GST Input Credit Tutorial 14 - Special Circumstances

GST Input Credit Tutorial 14 – Special Circumstances Special circumstances under Input tax credit such as ITC for ineligible claim now eligible, Eligible ITC transferred from one taxpayer to other, ITC claimed earlier now ineligible etc .

now that we know about the negative list

input tax calculation and the conditions

attached let’s move on with the special

circumstances relating to transfer of

input tax credit there are three types

of transfers where the government would

transfer input tax credit previously not

granted to the taxpayer

so that’s one transfer from government

to taxpayer second one business could

transfer into tax credit to another

business and the third is whether

taxpayer is paying back credit earlier

claimed with the government he’s

forfeiting credit claimed we can

actually assign popular films to each of

these situations the first one where the

government is giving credit which it did

not allow earlier you can call it as

something like retrospective relief the

second one is to do with mergers

acquisitions all of those corporate

actions and the third well the taxpayer

has to forfeit Fred it claim so it’s our

normal retrospective accession what are

the circumstances which give rise to

transfer in these three cases in the

first one where the government would

have to give credit for earlier

ineligible

input tax credit to the taxpayer there

are two reasons one relating to

registration and second where a

previously exempt supply is now taxable

second situation is a very simple and

logical one a business will transfer all

its liabilities and assets to another

business when there’s a change in

Constitution there’s a sale merger the

merger mile donation lease or transfer

of the business third situation where

the taxpayer would have to forfeit

credit earlier claim to the government

it is opposite of the first situation

where an earlier acts abilify has now

become exempt or the taxpayer has chosen

for the composition scheme or he’s

disposed of capital

goods will check up each of the

situations one by one the longest of all

of these is the one related with

registration where the government will

have to give input tax credit to the

taxpayer the taxpayer would register

himself under GST in three situations

one where the law forces him to where

he’s liable to register this force that

is the liability to register depends on

a threshold we’ll get to that in a bit

second he’ll voluntarily go and register

he is below the threshold for

registration but he’ll still go and

to claim input tax credit that’s more

beneficial for him than the

complications of registered taxpayer the

third situation is where he’s no longer

a composite dealer he becomes a normal

dealer and hence he has to register the

first two situations involve a threshold

what is this threshold it is based on

aggregate turnover we’ve already seen

what aggregate turnover is in the second

module of law has separated aggregate

turnover limit for North East and the

rest of India where the aggregate

turnover for the rest of India except

the North East is lakhs or more the

taxpayer is liable for register while in

Northeast the limit is lakhs so if a

tax payers aggregate turnover is

lakhs or more or lakhs or more

respectively for rest of India and

north-east india he is liable and get

registered under GST we know that being

registered is one of the conditions for

claiming input tax credit non registered

dealers will not get input X credit

claim so once a tax payer is registered

it is the duty of the government to give

him credit for his input so there’s a

special circumstance that arises here he

can claim input breaded on raw materials

semi finished goods and finished boots

that he holds in stock but there’s a

condition on I’m

this condition exists for all three

situations under registration so we will

check it out together after we’ve looked

in blue the third situation where the

dealer is no longer composite Villa he’s

a normal dealer and he will have to

composition scheme is at the composite

winner will have aggregate turnover less

than large or he’s not engaged in

certain sets of activities then he can

broken one of these conditions and he is

no longer composite dealer in such a

situation this dealer will have to

input tax credit on raw materials semi

finished goods and finished goods like

in the case of other registrations but

there is one more thing he can claim

input credit on capital goods again

there is a condition for time line let’s

check out what this condition is for a

person who’s liable to register who’s

above the threshold limit for

registration he is required to apply for

registration within days from the

date he becomes liable to register that

is within days from when he crosses

lakhs or lakhs of Olivia turn over

if he has applied within days then he

can claim input expiry of stock that is

lying with him from the day immediately

before he became liable to register so

suppose he became liable to register on

st of October he’s applied on th of

October then he can claim input except

edit for all of his stock from th

September onwards the second situation

voluntary registered he can claim input

a spirit from the day immediately before

the date of registration simple the

stock just before the date of

registration he is eligible to claim

input tax credit for the composite

breather

this timeline is from the date he sees

to be a composite dealer so those were

the circumstances relating your

registration the second is where earlier

example outward supply have now become

taxable so the government would have to

give credit for inputs used for taxable

supplies such a taxpayer would be

eligible to claim input tax credit on

raw material semi finished boots and

finished goods which are relatable to

such exam supplies and capital goods

which is exclusively used for such

exempt goods as a condition input tax

credit and supplies held in stock right

before they became taxable only on those

supplies he can claim credit he cannot

claim credit on invoices which are more

than a year old even if those goods are

still in stock he cannot absolutely

claim any credit on invoices more than

one year old and the third is that the

credit on capital goods would be reduced

by a percentage point which the

government would prescribe from time to

time coming to the next circumstance of

transfer from one business to other it

is only when there’s a sale mercer

d-major amalgamation change and

constitution of a business would birth

disk transfer there is one condition

though that the contract of change and

constitution contract of sale should

have a specific provision for transfer

of liability that arrangement has to be

made only then in the tax credit balance

in the books of the transferor

can be transferred to the new business

moving on to the next situation where

the taxpayer will have a four feet tax

he’ll have to pay back he’ll input a

credit claim to the government it would

just be opposite for what we’ve already

seen in the first situation there

previously taxable goods have now become

exempt or that the taxpayer has opted

for the composition scheme then he’ll

have to pay back to the government in

purpose credit claimed for raw material

semi finished goods

finished goods

related to such exam supplies or just in

the stock for a composite dealer and

capital goods which are exclusively used

for such exempt boots three points that

you’ll have to keep in mind for this

situation input as credit on supplies

which are held in stop right before

these Goods became exempt or right

before the dealer converted the

composition scheme the input as credit

on those supplies will have to be paid

back for the government the credit on

capital goods as we’ve seen before would

be reduced by a percentage point mr.

government would prescribe from time to

time after the taxpayer has paid back

this amount of the government the

balance of input tax credit in his

electronic credit ledger would laughs he

will no longer be able to claim it

against our products liability the last

situation is related to capital goods

where the dealer has disposed of capital

goods now the logic is somewhat in line

with the principles of negative lists

that we’ve discussed if these capital

which are disposed of remember the r.i.p

Goods disposed of which that’s the

category we are talking about they’ll no

longer be able to contribute a value

addition and input as credit will have

to be paid back there’s a formula which

has to be used only so much amount will

have to be paid back the higher of input

tax credit claimed – a specified

percentage point this point again will

be prescribed by the government or the

tax on the transaction value value

received on the sale or disposal of a

butch higher of these two amounts would

have to be paid back to the government

there’s an exception if you’re disposing

of refractory bricks moles and ice jigs

and fixtures supplied as crap then input

expression that you’ll have to pay back

is just the transaction value you need

not check the higher of the two

components is payback the transaction

value and so these were the five

special circumstances under which

transfer of input tax credit from

taxpayer to government vice-a-versa

from one taxpayer to another taxpayer

would offer registration exempt now

taxable change and constitution taxable

now exempt or composition scheme and

disposal of capital goods so in this

section we’ve understood the end

conditions for receiving input as credit

and we’ve also seen the files special

circumstances for transfer of input Tax

Credit

GST Input Credit Tutorial 14 – Special Circumstances

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