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ITC Maximization   |   GST Set Off Optimization   |   Intelligent Reports

We had shared an article earlier on basics of input tax credit (ITC) and how to claim. In this article, we would be sharing the particular forms and documents required as released by the Indian Government in the latest draft of GST law.

Update as on 3rd April 2020

The CBIC has notified that taxpayers can claim input tax credit in the GSTR-3B return from February 2020 to August 2020, without applying the rule of capping provisional ITC claims at 10% of the eligible ITC as per GSTR-2A.

While filing the GSTR-3B of September 2020, the taxpayers must cumulatively adjust ITC as per the above rule from February 2020. 

Update as on 1st Jan 2020

The CBIC has revised the extent of provisional input tax credit claims from 20% to 10%.

Update as on 9th October 2019

The CBIC has notified that the input tax credit that can be availed by a registered person in respect of invoices or debit notes, will be restricted to 20% of of the eligible credit available in respect of invoices or debit notes as per details uploaded by the suppliers.

Document and forms for claiming ITC under GST

Following documents would be required by each applicant who wants to claim ITC under GST:

  1. An invoice issued by the supplier for the supply of goods and services or both as per the GST law.
  2. The debit note issued by the supplier to the recipient in case of taxable value or tax payable mentioned in the invoice is less than the taxable value or tax payable on such supply of goods and services or both.
  3. Bill of entry
  4. An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs 200 or in situations where the reverse charge is applicable as per GST law.
  5. An invoice or credit note to be issued by the Input Service Distributor(ISD) as per the invoice rules under GST.
  6. A bill of supply issued by the supplier of goods and services or both as per the invoice rules under GST

All the above applicable documents prepared as per the invoice rules under GST are to furnished at the time of filing form GSTR-2.

ITC cannot be claimed on the tax paid on goods and services or both due to an order for the demand raised due to any fraud, willful misstatement or suppression of facts.

ITC claim by Banking company or Financial institution

According to the GST rules, an applicant claiming ITC on such goods and services or both which are used partly for taxable supplies (including 0 rated goods) and exempted supplies will be allowed to claim ITC for only the taxable supplies (including 0 rated goods).

Banking companies or financial institutions have an option for claiming the ITC on the deposits and loans or advances to comply with above rules or claim the 50% of the total ITC available in each month and the rest will lapse. Details for claiming the 50% ITC have to be filled out in form GSTR-2.

For example:

Bank of Baroda has total ITC of Rs 5 crore out of which 2 crores of ITC for the taxable supplies including zero-rated goods. Bank of Baroda should opt for the 50% ITC claim as it is more beneficial than getting the ITC only for Rs 2 crore.

Steps for claiming ITC in special circumstances

In the following circumstances, certain different steps are to be followed for claiming the ITC:

  1. An applicant switching from the composition scheme to a normal taxpayer under GST can claim ITC on the input held in stock, capital goods, semi-finished and finished goods in stock as on the day preceding the day on which he becomes liable to pay tax as a normal taxpayer.
  2. When an exempt goods or service becomes a taxable supply then the applicant can claim ITC on the input in stock, capital goods, semi-finished or finished goods used for such supply.

*ITC on Capital goods has to be reduced by 5% per quarter or a part thereof from the date of invoice or other document specifying when capital goods were received by the taxable person.

For example:

Ajay was registered in the composition scheme and made the switch to being a normal taxpayer.He was liable to pay tax as a normal taxpayer from 20 September 2017. Ajay can claim ITC on inputs up to 19 September 2017.

Registered person under above circumstances has to file form GST ITC-01on the common portal within 15 days of becoming eligible to claim ITC. Details provided in form GST ITC-01 have to be duly certified by a chartered accountant or cost accountant if the aggregate ITC of CGST, SGST and IGST exceeds Rs 2 lakh.

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