Filed for LUT Can I Still Claim ITC ?, Goods and Services Tax - GST

[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.

Posts / Replies

[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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