Ans. As per section 16, every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in section 49, be entitled to 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 and the said amount shall be credited to the electronic credit ledger of such person.
In the given case, if the mobile phone, fridge, AC, etc. are purchased by the firm in its name and these are used by the partners and/ or employees of the firm in the course or furtherance of business of the firm, the firm can claim the ITC.
Q2.Whether GST paid voluntarily in TR-6 challan in relation to import bill of entry is available as ITC?
Ans. Section 16(2)(a) mandates that to avail ITC, one must have possession of tax invoice/debit note issued by supplier or any other document as may be prescribed. Further, rule 36 talks about “Documentary requirements and conditions for claiming input tax credit”. Clause (d) of sub-rule (1) of rule 36 states: “a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports”.
Therefore, if IGST is paid voluntarily in TR-6 challan in relation to imports, then credit will be available as per clause (a) of section 16(2).
a) Please suggest how to avail ITC in this case?
b) Please clarify, whether the condition of 105% is for a month or for the accumulated balance in Form GSTR-2B (like for example April month unclaimed ITC plus ITC for the month of May)?
c) Also clarify, whether the clarification/ procedure specified in Circular No. 123/42/2019 GST dated 11-09-2019 can be applied to Form GSTR- 2B as well.
Ans. A) You can avail ITC only upon receipt of goods or services or both. Further, ad hoc 5% ITC is available only in cases where invoices with eligible ITC are not uploaded by the supplier and such 105% cannot exceed the total eligible ITC. Thus, availing of 5% of ITC in April month itself is incorrect.
B) Since you had received the goods in the month of May, you shall avail the credit only in the month of May. Certainly, there will be a mismatch between the values as per Form GSTR-2B and the ITC claimed in Form GSTR-3B. The colour of the particular ITC field in Form GSTR-3B will also turn to red. However, this is the correct procedure.
C) In case, you get an intimation from the Department asking why you have claimed in excess, then you will be able to substantiate and explain the position as under:
The said invoice is already reflected in Form GSTR-2B of April month and further, while comparing the ITC of April month that you have availed in Form GSTR-3B and the amount in Form GSTR-2B, it will be evident that, you had not availed the credit of that particular invoice for the reason that, you had not received the goods in the same month. In compliance with section 16(2)(b), you have availed the credit only upon receipt of the said goods and hence, the amount is showing excess of Form GSTR-2B.
Q4. Whether ITC can be claimed if depreciation availed on capital goods is reversed later on?
Ans. 1. Yes, provided the revised income tax return wherein depreciation earlier availed on tax component of capital goods has been reversed, is filed within the time limit allowed under section 16(4) for claiming ITC.
2. Section 16(3) provides that 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 Act, 1961, ITC on the said tax component shall not be allowed.
Further, section 16(4) provides that a registered person shall not be entitled to ITC in respect of any invoice or debit note for supply of goods/services after the due date of furnishing the return under section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Thus, broadly speaking, the time limit for claiming ITC is 20th October following the end of the financial year, unless the registered person has furnished his annual return for the year before 20th October, in which case the time limit for claiming ITC would be restricted to that date.
3. The claim for depreciation including that on tax element will be made through income tax return which would be filed after the end of the financial year. Any revision in the income tax return reversing such claim in respect of depreciation on tax component will have to be done by filing revised income tax return. The time limit for filing revised return would normally be beyond the time limit as mentioned earlier under GST Law for claiming ITC. If such a revised income tax return is filed before the time limit for claiming the ITC, the registered person can claim ITC and not otherwise as the last date for claiming ITC would then be over. There is no specific requirement for ITC that the claim for depreciation on tax element cannot be revised but such revision has to be done by properly filing the revised income tax return in time for claiming ITC, and then there would be no bar on ITC claim.
Q5. When camera and other things become old and are sold at cheaper rates, whether full ITC is available?
Ans. There is no necessity to reverse the entire ITC taken. The sale of old assets when ITC has been availed on such assets at the time of purchase is treated as supply even if made without consideration in terms of Schedule I to section 7.
Section 18(6) states method for reversal of ITC in respect of capital goods or plant and machinery on which ITC has already been taken.
The said section covers the situation wherein capital goods are being sold after use and it stipulates that in such cases amount payable by the supplier has to be either:
- ITC as reduced by percentage points as per the method specified in the relevant rule, or
- Tax on transaction value,
Transaction value at the time of sale has to be determined as per section 15.
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