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TMI BlogOverview -Input Tax Credit Mechanism in GSTX X X X Extracts X X X X X X X X Extracts X X X X ..... As the tax charged by the Central or the State Governments would be part of the same tax regime, credit of tax paid at every stage would be available as set-off for payment of tax at every subsequent stage. Let us understand how 'cascading' of taxes used to take place in the earlier tax regime. Central excise duty charged on inputs used for manufacture of final product could be availed as credit for payment of Central Excise Duty on the final product. Example, Manufacture a pen, the manufacturer requires, plastic granules, refill tube, metal clip, etc. All these 'inputs' were chargeable to central excise duty. Once a 'pen' was manufactured using these inputs, the pen was also chargeable to central excise duty. Let us assume that the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both are subsumed under a single levy. The major taxes/levies which are clubbed together or subsumed in the GST regime are as under: Central Tax State Tax Central Excise duty VAT / Sales Tax Additional Duties of Excise (Goods of Special Importance) Central Sales Tax The Excise duty levied under Medicinal & Toilet Preparation (Excise Duties) Act, 1995 Purchase Tax Additional duties of Customs (commonly known as CVD ) Entertainment and Amusement Tax (other than those levied by local bodies) Special Additional Duty of Customs (SAD) Luxury Tax Service Tax Octroi and Entry Tax (All forms) Surcharges & Cesses Taxes on lotteries, betting & Gambling Taxes on advertisements State Cesses and Surcharges GST compr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is called utilization of input tax credit. For example- you are a manufacturer: a. Tax payable on output (FINAL PRODUCT) is Rs 450 b. Tax paid on input (PURCHASES) is Rs 300 c. You can claim INPUT CREDIT of Rs 300 and you only need to deposit Rs 150 in taxes. Some of the technical aspects of the scheme of Input Tax Credit are as under: A) Any registered person can avail credit of tax paid on the inward supply of goods or services or both which is used or intended to be used in the course or furtherance of business. B) The pre-requisites for availing credit by registered person are: a) He is in possession of tax invoice or any other specified tax paying document. b) He has received the goods or services. "Bill to ship" scenarios als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of Invoice Rules. F) ITC is not available in some cases as mentioned in section 17(5) of CGST Act, 2017. Some of them are as follows: a) motor vehicles and other conveyances except under specified circumstances. b) goods and / or services provided in relation to i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, except under specified circumstances; ii. membership of a club, health and fitness center; iii. Rent-a-cab, life insurance, health insurance except where it is obligatory for an employer under any law; iv. travel benefits extended to employees on vacation such as leave or home travel concession; c) Works contract services when supplied for construction of immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch and inputs contained in semi-finished or finished goods) and capital goods on the day immediately preceding the date from which he becomes liable to pay tax as normal taxpayer. d) Where an exempt supply of goods or services or both become taxable, the person making such supplies shall be entitled to take ITC in respect of goods held in stock (inputs as such and inputs contained in semi-finished or finished goods) relatable to exempt supplies. He shall also be entitled to take credit on capital goods used exclusively for such exempt supply subject to reductions for the earlier usage as prescribed in the rules. e) ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice by the supplier. f) In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the available ITC in such cases has to be worked out as prescribed in the rules. I) Provisions Specifically applicable for Construction Service w.e.f. 01.04.2019, in case of supply of construction services, the input tax shall be calculated finally, for each on going project or project which commences on or after 1st April, 2019, which did not undergo or did not require transition of input tax credit consequent to change of rates of tax on 1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate), dated the 28th June, 2017, as amended, for the entire period from the commencement of the project or 1st July, 2017, whichever is later, to the completion or first occupation of the project, whichever is earlier, before th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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