Case Scenarios
Illustration 1:
Mr. A, a registered person under GST, purchases goods worth Rs. 5,00,000 with the payment of GST @ 5% of Rs. 25,000 in total. These goods were supplied by Mr. A to Mr. B, a registered dealer in same state, in due course of business at Rs. 6,00,000. Assuming the tax rate to be same, what shall be the amount of tax payable by Mr. A on supply made to Mr. B?
Solution:
The GST liability of Mr. A shall be calculated as below:
| Particulars | Taxable Amount | GST @ 5% | |
| Outward Supply made by Mr. A to Mr. B | 6,00,000 | 30,000 | |
| (-) | Tax paid on inward supply | 25,000 | |
| Net tax payable by Mr. A to Government Exchequer | 5,000 |
Illustration 2:
Mr. Aman purchased some goods from Mr. Sham at a price of Rs. 10,000 + 900 (CGST) + 900 (SGST). Verify whether Mr. Aman is eligible to avail ITC under Section 16(1) of the tax paid above, if
(i) Mr. Aman is not registered under GST
(ii) Mr. Aman is registered under GST but a composition dealer.
(iii) Mr. Aman is a registered dealer and has used goods worth Rs. 6000 (excluding GST) for personal use.
(iv) Mr. Aman is registered under GST and has used all goods in due course for furtherance of business.
Solution:
The eligibility under Section 16(1) can be verified under each case as follows:
| S. No. | Particulars | Eligibility for ITC | Reason thereof | Amount of ITC allowed |
| (i) | Mr. Aman is not registered under GST
|
Not eligible | U/s 16 (1) , only a registered person shall be entitled to take credit | Nil |
| (ii) | Mr. Aman is registered under GST but a composition dealer | Not eligible | A composition dealer U/s 10 is ineligible to avail ITC | Nil |
| (iii) | Mr. Aman is a registered dealer and has used goods worth Rs. 6000 (excluding GST) for personal use | Eligible, but on part of Rs. 4,000 ONLY | U/s 16(1), the goods must be used in course of / in furtherance of business only. | CGST= Rs.360
SGST=Rs. 360 |
| (iv) | Mr. Aman is registered under GST and has used all goods in due course for furtherance of business.
|
Eligible | Duly fulfilling all conditions u/s 16(1) | CGST= Rs.900
SGST =Rs.900 |
Illustration 3:
Mr. Sahil, a registered person under GST, paid Rs. 1,000/- as input tax on goods purchased from Mr. Sachin, another registered person under GST. If he supplies these goods after value addition with an output tax liability of Rs. 2,500/-, how the same shall be treated under GST. What will be the net tax liability Mr. Sahil needs to pay on outward supply and how?
Solution:
The tax paid by Mr. Sahil on inward supply of input goods will be credited to Mr. Sahil’s electronic credit ledger. The rest amount payable will be paid by crediting the same to electronic cash ledger.
| Particulars | Type of Ledger | Amount (in Rs.) | |
| Tax liability on Outward Supply | 2,500 | ||
| – | Tax paid on inward supply | Electronic Credit Leger | (1,000) |
| Net liability payable | 1,500 | ||
| – | Amount credited through cash/online payment/Cheque/other mode | Electronic Cash Ledger | (1,500) |
| Balance | Nil |
Illustration 4:
Amartya Ltd., a registered firm, purchased goods in the month of April 2021 from various firms as follows:
| S. No. | Particulars | Taxable amount | GST | Invoice Price (in Rs.) |
| 1. | Mourya Ltd. | 2,00,000 | 36,000 | 2,36,000 |
| 2. | Surya Ltd. | 50,000 | 9,000 | 59,000 |
| 3. | Arya Ltd. | 1,00,000 | 18,000 | 1,18,000 |
Given that, in case of Mourya ltd. and Surya ltd. the invoices were received in April 2021, but goods were received in April 2021 (from Mourya ltd.) and May 2021 (from Surya ltd.) respectively. In case of Arya ltd. goods were received in April 2021 and invoice was received in May 2021. How much ITC shall be available to Amartya ltd. and in which month?
Solution:
In accordance with the provisions of Section 16(2), the ITC available in respect of above mentioned inward supplies is provided below month-wise:
| S. No. | Particulars | April 2021 | May 2021 | ITC available in month |
| 1. | Mourya Ltd. | a) Invoice received
b) Goods received |
——- | April 2021 |
| 2. | Surya Ltd. | a) Invoice received
|
b) Goods received | May 2021 |
| 3. | Arya Ltd. | a) Goods received | b) Invoice received | May 2021 |
Thus the ITC available in each month is as follows:
| S. No. | Particulars | April 2021 | May 2021 (in Rs.) |
| 1. | Mourya Ltd. | 36,000 | —- |
| 2. | Surya Ltd. | —- | 9,000 |
| 3. | Arya Ltd. | —– | 18,000 |
| Total | 36,000 | 27,000 |
Illustration 5:
POSCO ltd. is into business of retail trading of trucks. It purchases goods from ‘TT motors’ from different locations like Jamshedpur, Lucknow, Pune etc. The goods remain in transit for 5-10 days. The supplier raises invoices at the end of each month, but the goods arrive at the end of POSCO ltd. in next month. Assuming that POSCO ltd. files a monthly return, when shall the Input tax credit of the purchases be booked? What will be your answer, if the goods are sold by POSCO ltd. to end customer in the same month when purchase invoice was raised?
Solution:
In accordance with the provisions of Section 16, ITC is available only when the recipient has received the goods. In the given case also, the ITC in lieu of inward supplies shall be available to POSCO ltd. in the next month after the receipt of goods only.
POSCO ltd. will be under liability to pay the tax on outward supply in the same month of purchase as invoice is raised and tax is collected by him even though he is not in physical possession of goods to be delivered under invoice. The supply of goods to end customer will take place at a later stage. Still, it won’t be able to claim ITC in respect of outward supply made against its purchase invoice of same month as goods will be received by it in the next month.
Illustration 6:
Mr. A of Delhi, a registered person under GST, supplied taxable goods to Mr. B of Uttar Pradesh. These goods are to be delivered to Mr. C of Madhya Pradesh as a part of agreement. When shall ITC be available to recipient if the invoice dated 21.4.2021 issued by Mr. A was provided to Mr. B on 23.4.2021 but goods were delivered to Mr. C on 05.05.2021.
Solution:
In accordance with the provisions of Section 16(2) of CGST Act, 2017 as amended, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to any other person on the direction of such registered person before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.
In the given case, it shall be deemed that Mr. B has received the goods when they are received by Mr. C. Hence, the ITC shall be available to Mr. B when goods are delivered to Mr. C on 05.05.2021.
Illustration 7:
Max Packers is engaged in manufacture of plastic toys in Jodhpur and is registered under GST. It enters into an agreement to purchase goods from a supplier ‘U’ in Guwahati and will further supply the said goods to another party ‘P’ in Guwahati. Max Packers’ supplier will directly deliver the goods to other party in Guwahati. Analyze whether ITC of IGST paid on ‘bill to-ship to’ model is admissible to the Max Packers.
Solution:
Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply shall be the principal place of business.
In the instant case, Max packers is acting as a third party, directing ‘U’ of Guwahati to dispatch the goods directly to ‘P’ of Guwahati. ‘U’ would accordingly ‘bill to’ the Max Packers and ship to ‘P’. Accordingly, it shall be deemed that said third person received goods and place of supply of such goods shall be principal place of business of such person i.e. Jodhpur. Thus, IGST will be applicable on both transactions and Max Packers shall be eligible to claim ITC as per Section 16 of CGST Act, 2017.
Illustration 8:
Abhay enterprises, a registered person in Hisar, Haryana, made following inward supplies during the May, 2021. Determine under the light of provisions of Section 16, whether it is eligible to take ITC on following or not.
| S. No. | Particulars | Amount of ITC (in Rs.) |
| 1. | Goods purchased from Anil against which full payment is made by Abhay enterprises, but tax has not been deposited by Anil. | 5,000 |
| 2. | Goods purchased from Asha Organization on which invoice has been received but goods are still in transit | 10,000 |
| 3. | Goods imported from South Africa of which Bill of Entry is available with Abhay Enterprises | 25,000 |
| 4. | Goods purchased of which 50% goods are used for exempted supply | 60,000 |
| 5. | Goods purchased on invoice on which tax has been duly paid and deposited | 20,000 |
Solution:
According to the provisions of Section 16, the admissibility of ITC on given inward supplies is determined as:
| S. No. | Particulars | Amount of ITC admissible in return of May 2021 (In Rs.) |
| 1. | Goods purchased from Anil against which full payment is made by Abhay enterprises, but tax has not been deposited by Anil. | Nil |
| 2. | Goods purchased from Asha Organization on which invoice has been received but goods are still in transit | Nil |
| 3. | Goods imported from South Africa of which Bill of Entry is available with Abhay Enterprises | 25,000 |
| 4. | Goods purchased of which 50% goods are used for exempted supply | 30,000 |
| 5. | Goods purchased on invoice on which tax has been duly paid and deposited | 20,000
|
| Total ITC available in May 2021 | 75,000 |
Illustration 9:
A entered into an agreement to receive 100 qtl of rbm from B. The first lot of 50 qtl was received on 15.05.2021 and second lot of 30 qtl was received on 20.5.2021, the third lot of 20 qtl was received on 2.6.2021. When will A be eligible to avail ITC on this inward supply?
Solution:
In accordance with proviso to Section 16, where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment.
Thus, A shall be eligible to avail ITC only after receipt of last installment of goods i.e. on 02.06.2021.
Illustration 10:
In the month of December 2019, Mr. Arihant had a total inward supply, of Rs. 50 Lac with eligible GST thereon of Rs.6 Lac, from ten suppliers. Determine the maximum ITC that can be claimed by Mr. Arihant in his GSTR-3B of month of December 2019 filed on 18 January 2020, if:
(i) Out of 10 suppliers, 2 suppliers didn’t file their December GSTR-1 in time, and invoices with taxable value of Rs. 10 lac and GST input of Rs. 1.2 Lac are not available in GSTR 2A of Mr. Arihant as on 18.01.2020.
(ii) All the suppliers filed their returns in time, however invoices with taxable value of 2.5 lac with GST input of Rs. 30,000 are not uploaded on Portal.
Solution:
ITC that can be claimed by Mr. Arihant in GSTR-3B of December 2019 is determined as follows:
| (i) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Arihant | 6,00,000 | |
| (-) | Invoices not filed | (1,20,000) |
| Net eligible ITC available | 4,80,000 | |
| (+) | Additional ITC available as per Rule 36(4) (20% of Net eligible ITC restricted upto Rs. 1,20,000) | 96,000 |
| Total ITC that can be availed in December 2019 GSTR-3B | 5,76,000 |
| (ii) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Arihant | 6,00,000 | |
| (-) | Invoices not filed | (30,000) |
| Net eligible ITC available | 5,70,000 | |
| (+) | Additional ITC available as per Rule 36(4) (20% of Net eligible ITC restricted upto Rs. 30,000) | 30,000 |
| Total ITC that can be availed in December 2019 GSTR-3B | 6,00,000 |
Illustration 11:
Mr. Amish, a registered person under GST, made an inward supply of goods involving GST of Rs. 1,00,000 during February 2020. What shall be the maximum eligible ITC that Mr. Amish can claim in GSTR- 3B of February 2020, if GSTR-2A of February 2020 shows as below? Assume that total GST paid on purchases is eligible for ITC.
(i) Invoices with corresponding GST of Rs. 40,000 are not available in GSTR-2A of February 2020.
(ii) Invoices with corresponding GST of Rs. 4,000 are not available in GSTR-2A of February 2020.
Solution:
Under the light of provisions of Rule 36(4) read with CGST Act, 2017, the maximum eligible ITC that can be availed in GSTR-3B can be calculated as follows:
| (i) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Amish | 1,00,000 | |
| (-) | Invoices not filed | (40,000) |
| Net eligible ITC available | 60,000 | |
| (+) | Additional ITC available as per Rule 36(4) (10% of Net eligible ITC restricted upto Rs. 40,000) | 6,000 |
| Total ITC that can be availed in February 2020 GSTR-3B | 66,000 |
| (ii) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Amish | 1,00,000 | |
| (-) | Invoices not filed | (4,000) |
| Net eligible ITC available | 96,000 | |
| (+) | Additional ITC available as per Rule 36(4) (10% of Net eligible ITC restricted upto Rs. 4,000) | 4,000 |
| Total ITC that can be availed in February 2020 GSTR-3B | 1,00,000 |
Illustration 12:
If in Illustration 137, the tax period and all the relevant data belong to February 2021, what shall be the maximum eligible ITC that the recipient can avail in his return?
Solution:
Under the light of provisions of Rule 36(4) read with CGST Act, 2017, the maximum eligible ITC that can be availed in GSTR-3B can be calculated as follows:
| (i) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Amish | 1,00,000 | |
| (-) | Invoices not filed | (40,000) |
| Net eligible ITC available | 60,000 | |
| (+) | Additional ITC available as per Rule 36(4) (5% of Net eligible ITC restricted upto Rs. 40,000) | 3,000 |
| Total ITC that can be availed in February 2021 GSTR-3B | 63,000 |
| (ii) | Particulars | GST ITC (in Rs.) |
| Eligible ITC available with Mr. Amish | 1,00,000 | |
| (-) | Invoices not filed | (4,000) |
| Net eligible ITC available | 96,000 | |
| (+) | Additional ITC available as per Rule 36(4) (5% of Net eligible ITC restricted upto Rs. 4,000) | 4,000 |
| Total ITC that can be availed in February 2021 GSTR-3B | 1,00,000 |
Illustration 13:
Mr. X purchased goods worth Rs. 1,00,000/- involving GST of Rs. 18,000/- from Mr. Y on an invoice dated 25.1.2021, the goods were received by Mr. X on 26.1.2021. The input tax credit of this inward supply was availed by Mr. X in GSTR-3B of January 2021. However, the payment was not made by Mr. X to Mr. Y in respect of the goods purchased till the end of July 2021. What shall be right course of action in respect of such ITC availed?
Solution:
In accordance with the second proviso to Section 16(2), where a recipient fails to pay to the supplier of goods or services or both, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed.
Accordingly, Mr. X shall reverse the ITC in case of non-payment on this invoice before 180 days from date of invoice. This period of 180 days expires on 24 July 2021. Since the recipient has not made any payment, he will have to reverse this by making payment of the ITC availed of Rs. 18,000 + interest @ 18% thereon in July GSTR-3B.
Illustration 14:
M/s Express ltd., a registered person under GST, made inward supplies from various suppliers details of which are given below:
| Supplier name | GST ITC involved (in Rs.) | Date of issue of invoice | Date of availing credit by recipient | Date of payment by recipient to supplier |
| A | 15,000 | 12.12.20 | 12.1.21 | 13.8.21 |
| B | 10,000 | 15.10.20 | 5.11.20 | 10.2.21 |
| C | 7,500 | 25.01.21 | 11.02.21 | 24.7.21 |
Calculate the last date upto which M/s Express ltd. needs to make payment in respect of the invoices while availing ITC. Also, in case of non-payment unto last date, calculate the amount of ITC and interest to be paid by M/s Express ltd.
Solution:
In respect of these invoices, the last date of payment, ITC and interest to be paid in case of non-payment are calculated as below:
| Supplier name | GST ITC involved(in Rs.) | Date of issue of invoice | Last date up to which payment should be made | Date of payment by recipient to supplier | Whether ITC + interest needs to be paid as output tax liability | Interest | Total amount to be paid back |
| A | 15,000 | 12.12.20 | 10.6.21 | 13.8.21 | YES | 15000*18%*189/365
=1331.5 |
15000+1331.5
=16331.5 |
| B | 10,000 | 15.10.20 | 13.4.21 | 10.2.21 | NO | —– | —— |
| C | 7,500 | 25.01.21 | 24.7.21 | 24.7.21 | NO | —– | —— |
In the given case, M/s Express ltd. not made payment within the prescribed time limit i.e. upto 10.6.21 of goods supplied by Supplier A. Hence, it is required to pay the tax with interest thereon in its June 2021’ GSTR-3B which has (assumed) due date of 20.07.2021. Thus, M/s Express Ltd. will pay tax of Rs. 15000 along with interest of Rs. 1331.5 as calculated in the table above.
Note– As per Rule 37(2) of CGST Rules, 2017 the registered person shall be liable to pay interest @18% p.a. for the period starting from the date of availing credit on such supplies till the date when the amount is added to the output tax liability. 189 days are calculated from 12.1.21 (date of availment of ITC) to 20.7.21 (assumed date of filing of June GSTR-3B).
Illustration 15:
Mahesh enterprises, a registered person under GST, had an inward supply of capital goods worth Rs. 5,00,000 involving GST @ 18% of Rs.90,000/-. These were capitalized in the books of Mahesh enterprises at Rs. 5,90,000 including GST. The depreciation was claimed @15% on W.D.V. annually under the provisions of Income Tax Act, 1961. Determine how much ITC shall be allowed to Mahesh Enterprises in respect of this inward supply.
Solution:
In accordance with the provisions of Section 16(3), where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961, the input tax credit on the said tax component shall not be allowed.
In the given case, it has been provided that Mahesh enterprises capitalized the invoice value of goods (i.e. taxable value + GST) in its books of account and depreciation has been claimed on full value of the asset including GST. Hence, ITC shall not be allowed on this inward supply.
Illustration 16:
Mr. X had some invoices dated 25.12.2019 with eligible ITC of Rs. 10,000/-. He forgot to claim ITC of the invoices in January GSTR 3B. Determine the maximum time limit unto which he can claim ITC on above-mentioned invoices. Assume the date of filing of annual return is 31.3.2021.
Solution:
The time limit for availing ITC on invoices dated 25.12.2019 can be calculated as under:
| Particulars | Date | |
| (i) | Date of filing of Annual Return | 31.3.2021 |
| (ii) | Date of filing return for the tax period ending September, 2020 (next F. Y.) | 20.10.2020 |
| Earliest of both | 20.10.2020 |
The last date to claim ITC of Rs. 10,000/- on invoices dated 25.12.2019 is 20.10.2020 as calculated above.
Illustration 17:
Mr. Amish made an inward supply of goods worth Rs. 1,00,000/- involving eligible ITC of Rs. 18,000/- on an invoice dated 10.1.2021. Suppose all others conditions to claim ITC have been fulfilled, but ITC has not been claimed by him even on 18.7.2021. Examine, whether Mr. Amish can claim the ITC in respect of this invoice dated 10.1.2021 on 18.7.2021? The due date of filing Annual return for F.Y. 2020-21 is 30.12.21.
Solution:
The time limit for availing ITC on invoices dated 10.01.2021 can be calculated as under:
| Particulars | Date | |
| (i) | Due Date of filing of Annual Return | 30.12.2021 |
| (ii) | Date of filing return for the tax period ending September, 2021 (next F. Y.) | 20.10.2021 |
| Earliest of both | 20.10.2021 |
The last date to claim ITC of Rs. 18,000/- on invoices dated 10.1.2021 is 20.10.2021 as calculated above.
Illustration 18:
Mr. Amit purchased goods on 1.3.2021. A debit note was issued by the supplier in this respect on 4.4.2021. Calculate the last date of availing ITC on the debit note where due date of Annual Return 2020-21 is 31.12.2021 and for 2021-22 is 31.12.2022.
Solution:
In the given case, although the date of debit note is 4.4.2021, however the date of original invoice is 1.3.2021. The time limit for availing ITC in this case can be calculated as under:
| Particulars | Date | |
| (i) | Due Date of filing of Annual Return | 31.12.2021 |
| (ii) | Date of filing return for the tax period ending September, 2021 (next f.y.) | 20.10.2021 |
| Earliest of both | 20.10.2021 |
The last date to claim ITC in respect of debit notes dated 4.4.2021 shall be calculated on the basis of original invoices dated 1.3.2021 is 20.10.2021 as calculated above.
Illustration 19:
Knowhow ltd. is engaged in business of providing internet based communication solutions to its customers in different states. It got itself registered under GST w.e.f. 01.04.2018, prior this date it was an unregistered person in state of Karnataka. Knowhow ltd. made an inward supply of services worth Rs. 2,00,000/- involving GST @ 18% of Rs. 36,000/- on invoice dated 30.3.2018. The amount in this respect was paid to supplier in advance on 25.3.2018. Shall Knowhow ltd. be eligible to take credit of the tax paid on such inward Supply? Provided the due date of Annual return of 2017-18 is 31.12.2018.
Solution:
In the given case, Knowhow ltd. was registered w.e.f. 1.4.2018 and earlier to this period i.e. from 1.7.2017 to 31.3.2018, it was not a registered person under GST.
The input tax credit in respect of invoices related to input services dated prior to the effective date of registration is not allowed. Thus Knowhow ltd. is not eligible to claim input tax credit of the tax paid on input invoices of services availed before its effective date of registration under GST.
Illustration 20:
CogTech Ltd. is engaged in providing taxable services in the State of Rajasthan. It procured services of short term accommodation in Haryana and the supplier charged CGST & SGST of Haryana in the invoice. Whether the ITC in respect of such accommodation services availed shall be available to Cog tech ltd.?
Solution:
In GST Regime, SGST and CGST charged for services provided and availed in a state would be eligible for ITC within that particular State where the services were provided and consumed. As the supplier of services and place of supply, both are outside the state of Rajasthan, input tax credit of Central Tax paid in Haryana is not available to the CogTech Ltd.
In other words, ITC of the Central Tax charged from the appellant in Haryana is not available to them as in this case both the location of the supplier and place of supply of services are in state of Haryana.
Illustration 21:
Mr. Subhash, a taxable person, is engaged in providing taxable supply of goods. During the course of business, he invests his surplus funds in gold bullions (as investment) with the intention to resell when the price goes up. Can he claim ITC on such gold bullions purchased?
Solution:
The definition of the term “business” given in section 2(17) is given hereunder:
“(17) “business” includes––
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;”
In the given case, Investment in gold bullion is in due course of business even though the same is undertaken on casual or irregular basis by virtue of clause (c) of the above definition clause. Also, at the time of re-sale of such investment the said taxpayer is liable to pay GST because the activity of sale constitutes supply as per section 7. As per section 16(1), a registered person is eligible to take ITC on goods or services used in the course or furtherance of business. Thus, whether investment is made for long term or short-term purposes, ITC is allowed as long as the conditions mentioned in section 16 are complied with.
Illustration 22:
AP Co. Ltd., a registered firm under GST, is required has to pay rent charges of the leased factory. The rent payment comprises of
| Particulars | Amount (in Rs.) | |
| LEASE CHARGES (Rent + Annual maintenance Charges) | 1,00,000 | |
| GST @ 18% | 18,000 | |
| Total amount payable | 1,18,000 |
Whether ITC can be availed on annual maintenance charges paid by the company to the industrial park?
Solution:
In accordance with Section 16(1), every registered person, subject to prescribed conditions and restrictions, is entitled to take credit of input tax charged on any supply of goods or services or both used or intended to be used in the course or furtherance of his business.
In the given case, the consideration paid under the lease deed is classified as annual lease rent as well as the annual maintenance charges for maintenance and development of the industrial area. The maintenance charges are very much the part of the annual lease rental as maintenance charges are obligatory for the lessee without any option, Thus, Rent and maintenance are naturally bundled and supplied in conjunction with each other in the ordinary course of business. Hence, ITC on the annual maintenance charges (which is a part of the rent) shall be available to AP Co. Ltd.
ITC available to AP Co. Ltd. = Rs. 18,000/-
Illustration 23:
Ashish enterprises is engaged in providing taxable services under GST. It has a loan account with State Bank of India which debits many charges from the account inclusive of GST. Ashish enterprises gets a loan statement every month wherein these charges are mentioned. Tax paid on bank charges is reflected in Form GSTR-2A/2B. However, the bank never issues an invoice for the same. M/s Ashish enterprises takes ITC of GST paid on such bank charges every month in its GSTR-3B. Whether it is correct to claim ITC based on Form GSTR-2A/2B?
Solution:
Section 16(2)(a) provides that in order to avail ITC, the recipient shall be in possession of a tax invoice issued by a supplier. However, the proviso to rule 36(2) provides relaxation that if a document contains amount of tax charged, description of services, total value, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, ITC may be availed by such registered person. As inferred from the above, it can be concluded that ITC reflected in Forms GSTR-2A /2B can be claimed, if the banking company provides any document containing the particulars as per rule 54(2) read with proviso to rule 36(2).
In the given case also, Ashish enterprises can claim ITC of GST charged on bank charges by the banking company on the basis of details as provided in monthly loan statement as well as GSTR 2A/2B.
Illustration 24:
A company XYZ pvt. Ltd., has a policy of reimbursing its employees the cost of mobile phones. Mr. B, an employee is entitled to reimbursement of upto Rs. 10,000/-. The Company purchased a mobile for Rs. 20000+GST on his behalf wherein Rs. 10000/- is borne by company and balance is deducted from Mr. B’s salary. Can the company claim 100% ITC on mobile phone? If the same is to be done partially, then on what basis disallowance is to be computed?
Solution:
As per section 16, every registered person shall, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. One important condition to claim ITC is that the registered person should be in possession of a tax invoice or debit note issued by a supplier registered under this Act.
In the given case, the mobile phone is purchased by the company in its name, the company is in possession of the tax invoice of the said mobile phone and the said mobile phone is used by the employee in the course or furtherance of the business of the company. Therefore, the company can claim ITC on full value of the mobile phone. Reimbursement of the amount of Rs. 10,000 from the employee via deduction from his salary won’t make any impact on the claim of ITC.
