ltd. is required to take, if any, in accordance
with the statutory GST provisions on the sale of the second-hand machine.

Solution:

Section 18 of the CGST Act, 2017 read with the CGST Rules, 2017 provides that if capital
goods or plant and machinery on which input tax credit has been taken are supplied

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 37
8. Input Tax Credit

outward by the registered person, he must pay an amount that is the higher of the
following:
(a) Input tax credit 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 (i.e., input tax credit pertaining
to remaining useful life of the capital goods), or
(b) Tax on transaction value. Accordingly, the amount payable on supply of needle
detecting machine shall be computed as follows:

Input tax credit taken on the machine (Rs. 10,00,000 x 18%) 1,80,000
Less: Input tax credit to be reversed @ 5% per quarter for the
period of use of machine
(i) For the year 2022-23 = (Rs. 1,80,000 x 5%) x 3 quarters 27,000
(ii) For the year 2023-24 = (Rs. 1,80,000 x 5%) x 3 quarters 27,000 54,000
Amount required to be paid (A) 1,26,000
Duty leviable on transaction value (Rs. 7,50,000 x 18%) (B) 1,35,000
Amount payable towards disposal of machine is higher of (A) and (B) 1,35,000

Illustration: 37

R Ltd. a registered company engaged in supplying taxable goods is being sold to X Ltd.,
with specific provision for transfer of liabilities. The unutilised credit in respect of CGST
and SGST is Rs. 48,000 and Rs. 48,000 respectively. Now X Ltd. wants to utilize such
credit remaining unutilised. Discuss its eligibility.

Solution:

As per Section 18(3), 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 ITC 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.
Therefore, X Ltd. is entitled to utilize the unutilised credit on input and capital goods lying
in account of R Ltd., provided R. Ltd. furnishes details of such transaction on sale of
business in form GST ITC-02 electronically in common portal with request to transfer
unutilised tax credit in electronic credit ledger of transferee i.e., X Ltd.
A certificate of CA/ CMA is to be furnished and the transfer details to be accepted by
the transferee.

Illustration: 38

R Ltd. a registered manufacturer demerged its entity into RX Cement Ltd. and RY Steel

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 38
8. Input Tax Credit

Ltd. The total value of Assets of R. Ltd. is Rs. 25,00,000 and unutilised credit on account
of CGST, SGST and IGST amounted to Rs. 60,000, Rs. 45,000 and Rs. 84,600 respectively.
The value of assets of RX Cement Ltd. and RY Steel Ltd. is Rs. 12,00,000 and Rs.
13,00,000 respectively obtained as per the scheme. Discuss the eligibility of credit
transferred to new units on account of Demerger.

Solution:

As per Section 18(3), 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.
As per Rule 41 of CGST Rules, 2017, case of Demerger, input tax credit shall be
apportioned in the ratio of Value of assets of new unit as specified in Demerger scheme.
In the given case, credit transferred to both the new units would be (amounts in Rs.)

Particulars R Ltd. RX Cement RY Steel

Ltd. Ltd.
Value of Assets 25,00,000 12,00,000 13,00,000
Unutilised credit relating to: CGST – Rs. 60,000,
SGST – Rs. 45,000 & IGST – Rs. 1,89,600 (to be
apportioned in ratio of value of assets of RX
Cement and RY
Total apportioned Credit 1,89,600 91,008 98,592

Illustration: 39

Mr. X, a supplier of goods, pays GST under regular scheme. Mr. X is not eligible for any
threshold exemption. He has made the following outward taxable supplies in a tax period:
Particulars Rs.
Intra-State supply of goods 16,00,000
Inter-State supply of goods 6,00,000
He has also furnished the following information in respect of purchases made by him in
that tax period:
Particulars Rs.
Intra-State purchases of goods 10,80,000
Inter-State purchases of goods 1,50,000
Mr. X has following ITCs with him at the beginnings of the tax period:

Particulars Rs.

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 39
8. Input Tax Credit

CGST 40,500
SGST 40,500
IGST 90,000

Note:
(i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the net GST payable by Mr. X during the tax period. Make suitable assumptions
as required.

Solution:

Computation of GST payable by Mr. X on outward supplies (amount in Rs.)

(i) Intra-State supply of goods

CGST @ 9% on Rs. 16,00,000 1,44,000
SGST @ 9% on Rs. 16,00,000 1,44,000 2,88,000
(ii) Inter-State supply of goods
IGST @ 18% on Rs. 6,00,000 1,08,000
Total GST payable 3,96,000

Computation of total ITC (amount in Rs.):

Particulars CGST SGST IGST

Opening ITC 40,500 40,500 90,000
Add: ITC on Intra-State purchased of goods valuing 97,200 97,200 Nil
Rs.10,80,000
Add: ITC on Intra-State purchases of goods valuing Nil Nil 27,200
Rs.1,50,000
Total ITC 1,37,700 1,37,700 1,17,000

Computation of GST payable from cash ledger (amount in Rs.):

Particulars CGST @ SGST @ IGST @

9% 9% 18%
GST payable 1,44,000 1,44,000 1,08,000
Less: ITC
IGST to be utilised for payment of IGST 1,08,000
Balance of IGST credit i.e. Rs. (1,17,000-1,08,000) 6,300 2,700
to be utilised for payment of CGST and SGST and

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 40
8. Input Tax Credit

then only credit of CGST and SGST can be utilised.

CGST and SGST credit to be utilised for payment 1,37,700 1,37,700
of CGST and SGST respectively
GST payable from Cash ledger Nil 3,600 Nil

Illustration: 40

Mr. Nimit, a supplier of goods, pays GST under regular scheme. He is not eligible for any
threshold exemption. He has made the following outward taxable supplies in the month of
August, 2023:

Rs.
Intra State supplies of goods 6,00,000
Inter State supplies of goods 40,050

He has also furnished following information in respect of purchases made by him from
registered dealers during August, 2023:

Rs.
Intra State purchase of goods 4,00,000
Inter State purchase of goods 50,000

Balance of ITC available at the beginning of the August, 2023:

Rs.
CGST 15,000
SGST 35,000
IGST 20,000

Note:
(i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively, on both inward and
outward supplies.
(ii) Both inward and outward supplies given above are exclusive of taxes, wherever
applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the net GST payable by Mr. Nimit for the month of August, 2023.

Solution:

Computation of net GST payable (amount in Rs.):

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 41
8. Input Tax Credit

Particulars CGST SGST IGST

Output tax liability
Inter-State Sale: Rs. 2,00,000 [IGST leviable @ 18%] 36,000
Intra-State Sale: Rs. 6,00,000 [CGST @ 9% and SGST @ 9 54,000 54,000
%]
Total output tax liability 54,000 54,000 36,000
Less: Input tax credit
Opening balance 15,000 35,000 20,000
Purchases during the month
Intra-State purchases-Rs. 4,00,000 [CGST@ 9% and SGST 36,000 36,000
@ 9%]
Inter- State purchases- Rs. 50,000 [IGST @ 18%] 9,000
Total Input tax credit 51,000 71,000 29,000
Less: Extra credit of SGST can be used for payment of -7,000 7,000
IGST [WN]
Net amount of CGST/SGST/IGST payable 3,000 Nil Nil
Net amount of SGST credit to be carried forward Nil - Nil
10,000

Working Note:
SGST credit can be utilised for payment of IGST. However, it cannot be utilised for
payment of CGST.

Illustration: 41

M/s. Pradyumn Corporation Pvt. Ltd, a registered dealer of Mumbai furnishes you following
information for the month of October, 2023.

Particulars Rs.
(i) Intra-State sale of Taxable goods (Out of above Rs. 50,000 was 2,00,000
received as advance in September, 2023)
(ii) Goods purchased from unregistered dealer (Purchases on 20th October, 5,000
2023) (10,000 in case of Inter State & Balance Intra-State)
(iii) Received for services by way of labour contracts for repairing a single 50,000
residential unit otherwise than as part of residential complex (It is
Intra-State transaction)
(iv) Professional fees paid to Ms. Udadhi located in a non-taxable territory 50,000
(It amounts to Inter-State transaction)

Compute GST liability (CGST, SGST or IGST, as the case may be) of M/s. Pradyuman
Corporation Pvt. Ltd. for the month of October, 2023. Assume the rates of GST as under:

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 42
8. Input Tax Credit

CGST @ 9%, SGST @ 9% and IGST @ 18%.

Note: Turnover of M/s. Pradyuman Corporation Pvt. Ltd. was 2 crore in the Previous F.Y.

Solution:

Computation of GST liability for the month of October 2023:

Particulars Value CGST SGST IGST Total

(i) Intra-State sale of Taxable 2,00,000 18,000 18,000 36,000
goods (out of above 50,000 was
received as advance in
September, 2023) [WN-1]
(ii) Goods purchased from 50,000 Exempt Exempt Exempt
unregistered dealer [WN-2]
(iii) Received for services by way of 50,000 4,500 4,500 9,000
labour contracts for repairing a
single residential unit otherwise
than as a part of residential
complex (It is Intra-State
transaction)
(iv) Professional fees paid to Ms. 50,000 9,000 9,000
Udadhi located in a non-taxable
territory (It amounts to Inter-
State transaction)
Total GST liability 22,500 22,500 9,000 54,000

Working Note:
(1) As per Notification No. 66/2017-CT dated 15-11-2017, all taxpayers (except
composition suppliers) are exempted from paying GST at the time of receipt of advance in
relation to supply of goods. The entire GST shall be payable only when the invoice for the
supply of such goods is issued or ought to have been issued. Thus, no GST is payable in
respect of advance of 50,000 in the month of September, 2023 but the same will be
payable in the month of October, 2023 when the supply of goods takes place.
(2) Goods purchased from unregistered supplier is liable to GST on reverse charge basis.
However, reverse charge is not applicable only on intra-State/inter-State supplies for
specified goods and services received by notified registered supplier from unregistered
person.
(3) Services by way of pure labour contracts of construction, erection, commissioning, or
installation of original works pertaining to a single residential unit otherwise than as a part
of a residential complex are exempt vide Entry 11 of Notification No. 12/2017-CT (Rate).
This exemption is not applicable for repair service. The same shall be liable to GST.
(4) In case of service supplied by a person located in a non-taxable territory to a person

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 43
8. Input Tax Credit

other than non- taxable online recipient, GST is payable under reverse charge by such
recipient.

Illustration: 42

Mr. Thiraj, a registered supplier of service in Bangalore (Karnataka State) has provided
the following information for the month of February 2024:

Particulars Amount
(i) Intra-State taxable supply of service 5,20,000
(ii) Legal fee paid to a Lawyer located within the state 20,000
(iii) Rent paid to the State Government for his office building 30,000
(iv) Received for services towards conduct of exams to Loveall University, 16,000
Pune
(recognized by law), being an inter-State transaction

Compute the net GST liability (CGST, SGST or IGST) of Mr. Thiraj for the month of
February 2024.
Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively. All the amounts given
above are exclusive of taxes.

Solution:

Computation of the net GST liability of Mr. Thiraj (amount in Rs.):

Particulars CGST SGST IGST

Output tax liability
Inter-state supply of services to Loveall University, Pune
towards conduct of exam is exempt from tax vide Entry 66
Notification No. 12/2017-CT (Rate)
Intra-State taxable supply of service: Rs. 5,20,000 [CGST @ 46,800 46,800
9% and SGST @ 9%]
Total output tax liability under Forward charge [A] 46,800 46,800
Tax to be paid under reverse charge as recipient of service
through electronic cash ledger:
Legal services: Rs. 20,000 [CGST @ 9% and SGST @ 9%] 1,800 1,800
[Chargeable to tax under reverse charge vide Entry 2
Notification No. 13/2017-CT (Rate)]
Rent paid to state Government for office building: Rs. 30,000 2.700 2,700
[CGST @ 9% and SGST @ 9%]
[Chargeable to tax under reverse charge vide Entry 5A

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 44
8. Input Tax Credit

Notification No. 13/2017-CT (Rate)]

Total GST liability under reverse charge to be deposited 4,500 4,500
through Electronic cash Ledger [B]
Total GST Liability [A+B] 51,300 51,300
Less: Input tax credit [GST paid under reverse charge can be 4,500 4,500
availed as credit to be used for payment of output tax liability
under forward charge]
Net GST Liability 46,800 46,800 Nil

Illustration: 43

Mr. Ekaant, a supplier registered in Delhi, is engaged in the business of sale and purchase
of plastic raincoats. He furnishes the following information pertaining to inward/outward
supply made by him for the month of July, 2023:

Particulars Rs.
Value of inter-State outward supply to registered persons 30,00,000
Value of intra-State outward supply to registered persons 50,00,000
Value of intra-State outward supply to unregistered persons 15,00,000
Value of intra-State inward supply from registered persons 10,00,000
Value of intra-State inward supply from registered persons 5,00,000
Value of intra-Sate inward supply from unregistered persons 2,00,000

Following additional information is also provided by Mr. Ekaant:

Particulars Rs.
IGST credit on capital goods purchased in the month of July 1,50,000
CGST/SGST credit on other inward supplies [including credit of Rs. 5,000 50,000
(CGST and SGST each) on account of membership of a club]
Availed consultancy services from Mr. Sujit, lawyer located in Delhi [Intra- 1,00,000
State services]

The amount of ITC brought forward in the month of July, 2023 is as under:
CGST : 2,00,000
SGST : 2,00,000
IGST : 5,00,000
Calculate the net GST liability (CGST and SGST or IGST, as the case may be) to be paid in
cash for the month of July, 2023 by assuming the rates of GST as under:
CGST 9%
SGST 9%
IGST 9%

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 45
8. Input Tax Credit

Note:
(i) All the amounts given above are exclusive of taxes.
(ii) All the conditions necessary for availing the ITC have been fulfilled.

Solution:

Computation of net GST liability of Mr. Ekaant:

Particulars Value CGST SGST IGST

(Rs.) (Rs.) (Rs.) (Rs.)
Total tax liability:
Value of intra-State legal consultancy 1,00,000 9,000 9,000
services i.e. inward supplies liable to
reverse charge (to be paid in cash) (A)
[WN-1]
Value of intra-State outward supplies 30,00,000 5,40,000
(B1)
Value of intra-State outward supplies to 65,00,000 5,85,000 5,85,000
registered as well as unregistered
persons (B2) (Rs. 50,00,000 + Rs.
15,00,000)
Total (B) = (B1) + (B2) 5,85,000 5,85,000 5,40,000
Input tax Credit:
Brought forward ITC 2,00,000 2,00,000 5,00,000
Value of intra-State inward supplies 10,00,000 90,000 90,000
from registered person [WN-2]
Value of inter-State inward supplies 5,00,000 90,000
from registered person [WN-2]
Value of intra-State inward supplies 2,00,000
from unregistered person [WN-3]
IGST credit of capital goods [WN-2] 1,50,000
Credit on other inward supplies 45,000 45,000
purchased in the month of July less
credit on membership of a club [WN-2 &
4]
Credit of legal consultancy services 9,000 9,000
[WN-2]
Total (C) 3,44,000 3,44,000 7,40,000
Net liability (B)-(C) 2,41,000 2,41,000 2,00,000
Less: Set off from IGST credit [WN-5] 2,00,000
Liability after set-off (D) 41,000 2,41,000 Nil

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 46
8. Input Tax Credit

Net GST liability to be paid in cash (A) + 50,000 2,50,000 Nil

(B)

Working Notes:
(1) Services supplied by an individual advocate to any business entity located in the taxable
territory by way of legal services, directly or indirectly are taxable under reverse charge
mechanism. Thus, tax is payable by the recipient (Mr. Ekaant) on said services to the
Government.
Further, as per section 49(4) of the CGST Act, 2017, amount available in the electronic
credit ledger [ITC amount] may be used for making payment towards output tax. However,
tax payable under reverse charge is not an output tax in terms of section 2(82) of the
CGST Act, 2017. Therefore, tax payable under reverse charge cannot be set off against
the input tax credit and thus, will have to be paid in cash.
(2) Every registered person is entitled to take credit of input tax charged on any inward
supply of goods and/or services which are used or intended to be used in the course or
furtherance of his business in terms of section 16 of CGST Act, 2017. Further "input tax"
in relation to a registered person includes the tax payable under reverse charge
mechanism in terms of section 2(62) of the CGST Act, 2017.
(3) Notified intra-State supplies received by a notified registered person from any
unregistered supplier, are liable to GST under RCM. Since such supplies have not been
notified u/s 9(4) GST is not payable on same. Since no tax has been paid, so no credit is
available.
(4) Input tax credit is not allowed in respect of membership of a club in terms of section
17(5) of CGST Act, 2017.
(5) Input tax credit of IGST has been used to pay IGST and then for CGST.

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