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TMI BlogInput Tax Credit Mechanism in GSTX X X X Extracts X X X X X X X X Extracts X X X X ..... urrently. 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 takes place in the present regime. Central excise duty charged on inputs used for manufacture of final product can be availed as credit for payment of Central Excise Duty on the final product. For example, to manufacture a pen, the manufacturer requires, plastic granules, refill tube, metal clip, etc. All these 'inputs' are chargeable to central excise duty. Once a 'pen' is manufactured by using these inputs, the pen is also chargeable to central excise duty. Let us assume that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a single levy. The major taxes/levies which are going to be clubbed together or subsumed in the GST regime are as under: Central Taxes State Taxes * Central Excise duty * Additional duties of excise * Excise duty levied under Medicinal & Toilets Preparation Act * Additional duties of customs (CVD & SAD) * Service Tax * Surcharges & Cesses * State VAT / Sales Tax * Central Sales Tax * Purchase Tax * Entertainment Tax (other than those levied by local bodies) * Luxury Tax * Entry Tax (All forms) * Taxes on lottery, betting & gambling * Surcharges & Cesses GST comprises of the following levies: a) Central Goods and Services Tax (CGST)[also known as Central Tax] on intra-state or intra-union territory witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plier. d) He has furnished the return. e) If the inputs are received in lots, he will be eligible to avail the credit only when the last lot of the inputs is received. f) He should pay the supplier the value of the goods or services along with the tax within 180 days from the date of issue of invoice, failing which the amount of credit availed by the recipient would be added to his output tax liability, with interest [rule 2(1) & (2) of ITC Rules]. However, once the amount is paid, the recipient will be entitled to avail the credit again. In case part payment has been made, proportionate credit would be allowed. a) Documents on the basis of which credit can be availed are: a) Invoice issued by a supplier of goods or services or both b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input service for further supply of works contract; b) Goods or services received by a taxable person for construction of immovable property on his own account, other than plant & machinery, even when used in course or furtherance of business; c) goods and/or services on which tax has been paid under composition scheme; d) goods and/or services used for private or personal consumption, to the extent they are so consumed; e) Goods lost, stolen, destroyed, written off, gifted, or free samples; f) Any tax paid due to short payment on account of fraud, suppression, mis-declaration, seizure, detention. a) Special circumstances under which ITC is available: a) A person who has applied for registration within 30 days of becoming liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerger etc, the unutilised ITC shall be allowed to be transferred to the transferee.
g) A person switching over from composition scheme under section 10to normal scheme or where a taxable supply become exempt, the ITC availed in respect of goods held in stock (inputs as such and inputs contained in semi-finished or finished goods) as well as capital goods will have to be paid.
h) In case of supply of capital goods or plant and machinery, on which ITC is taken, an amount equivalent to ITC availed minus the reduction as prescribed in rules (5% for every quarter or part thereof shall have to be paid. In case the tax on transaction value of the supply is more, the same would have to be paid. X X X X Extracts X X X X X X X X Extracts X X X X
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