GST Input Credit Tutorial 04 – Purchases and a Hint to Negative List

GST Input Credit Tutorial 04 – Purchases and a Hint to Negative List Understanding the Input, Input services and the Capital Goods on which Input tax credit is not available (Negative List under Input Tax Credit) along with the reason of covering the same under negative list.

this lecture is an introduction to the

negative list negative list is basically

a list of purchases in word supplies on

which input tax credit cannot be claimed

so in order to understand negative lists

the first thing that we’ll need to know

what exactly is included in purchases

under the app purchases are broadly

categorized into three categories inputs

capital goods and input services capital

goods is nothing but the goods the value

of which can be capitalized in the books

of accounts and that such goods are used

in the course of furtherance of business

again the concept of value addition it

is used to improve business directly

contributing to output well the
definition of input under the law is

very simple all goods purchased which

are not capital goods but again they

should be used for the furtherance of

business input services as you can guess

are nothing but services purchased for

use in business for furtherance of

business so these are the three types of

purchases inputs input services and

capital goods and on all three purchases

generally input tax credit is allowed so

this is an important point input tax

credit is in general situations

available on purchase of inputs capital

goods and input services so what are

those rare occasions where input tax

credit is not allowed on these purchases

remember our discussion on

disincentivizing overheads where the

government would want to incentivize

value addition it will try to balance

its financial resources by

disincentivizing overheads how by

putting the purchases which fall into

the category of overheads in something

called as the negative list now this is

not really stated anywhere in the law

this is a concept that we’ve built

by studying the input tax credit

provisions this concept would make it

very easy to understand the negative

list and it actually makes sense as well

and based on the concept of value

addition and overheads we have three

types of purchases the exempt purchases

ITC eligible purchases and the negative

list purchases on which IDC is not

available so in this section of the

module the first section we have seen

that the input tax credit is credit for

input tax on supplies and reverse charge

so input tax and reverse charge can be

claimed as credit to offset your output

tax liability that supplies include

inputs capital goods and input services

and negative list is the list of

supplies on which input tax credit is

not available