Filed for LUT Can I Still Claim ITC ?

[Siddharth Shukla]

We are a Partnership firm. Our Income source is Youtube Adsense Revenue from Youtube which is received from Google Ireland. Upon Research I found out about LUT since I can show earnings from my videos as earnings from ZERO RATED SUPPLIES and thus have to pay no GST. However Can I claim ITC for purchases like laptops, electronics for my firm ? My CA says since I have no Output GST paid, I cannot claim any ITC, But in Zero Rated supplies it is stated that I can claim ITC even tho I do not have to pay GST.

Please help me out here ? Any expert assistance on this matter in highly appreciated.

[YAGAY andSUN]

Your question touches on an important aspect of GST compliance, especially for businesses dealing with zero-rated supplies like YouTube AdSense revenue. Let me clarify the key points:

1. Zero-Rated Supplies and ITC Eligibility:

• Zero-rated supply means the supply is taxable at 0%, and you can claim the Input Tax Credit (ITC) on inputs and input services used to make such supplies.
• Since your income from YouTube AdSense is considered zero-rated (as it's an export of services), you are indeed eligible to claim ITC on inputs (like laptops, electronics) used for making these supplies.

2. Key Conditions to Claim ITC:

• Inputs must be used exclusively or partially for making zero-rated supplies. If they are used for both zero-rated and taxable supplies, you can still claim ITC but need to apportion the credit accordingly.
• No Output GST (i.e., no GST paid on your sales) doesn’t disqualify you from claiming ITC, as long as the inputs are used for making zero-rated supplies.

3. Your CA’s Perspective:

• Your CA may be referring to the fact that without any output GST, the ITC could be blocked under certain conditions—especially if the firm has opted for a composition scheme or certain other GST schemes.
• However, in the case of zero-rated exports, the rules are different. You can either:
  • Export under a LUT (Letter of Undertaking) without paying IGST on exports, and still claim ITC on inputs.
  • Export with payment of IGST and claim a refund of the IGST paid.

4. What You Should Do:

• Ensure proper documentation: Maintain clear records of purchases (invoices), proof that they were used for making zero-rated supplies, and relevant export documents.
• Consult with a GST expert: It might help to get a second opinion from a GST consultant who specializes in export of services.
• Review GST filings: Make sure your GST returns (GSTR-1, GSTR-3B) are filed correctly, with the exports declared as zero-rated.

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[Raam Srinivasan Swaminathan Kalpathi]

Kindly go through Sec. 54 of CGST Act. r w s 16 of IGST Act r.w.r 89 of CGST Rules.  To cut to the chase, for exports under LUT you will be eligible for refund of 'input tax only' - meaning thereby - inputs of capital goods like computers, plant and machinery (generator) capitalised in the books will not be eligible for refund of ITC.  If the amount of capital goods ITC is significant then the better option will be to remit tax and then claim refund.  In such cases refund of ITC of capital goods can also be availed and claimed.    

[Shilpi Jain]

You can claim credit of the GST paid on your procurements that are not specifically blocked under the la.

Laptops, electronics - you can claim ITC.

Ensure you do not capitalise the GST amounts in your books and claim depreciation.

However, refund of these capital goods will be allowed only if you issue a tax invoice with GST in it and use the ITC that you claimed to pay off this tax @ 18%. This 18% tax you can claim as refund.

[Siddharth Shukla]

But I filed for LUT because my earnings from Youtube Adsense are credited directly into my bank account from Google Ireland without any invoicing or GST. Like I cannot GST invoice it even if I wanted to. So How is it possible to claim any GST here ? Or is it not possible ? 

[Shilpi Jain]

You can still issue an invoice with GST. That will only be a GST tax invoice which is issued for the purposes of GST.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist,

Your services are akin to OIDAR.  As and when the moneys get credited to your account. please raise a GST invoice dated one or two days anterior and upload the same in GSTR-1 and 3B.  Please note for refund application you only need to file the list of invoices with GST remitted (Rule 89(2)(c)).  Dept does not ask for ack. from the client/ customer.  Also you will have to obtain FIRC from your bankers or related document for proof of receipt of moneys in foreign currency. GSTR-2B extract will also have to be attached.  Your guide will be GST master Circular 125 as amended by Circular 135 and Circular 139. Please keep these procedural formalities in mind.  Kindly approach a professional specializing in GST.