GST in 14 Days - Day 6 & 7

CH.SUDHEER C.A, C.M.A
Queries contact: vjabranchofsircoficai@gmail.com
Topics to be dealt in this chapter
1. Eligibility and conditions for taking ITC (Section 16)
2. Time limit for Availing ITC (Section 16)
3. Blocked Credits (Section 17)
4. Apportionment of Credit & Reversal there of (Section 17)
a) On Input and Input service
b) On Capital Goods
c) Optional Method for Banks
5. Credit in special Circumstances(Section 18)
a) Entitlement of ITC on New registration, conversion from Composition scheme to Regular
etc.,
b) Reversal of ITC on opting of Composition scheme etc.,
c) Cancellation of Registration
d) Supply of CG or P & M on which IT
e) Change in the constitution
6. Taking ITC in respect of Inputs and CG sent for Jobwork (Section 19)
7. Distribution of ITC by Input Service Distributor9 (ISD) (Section 20 & 21)
8. How ITC is availed and Utilised ( Section 41,42,49)
INPUT TAX CREDIT (ITC)
Eligibility for taking ITC
Registration under GST
Input Tax Credit (ITC)DAY 6 & 7CH.SUDHEER C.A, C.M.A
vjabranchofsircoficai@gmail.com
conditions for taking ITC (Section 16)
Time limit for Availing ITC (Section 16)
17)
Apportionment of Credit & Reversal there of (Section 17)
On Input and Input service
Optional Method for Banks & Financial Instutions
Credit in special Circumstances(Section 18)
Entitlement of ITC on New registration, conversion from Composition scheme to Regular
Reversal of ITC on opting of Composition scheme etc.,
Cancellation of Registration
Supply of CG or P & M on which ITC has been availed
Change in the constitution
Taking ITC in respect of Inputs and CG sent for Jobwork (Section 19)
Distribution of ITC by Input Service Distributor9 (ISD) (Section 20 & 21)
How ITC is availed and Utilised ( Section 41,42,49)
INPUT TAX CREDIT (ITC)
Goods/services to be used for
business purposes
Input Tax Credit (ITC)
1
Entitlement of ITC on New registration, conversion from Composition scheme to Regular
Distribution of ITC by Input Service Distributor9 (ISD) (Section 20 & 21)
Goods/services to be used for
business purposes

2Queries contact: vjabranchofsircoficai@gmail.com
FOUR Conditions for AVAILING ITC
1. Possession of Tax Invoice 2. Receipt of the goods and / or services
3. Tax leviable on supply actually paid to Government 4. Claim ITC by Filing GSTR-3B
 Tax should actually have been paid, by cash or
through utilization of ITC, on the goods and / or
services for which ITC is being taken.
 Provisional ITC can be taken initially, prior to
matching in the common portal, and used for
payment of self-assessed tax on outward supply.
Provisional ITC
Rule 36(4)-
Invoices not uploaded shall not
exceed 20% of Eligible credit
w.e.f.01/01/2020, shall not
exceed 10% of Eligible Credit
(Notn 75/2019 dt.26.12.2019)
Input tax credit to be availed by a
registered person in respect of
invoices or debit notes, the details
of which have not been uploaded by
the suppliers under sub-section (1)
of section 37, shall not exceed
20 % / 10% of the eligible credit
available in respect of invoices or
debit notes the details of which
have been uploaded by the
suppliers in GSTR-1

Note 1 In case of Goods received in lots ITC available only on receipt of last lot / Installment
Eg: XYZ makes an advance payment in August and
orders 10 MT of a particular chemical which is in
short supply. The supplier of the chemical raises a
bill for the entire amount in August and collects
GST from XYZ on the advance paid. The chemical is
delivered in lots over a period of three months and
the supply is completed in November. Though XYZ
paid some tax in advance as early as August, he can
take the ITC only on receipt of last instalment of
the chemical in the month of November.
Note 2 Payment for the invoice to be made
within 180 days from DOI:
The registered person must pay the
supplier, the value of the goods
and/or services along with the tax
within 180 days from the date of
issue of invoice.
In the event of failure to do so, Such
credits availed by the registered
person should be reversed in GSTR -
3B
Interest will be paid @ 18% from
the date of availing credit till the
date of reversal of credit.
However, once the payment is
made to supplier later, the recipient
will be entitled to avail the credit
again without any time limit
Exceptions:
This condition of payment of value of supply plus
tax within 180 days does not apply in the following
situations:
(i) Supplies on which tax is payable under reverse
charge
(ii) Deemed supplies without consideration
That means in above 2 cases, eventhough payment
is not made to supplier, ITC can be availed
Note 3 If depreciation claimed on tax
component, ITC not allowed
Thus, in respect of the tax paid on such items, dual
benefit cannot be claimed under Income-tax Act,
1961 and GST laws simultaneously. In other words,
either depreciation on the tax component can be
claimed under Income Tax Act or ITC of such tax
paid can be availed under GST laws.

In the following cases ITC is not available at all
S.N Name Exception (i.e., ITC is available)
1. Motor vehicles for
transportation of
persons having
approved seating
capacity of not more
than 13 persons
(including the driver)
When used for making the following taxable supplies:
• Further supply of such vehicles of conveyances; or
• Transportation of passengers; or
• imparting training on driving such motor vehicles
Eg: A car dealer is allowed ITC on cars purchased for resale; a cab
service is allowed ITC on cars purchased for use as cabs; a driving
school is allowed ITC on cars purchased for use in teaching driving.
Note: ITC is available on Motor vehicles with seating capacity of
more than 13 persons (Blocked credit is only for vehicles with
seating capacity ≤ 13 persons)
2. Vessels and aircraft (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;
3. Services of general
insurance, servicing,
repair and maintenance
in so far as they relate
to motor vehicles,
vessels or aircraft
referred to in 1 & 2
points above
If ITC is eligible(as per Exception 1 & 2), then these services also
eligible as ITC;
2. Time limit for availing ITC
ITC on invoices pertaining to a financial year or debit notes relating to invoices pertaining to a
financial year can be availed any time till the
a) Due date of filing of the return for the month of September of the succeeding FY
b) The date of filing of the relevant annual return,
 It may be noted that the return for the month of September is to be filed by the 20th
October
 Annual return of a F.Y is to be filed by 31st
December of the succeeding FY
 The time limit u/s 16(4) does not apply to claim for re-availing of credit that had been
reversed earlier.
Or
3. Blocked credits [Section 17(5)]

4. Foods and beverages,
outdoor catering, beauty
treatment, health
services, cosmetic and
plastic surgery
a) An inward supply of these is used for making an outward taxable
supply of the same category or as an element of a taxable
composite or mixed supply.
Eg : A caterer for a wedding gets the sweet dish course
supplied by a specialist in desserts. He is allowed ITC of the
tax paid by him to the specialist.
b) The Government has made it obligatory for an employer to
provide any of these services to its employees
5. Leasing, renting or hiring
of motor vehicles,
vessels or aircraft, life
insurance and health
insurance
a) The Government has made it obligatory for an employer to
provide any of these services to its employees; or
b) Inward supply of these services is used for making an outward
taxable supply of the same category or as an element of a
taxable composite or mixed supply.
6. Works contract services
for construction of an
immovable property
a) It is input service for further supply of works contract service
b) Immovable property is plant and machinery
7. Membership of a club,
health and fitness centre
When such services are provided by an employer to its employees
under a statutory obligation
8. Travel benefits to
employees on vacation
such as LTC
The Government has made it obligatory for an employer to provide
any of these services to its employees under any law;
9. Inward supplies received by a taxable person for construction of an immovable property (other
than plant and machinery) on his own account even when such supplies are used in the course
or furtherance of business
Eg : - A company buys material and hires a contractor to construct an office building to house
the plant supervisory staff. The input tax paid on such goods and services is not allowed as
credit.
Meaning of construction and plant and machinery
“Construction”, both in this clause and the previous one, includes reconstruction, renovation,
additions or alterations or repairs, to the extent of capitalization, to immovable property;
“Plant and machinery” means apparatus, equipment, and machinery fixed to earth by
foundation or structural supports but excludes land, building or other civil structures,
telecommunication towers, and pipelines laid outside the factory premises.
10. Inward supplies on which tax has been paid under the composition scheme
11. Inward supplies received by a non-resident taxable person except goods imported by him
12. Goods and / or services used for personal consumption
13. Goods that are lost, stolen, destroyed, written off or disposed of by way of gift or free samples
14. Tax paid under sections 74, 129 and 130. (These sections prescribe the provisions relating to tax
paid as a result of evasion of taxes, or upon detention of goods or conveyances in transit, or
towards redemption of confiscated goods/conveyances.)

ITC on cars purchased by a manufacturing company for official use of its employees is blocked.
ITC on cars purchased by a car dealer for sale to customers is allowed.
ITC on cars purchased by a company engaged in renting out cars for transportation of passengers, is
allowed.
ITC on cars purchased by a car driving school is allowed.
ITC on buses purchased by a company for transportation of its employees from their residence to
office and back, is allowed.
ITC on trucks purchased by a company for transportation of its finished goods is allowed.
ITC on aircraft purchased by a manufacturing company for official use of its CEO is blocked.
ITC on aircraft purchased by an Aviation School providing training on flying aircrafts, is allowed.
ITC on general insurance taken on a car used by employees of a manufacturing company for official
purposes, is blocked.
ITC on maintenance & repair services availed by a company for a truck used for transporting its
finished goods, is allowed.
AB & Co., a caterer of Amritsar, has been awarded a contract for catering in a marriage to be held
at Ludhiana. The firm has given the contract for supply of snacks, to be served in the marriage, to
CD & Sons, a local caterer of Ludhiana. ITC on such outdoor catering services availed by AB & Co., is
allowed.
ITC on outdoor catering services availed by a company, for a team development event organized
for its employees, is blocked.
ITC on outdoor catering service availed by a company to run a canteen inits factory. The Factories
Act, 1948 requires the company to set up a canteen in its factory. ITC on such outdoor catering is
allowed.
Eg:

4. Apportionment of Credit (Section 17)
ITC is available when the Inward Supply is
Used for Outward
supply of Taxable
goods and
services
Used as Capital
Goods
Used for Business
purpose
Used for Zero
rated supplies
notwithstanding
exempt nature
Zero Rated Supplies
Means that covers two kinds of supplies:
(i) Exports, and
(ii) Supplies to a SEZ or SEZ developer.
Therefore, ITC is available on goods and / or services used for
supplies made in the course of export or to an SEZ unit or SEZ
developer.
Apportionment of ITC
The situations requiring apportionment are as follows:
(a) When the goods and / or services are used by the registered person partly for the purpose of
business and partly for Non business purpose and
(b) When the goods and / or services are used by the registered person partly for making
taxable supplies and partly for making exempt supplies
(Here taxable supply includes zero-rated supplies)
In both the above situations, full ITC on inward supplies cannot be taken; only
proportionate ITC is allowed in such scenarios.

Total input tax involved on inputs & input services in a tax period
Less: Input tax on inputs & input services that are intended to be used exclusively for
non-business purposes
Less: Input tax on inputs & input services that are intended to
be used exclusively for exempt supplies
Less: Input tax on inputs & input services which are ineligible for credit [i.e., blocked
credits – Refer Next Topic]
T
(T1)
(T2)
(T3)
ITC credited to Electronic Credit Ledger
Less: ITC on inputs & input services that are intended to be used exclusively for taxable
supplies including zero rated supplies
C1
(T4)
Common ITC available for apportionment (C2)
Eg
Out of 10 containers purchased by a registered person engaged in
taxable supply of goods, 5 are used for storing non-taxable goods
(exempt supply) such as petroleum (petroleum is out of GST gamut). ITC
on 5 containers used for non-taxable goods cannot be availed.
A registered person (partnership firm) purchases 5 laptops but one of the
laptop is being used by the son of one of the partners of the firm. ITC will
not be available on such laptop as it is used for personal purposes.
Methodology of apportionment of credit on Inputs and Input services and reversal there of
Rule 42 of the CGST Rules provides the methodology for apportionment of ITC on inputs and input
services and reversal of ineligible credit:
Step 1 – Compute common credit

Compute C3
separately for
ITC of CGST,
SGST/ UTGST
and IGST.
Compute Σ (D1
the whole financial
by taking
turnover and
turnover for the
financial year, before
due date for
return for September
the following
year.
Step 2 – Compute credit attributable to exempt supplies (ineligible credit) by
apportionment of common credit
a) Calculate D1 : Apportion C2 into credit attributable to
D1
Where
E = Aggregate value of exempt supplies during the tax period
F = Total turnover in the State during the tax
b) Calculate D2 : Compute credit attributable to
D2
Notes
If the registered person does not have any turnover during the said tax period, or the above
information is not available, the values for the last t
Step 3 – Restrict ineligible credits
Important points
+ D2) for
financial year,
exempted
aggregate
the whole
before the
filing the
September in
financial
If Σ (D1 + D2) > the amount
already added to output
tax liability every month,
the differential amount has
to be added to the output
tax liability of any month
till September in the
following financial year and
interest @ rate 18% should
be paid on such differential
amount from 1st April of
succeeding year till the
date of payment.
If
output
month
additional
to
credit
month
September
financial
Compute credit attributable to exempt supplies (ineligible credit) by
apportionment of common credit
Apportion C2 into credit attributable to exempt supplies D1 as under:
= (E/F) x C2
F = Total turnover in the State during the tax period
: Compute credit attributable to non-business purposes D2 as under
= 5% of C2 (common credit)
available, the values for the last tax period may be used.
Restrict ineligible credits
Add D1 + D2 to the output tax liability.
9
If the amount added to
output tax liability every
month > Σ (D1 + D2), the
additional amount paid has
to be claimed back as
credit in the return of the
month not later than
September in the next
financial year.
Compute credit attributable to exempt supplies (ineligible credit) by
as under:
as under
ax period may be used.

EXEMPTED TURNOVER INCLUDES
(For Rule 42, 43)
Exempted by way Of
notification
E.g.: - Notification
12/2017 (For Services)
E.g.:- Notification
2/2017 (For goods)
Goods & Services
with term denoting
in SAC,HSN in rate
column as “NIL”
Outward supplies
which were
taxable under
RCM (From view
point of supplier
this is exempt)
Sale of land & building
where entire
consideration is
received after issuance
of completion
certificate
Transaction
in shares &
securities
Alcohol liquor for
human consumption
sale of petrol diesel,
crude, ATF
EXEMPTED TURNOVER (OR) SUPPPLY EXCLUDES
(i.e. ITC AVAILABLE FOR BELOW POINTS)
Supply of services, having
place of Supply in
Nepal/Bhutan for payment In
Indian Rupee’s
Interest or discounts on deposits and
loans (However for banks & financial
Institutions exempted T.O includes
interests/discounts)
Transport of goods by
vessel from India to
outside India
As per notification 12/2017-GST Act and 9/2017 IGST Act, they are exempted services. But to allow ITC they are excluded from exempted services
definition.

Amendments in Rule 42 – In case of assessee under business of construction (Notification no.
16/2019-CT date. 29.03.2019)
D1 shall be
calculated
for each
project
separately
E = Aggregate
carpet area of
apartments
which are
exempt from
tax
F = Aggregate
carpet area of
apartments in
the project
E shall include
aggregate carpet
area of
apartments
which have not
been booked till
the date of
issuance of
completion
certificate or first
occupation of
project,
whichever is
earlier
While calculating
‘E’ , carpet area of
apartment on
which tax @1%, 5%
is to be paid shall
also be included.
Because in those
cases ITC cannot be
availed If availed,
then reversal shall
be made under this
rule.
D1 & D2 shall be
reversed either
in GSTR 3B or
through GST
DRC-03
Methodology of apportionment of credit of Capital Goods and reversal there of (Rule 43)
CAPITAL GOODS
Used for Taxable
purpose
Used for exempted
purpose
Common use
Claim ITC in full No Claim
Claim credit Initially &
reverse for 60 months
under rule 43

(i) Identify input tax on capital goods which are used/intended to be used commonly for
making taxable as well as exempt supplies & business & non business purposes and denote
the same as ‘A’. Such amount will be credited to ECrL.
(ii) The useful life of such capital goods will be taken as 5 years from the date of invoice. (i.e.,
60 months)
information is not available, the values for the last tax period may be used.
Step 1 - Determine common credit ‘Tc’ on capital goods as under
Step 2 - Determine common credit during the useful life of capital goods for a tax period as
under and denote the same as ‘Tm’
Tm = Tc ÷ 60
Step 3 - Apportion common credit attributable to exempt supplies as under
Te = (E ÷ F) x Tm
Where
E = Aggregate value of exempt supplies made during the tax
period
F = Total turnover during the tax period
Notes
Step 4: Restrict ineligible credit
Add ‘Te’ to the output tax liability along with applicable
interest @ 18% p.a during every tax period of the useful
life of the capital goods concerned.

1. Capital goods used for taxable supplies at the time of acquisition & Later converted to exempted
supplies/Non-Business use.
 Initially ITC has been availed
 Upon conversion, reversal of ITC = Total ITC * balance no. of months
60 months
E.g. If a capital good used for 5m 6 days, then reversal of ITC later = Total ITC* 54M
60M
 Then capitalise the amount and claim depreciation.
2. Capital goods used for exempted supplies at the time of acquisition & Later converted to taxable
supplies
 If any ineligible claim is capitalised and depreciation is claimed, then no ITC is admissible
now.
 However, if ITC is shown as current asset initially (i.e., not claim ITC or not capitalised) or
depreciation claimed on ITC has been reversed, then
 Now ITC to be availed = Total ITC-5% per quarter (or) part thereof
3. Capital goods used for taxable supply at the time of acquisition & Later used for common use
 Initially full ITC is claimed
 After conversion, compute common credit
 Common credit = ITC-5% per quarter (or) part thereof
 The common credit is already claimed (because, initially it is taxable so claimed)
 So, reversal has to be made by procedure specified in rule-43 for 60 months
 i.e. monthly reversal under Rule 43 = Common credit X Exempted T.O
60M Total T.O
4. Capital goods used for exempted supply at the time of acquisition & Later used for common use
 Initially no ITC is taken
 After conversion, compute common credit
 Common credit = ITC-5% per quarter (or) part thereof
 First avail this ITC (i.e., Transfer to credit ledger)
 Later monthly reversed for 60 months (Rule 43) =
Common credit X Exempted T.O
60M Total T.O
5. Capital goods used for common use at the time of acquisition & Later used for taxable supplies
 E.g. For suppose, for 4 months used for common usage and ITC reversed as per rule 43 from
5th
month it used exclusively for taxable supply then,
 No reversal is required from this month i.e., reverse of ITC under rule 43
 Availment of ITC is already made at the time of acquisition itself.
6. Capital goods used for common use at the time of acquisition & Later used for exempted supply
 Initially credit is availed and reversal is being made monthly for 9 months
 After conversion into exempted supply.
 Reversal = ITC * Balance No. of months
60 months
Conversion of use of CAPITAL GOODS

• As an alternative of Rule
NBFC, which accepts
availment of ITC to 50
month and the remaining
• Credit of tax paid on inputs
items mentioned u/s section
• The restriction of availing
procured from another
tax can be availed.
• The option once exercised
financial year.
Optional Methodology of apportionment
Rule 38 of the CGST Rules provides the optional methodology
Rule 42 & 43, a banking company or a financial
deposits, or extends loans or advances, has
50% of the eligible ITC on inputs, capital goods
remaining ITC shall lapse.
inputs and input services that are used for nonbusiness
section 17(5) [blocked credits] cannot be availed
availing 50% ITC shall not apply to the
another registration within the same entity i.
exercised cannot be changed during the
Optional Methodology of apportionment of credit & reversal for Banks & Financial Institutions
Rule 38 of the CGST Rules provides the optional methodology
14
financial institution including a
has the option to limit its
goods and input services each
nonbusiness purposes and
availed.
the tax paid on supplies
.e., 100% credit of such
remaining part of the
of credit & reversal for Banks & Financial Institutions

S.N Persons eligible to take
credit
Goods entitled to ITC Restrictions/
ConditionsInputs held in stock/
capital goods
As on
1. New Registration
Person who has applied
for registration within 30
days from the date on
which he becomes liable
to registration
a) Inputs held in stock
b) Inputs contained in
semi-finished or
c) Finished goods held
in stock
The day
Immediately
preceding the
date
from which he
becomes liable to
pay tax
ITC to be availed
within 1 year from
the date of the issue
of the tax invoice by
the supplier.
2. Voluntary registration
Person who is not
required to register, but
obtains voluntary
registration
semi-finished or
in stock
The day
immediately
preceding the
date of
registration
3. Composition tax to
Regular scheme
semi-finished or
in stock
d) capital goods
The day
immediately
preceding the
date liable to pay
tax under regular
scheme
a) ITC on capital
goods will be
reduced by 5% per
quarter of a year or
part of the year from
the date of invoice.
b) ITC can be claimed
only in invoices were
available
b) ITC to be availed
within 1 year from
the date of the issue
of the tax invoice by
the supplier.
4. Exempt supplies become
Taxable supplies
semi-finished or
in stock
d) capital goods
exclusively used for
such exempt supply
The day
immediately
preceding the
date
from which such
supply becomes
taxable
5. Credit in Special Circumstances [Section 18]
Entitlement of ITC:
Section 18 read with Rule 40 of CGST rules:
In all the below cases, the registered person has to make an electronic declaration in ITC-01 within
30 days from the date when the registered person becomes eligible to avail ITC.
If the claim of ITC pertaining to CGST, SGST/UTGST, IGST put together exceeds ₹ 2,00,000, the
declaration needs to be certified by a practicing Chartered Accountant/Cost Accountant.

CASE 1 : Conversion from Regular to Composition scheme
CASE 2 : Taxable supplies become Exempted supplies
a) In respect of Inputs held in Stock
If invoices available : ITC on inputs will be reversed proportionately on the basis of
corresponding invoices on which credit had been availed on such inputs.
If invoices are not available : If invoices are not available, the ITC to be reversed will be based
on the prevailing market price of such goods on the date of switch over/exemption.
The details furnished on the basis of prevailing market value will be duly certified by a
practicing Chartered Accountant/ Cost Accountant.
b) In respect of Capital Goods
ITC involved in the remaining useful life (in months) of the capital goods will be reversed on
pro-rata basis, taking the useful life as 5 years.
Eg: Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months = 5 months ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60
c) Details of the amount payable must be furnished in FORM GST ITC-03 (This form is to be filed
with 60 days from the date of CASE 1/ 2 above)
d) Credit Ledger shall be reversed to the extent of Tax on ITC -03. Balance of ITC, if any, lying in
the electronic credit ledger shall lapse.
e) The ITC to be reversed on inputs and capital goods will be calculated separately for ITC of
CGST, SGST/UTGST and IGST.
II. Reversal of ITC ( Section 18(4) read with rule 44 of CGST Rules)
III. Cancellation of
registration
 Same as Case 1 & 2 given above but Tax payable in this case
is
a) Tax computed as per above provision
(or)
b) Tax on Transaction value
 This tax shall be paid in GST REG -16 itself (Application for
Cancellation of Registration)
 Final Return in GSTR-10 should also be submitted within 3
months from date of Cancellation

IV. Amount payable on supply of capital goods on which ITC has
been availed (S.18(6) read with rule 40 & 44 CGST Rules)
a) If capital goods or
plant and machinery on
which ITC has been taken
are supplied outward by
the registered person, he
must pay an amount that
is the higher of the
following:
(i) ITC availed (-) 5% per quarter of a year or part
thereof
(ii) Tax on transaction value
Or
b) ITC pertaining to remaining useful life of the capital goods will be computed separately for ITC of
CGST, SGST/UTGST and IGST.
c) Such amount will have to be paid and thus, will be added to the output tax liability.
d)If refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may
pay tax on the transaction value.

V. Transfer of ITC on account of change in constitution of registered person
Section 18(3) read with rule 41 of CGST Rules
In case of change in
constitution of a
registered person
like
a) sale
b) demerger,
c) transfer of
business
d) Amalgamation
e) Demerger etc.,
the ITC in the ECrL
can be transferred
to the new entity,
The registered
person will have to
furnish the details
of change in
constitution on the
common portal
(FORM GST ITC-02)
and submit a
certificate from
practicing CA/CMA
Upon acceptance
of such details by
the transferee on
the common
portal, the
unutilized ITC will
be credited to his
electronic credit
ledger.
The transferee
will record the
inputs and capital
goods so
transferred in his
books of account
value of assets‖
means the value
of the entire
assets of the
business,
whether or not
input tax credit
has been availed
thereon.
In case of death of
sole proprietor if
the business is
continued by any
person being
transferee or
successor, the input
tax credit which
remains un-utilized
in the electronic
credit ledger is
allowed to be
transferred to the
transferee as per
above provisions
Condition :
All the liabilities
should be
transferred to
New Entity

a) Principal can take credit on goods (inputs and capital goods) sent for job work.
b) Credit can be taken even if the said goods are sent directly to job worker without being first
brought to the principal's place of business
Time limit for return of
goods sent for job
work/supply from job
worker's place of business
♦ Inputs - 1 year
♦ Capital goods - 3 years
from the date of sending the
same for job work / direct
receipt by Job worker
On failing to comply with the timelines, the
goods will be deemed to have been supplied
to the job worker on the day they were sent
out.
a) It should be declared in GSTR 1
b) Principal is liable to pay tax along with
applicable interest on such supply.
c) Subsequent return of the goods by the
job worker will be treated as a separate
supply
Time-lines do not
apply to moulds and
dies, jigs and fixtures
or tools sent out for
job work.
Other Conditions:
a) Delivery challan to be issued by the principal under Rule 55
b) The challan needs to be issued for the inputs or capital goods sent directly to the job worker.
c) The responsibility for keeping proper accounts for the inputs or capital goods lies with the
principal.
d) The details of various challans relating to goods sent to /received from job worker or sent
from one job worker to another job worker are to be included in quarterly Form GST ITC 04
submitted by 25th day of the month succeeding the relevant quarter.
Original Time limit Extension on approval by commissioner
Inputs 1 year from date of sending
goods to Job worker
One more year
Capital goods 3 years from date of sending
goods to Job worker
2 more years
e) Details of goods sent by one jobworker to another jobworker need not uploaded in GST ITC-04
6. Taking ITC in respect of Inputs and CG sent for Jobwork (Section 19)
a) A registered person taking multiple registration in State if intends to transfer the ITC to the newly
registered entity then he shall file the details of ITC to be transferred in FORM ITC 02A (newly
inserted in Forms) within 30 days of obtaining separate registration.
b) ITC shall be transferred in the ratio of value of assets held by those multiple entities at the time
of registration
VI. Rule 41A. Transfer of credit on obtaining separate registration
for multiple places of business within a State or Union territory.-

Eg: The Corporate office of ABC Ltd., is at Bangalore, with its
Kolkata. Software license and maintenance is used at all the locations, but invoice for these services (indicating CGST and S
Office. Since the software is used at all the four locations, the ITC of entire services cannot be claimed at Bangalore. The same has to be
the four locations. For that reason, the Bangalore Corporate office has to act as ISD to distribute the credit
If the corporate office of ABC Ltd, an ISD situated in Bangalore, receives invoices indicating
distribute the ITC of CGST, SGST as well as IGST of ₹
containing the amount of credit distributed.
7. Distribution of Credit by ISD (Section 20 & 21)
Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in r
should be apportioned between all the consuming units. ISD mechanism enables proportionate distribution of credit of input se
consuming units. The concept of ISD under GST is a legacy carried over from the ser
An ISD is compulsorily required to obtain a separate registration as an ISD even though it may be separately registered. Ther
registration for an ISD. The other locations may be registered separately. Since the s
transferred to such locations (having separate registrations) as the output services are being provided there.
Input Tax Credit (ITC)DAY 6 & 7
20vjabranchofsircoficai@gmail.com
The Corporate office of ABC Ltd., is at Bangalore, with its business locations of selling and servicing of goods at Bangalore, Chennai, Mumbai and
Kolkata. Software license and maintenance is used at all the locations, but invoice for these services (indicating CGST and S
the software is used at all the four locations, the ITC of entire services cannot be claimed at Bangalore. The same has to be
the four locations. For that reason, the Bangalore Corporate office has to act as ISD to distribute the credit.
If the corporate office of ABC Ltd, an ISD situated in Bangalore, receives invoices indicating ₹ 4 lakh of CGST, ₹4 lakh of SGST and
₹ 15 lakh amongst its locations at Bangalore, Chennai, Mumbai and Kolkata through an ISD invoice
7. Distribution of Credit by ISD (Section 20 & 21)
ISD is an office of a business which
input service and distributes available ITC to other branch
offices of the same business
Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in r
should be apportioned between all the consuming units. ISD mechanism enables proportionate distribution of credit of input se
consuming units. The concept of ISD under GST is a legacy carried over from the service tax regime.
An ISD is compulsorily required to obtain a separate registration as an ISD even though it may be separately registered. Ther
registration for an ISD. The other locations may be registered separately. Since the services relate to other locations the corresponding credit should be
transferred to such locations (having separate registrations) as the output services are being provided there.
business locations of selling and servicing of goods at Bangalore, Chennai, Mumbai and
Kolkata. Software license and maintenance is used at all the locations, but invoice for these services (indicating CGST and SGST) are received at Corporate
the software is used at all the four locations, the ITC of entire services cannot be claimed at Bangalore. The same has to be distributed to all
4 lakh of SGST and ₹ 7 lakh of IGST, it can
, Chennai, Mumbai and Kolkata through an ISD invoice
ISD is an office of a business which receives tax invoice for
input service and distributes available ITC to other branch
Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices
should be apportioned between all the consuming units. ISD mechanism enables proportionate distribution of credit of input services amongst all the
An ISD is compulsorily required to obtain a separate registration as an ISD even though it may be separately registered. There is no threshold limit for
ervices relate to other locations the corresponding credit should be

The credit connected to
recipient to whomss that
If the input service is
distributed to such recipients
recipient in a State / Union
period of all the recipients
operational during the current
ITC pertaining to input
the recipients in the ratio
above.
Both ineligible and eligible
ITC of CGST, SGST/UTGST
The credit attributable
exempt supplies
Here Turnover includes
Can a company have multiple ISDs?
Yes, different offices a company like marketing division, security
division etc. may apply for separate ISD registration.
Manner of distribution of credit by an ISD [Section 20 read
It must follow these principles
1
6
5
4
3
2
7
“Relevant period”
previous financial year, if all the recipients of credit had turnover in
their State / Union Territory during that year.
If some or all the recipients did not have turnover in their State /
Union territory duri
quarter for which details of turnover of all the recipients is available,
prior to the month for which credit is to be distributed, will be the
“relevant period”.
to an input service must be distributed only
that input service is attributable.
attributable to more than one recipient, the
recipients in the ratio of turnover during the relevant
Union Territory to the aggregate turnover during
recipients to whom the input service is attributable
current year.
input services which are common for all units, is
ratio of turnover during the relevant period
eligible ITC are distributed separately
SGST/UTGST and IGST are distributed separately.
attributable to a recipient is distributed even if such recipient
includes both taxable and non-taxable goods
Can a company have multiple ISDs?
division etc. may apply for separate ISD registration.
Manner of distribution of credit by an ISD [Section 20 read with rule 39 of CGST Rules]
“Relevant period” for working out the above distribution is the
their State / Union Territory during that year.
Union territory during the previous financial year, then the last
“relevant period”.
21
only to the particular
the relevant ITC is
relevant period of the
during the relevant
attributable and which are
is distributed to all
as described in (b)
recipient is making
with rule 39 of CGST Rules]
for working out the above distribution is the
ng the previous financial year, then the last

8. Distribution of taxes
ITC of CGST, SGST in
respect of recipient
located in the same State
is distributed as CGST /
SGST respectively
ITC of CGST and
SGST/UTGST, in respect
of a recipient located in a
different State , is
distributed as IGST (total
of ITC of CGST and
SGST/UTGST which were
to be distributed to such
recipient).
ITC on account of
IGST is distributed
as IGST
9. Procedural aspects of distribution of credit [Rule 39 of CGST Rules]
The ISD has to
issue an ISD
invoice for
distributing
ITC. Indicate
in such
invoice that it
is issued only
for
distribution of
ITC.
The ISD needs
to issue a ISD
credit note,
for reduction
in credit if the
distributed
credit gets
reduced for
any reason.
ITC available
for
distribution
in a month is
to be
distributed
in the same
month.
An ISD is
not
required to
file annual
return.
 Furnish monthly
GSTR-6 within 13
days.
 The details in the
returns are made
available to the
recipients in their
GSTR 2A.
 The recipients may
include these in its
GSTR- 3B for ITC
An ISD cannot
accept any
invoices on
which tax is to
be discharged
under reverse
charge
mechanism.
Recovery of excess credit distributed to
a recipient [Section 21]
Shall be recovered from the recipient
but not from ISD

8. How ITC is availed & Utilised (Section 49)
Changes in Availment of ITC- New section 49B & New rule 88A
The new rule provides as under
ITC of IGST
should first be
utilized towards
payment of IGST
Remaining ITC of IGST,
if any, can be utilized
towards the payment
of CGST and
SGST/UTGST in any
order, i.e. ITC of IGST
can be first utilized
either against CGST or
SGST.
ITC of CGST, SGST/UTGST
can be utilized towards
payment of IGST, CGST,
SGST/UTGST only after the
ITC of IGST has first been
utilized fully.

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