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Apportionment of Input Tax Credit (ITC) under GST [Section 17(1), (2) & (3) of CGST Act, 2017]

1. Where Goods or Services are used Partly for Business Purposes and Partly for Other Purposes [Section 17(1)  of CGST Act, 2017] 

Where the goods or services or both are used by the registered person partly for the purpose of any business  and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable  to the purposes of his business.

Where Goods or Services are used Partly for Business Purposes and Partly for Other Purposes [Section 17(1) of CGST Act, 2017]

 

Example :
Mr. Dust owning a bakery provides the following information for the month of November, 2017: 

  • Total ITC in respect of milk products received Rs. 80,000 

  • Milk products sold in the course of business 70% 

  • Milk products used in the birthday party of his daughter 30%

In the above-case, Mr. Dust shall be entitled to take ITC of Rs. 56,000 (Rs. 80,000 × 70%) in terms of provisions of  section 17(1)

2. Where Goods and Services are used Partly for effecting Taxable Supply including Zero Rates Supply and  Partly for Exempted Supplies [Section 17(2) of CGST Act, 2017 ] 

Where the goods or services or both are used by the registered person partly for effecting taxable supplies  including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for  effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax  as is attributable to the said taxable supplies including zero-rated supplies. 

The value of exempt supply under section 17(2) shall be such as may be prescribed, and shall include supplies  on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and,  subject to clause (b) of paragraph 5 of Schedule II, sale of building. [Section 17(3)]

Apportionment of Input Tax Credit (ITC) under GST [Section 17(2) of CGST Act, 2017]

 

Example  :
Mr. Dust, a registered person provides the following information for the month of November 2018:

 

Particulars

Amount

(A)

Eligible Input Tax Credit in respect of services

Rs. 1,50,000 

(B)

Taxable Supplies [excluding Zero-rated Supplies]

Rs. 8,00,000 

(C)

Exports [Zero-Rated Supplies]

Rs. 4,00,000 

(D)

Exempt Supplies

Rs. 3,00,000 

(E)

Supplies on which recipient is liable to pay tax on reverse charge basis

Rs. 1,00,000

(F)

Total supplies [B+C+D+E]

Rs. 16,00,000 

(G)

Percentage of Taxable Supplies including Zero Rated Supplies to the Total  Supplies

75%  [12,00,000/16,00,000×100] 

 

In the above-case, Mr. Dust shall be entitled to take Input Tax Credit of Rs. 1,12,500 [75% of Rs. 1,50,000]

 

3. Optional method for Bank, etc. for taking Input Tax Credit [Section 17(4)] 

A banking company or a financial institution including a non-banking financial company, engaged in  supplying services by way of accepting deposits, extending loans or advances shall have the option to either — 

—  comply with the provisions of section 17(2) (see above), or 

—  avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods and  input services in that month and the rest shall lapse. 

The option once exercised shall not be withdrawn during the remaining part of the financial year. 

Further, the restriction of 50% shall not apply to the tax paid on supplies made by one registered person to  another registered person having the same Permanent Account Number. 

Example : 

State Bank of India provides the following information for the month of November 2017 for their Registration in  Punjab: 

Particulars

Amount (Rs.)

ITC from suppliers of goods or services or both

1,00,000

ITC from other offices

20,000

Eligible credit for the month of November — 50% of Rs. 1,00,000 i.e. Rs. 50,000 + Rs. 20,000 (ITC from other  offices for which restriction of 50% is not applicable) = Rs. 70,000

 
GST Liability on Composite and Mixed Supplies [Section 8 of CGST Act, 2017] GST - Ready Reckoner in India Blocked Credits i.e. Goods or Services or Both on which Input Tax Credit (ITC) shall Not be Available under GST Act. [Section  17(5)]
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