What are GST Input Tax Credit Rules?

What are GST Input Tax Credit Rules?

We will be talking about input credit rules today. And, why not? Many people have queries regarding the input tax. This is one of the important features of GST. You will get this facility, only if you register for GST.

What are GST Input Tax Credit Rules?

What Is Input Tax Credit?

It basically means that at the time of paying tax on the output you can subtract the portion of tax you paid on inputs. You only need to pay the balance.

Let us explain the entire scenario, with the help of an example.

You bought some goods from a registered dealer and you paid some taxes on it, right? When you sell the goods, you charge tax. You adjust the taxes paid on purchase with the tax on sales and pay the balance to the government. This is what we call input tax credit.

The claim of Input Tax Credit Rules

A person registered under GST can claim it. There are certain conditions that you need to fulfill to claim it.

● You should have the invoice with you.

● You should have already received the goods.

● You must have completed filing all returns.

● You have already paid the applicable tax to the government.

● If you are receiving the goods in installments, you can claim the input tax credit only on receiving the final lot.

● You cannot claim the credit if you have claimed depreciation on the tax part of the capital goods.

● Finally, you cannot claim ITC, if you have opted for the composition scheme.

You must be thinking, that’s a lot of conditions. However, it is absolutely necessary if you want to enjoy the liberties offered by the new regime. So, till now we gathered quite a bit of knowledge on one important facet of GST. New rules and amendments are being enforced every day, owing to the changing circumstances of the economy.

GST Amendment Act of 2018

The provisions under the GST Amendment Act 2018 came into force from 1st February 2019. We will discuss a few of the most important amendments today.

What are GST Input Tax Credit Rules?

● There are changes in definition.

⮚ CBEC or Central Board of Excise and Customs has been replaced with CBIC or Central Board of Indirect Taxes and Customs.

⮚ There has been a change in the definition of business. The activities of a race club including activities of a totalisator or license to bookmaker in the club have been included.

⮚ The definition of a business vertical has been removed.

⮚ ‘Services’ have come to include any kind of facilitation or arrangement of transactions in securities.

● A reverse charge for supplies from unregistered persons is restricted now. Now the goods or services which will be notified by the government will be taxable.

● Composition Scheme:

⮚ The limit has been increased to Rs. 1.5 crores from Rs 1 crore.

⮚ The rate of tax on services by composition dealers will be 0.5% SGST and 0.5% CGST.

⮚ Now, composition dealers will be able to supply services of a value, which will not exceed 10% of the turnover in the state or union territory in the next financial year or 5 Lakhs, whichever is higher.

● Inadmissible Input Tax Credit (ITC) under GST Section 17(5) of CGST Act 2017

⮚ Now ITC has been allowed for motor vehicles having a seating capacity of more than thirteen.

⮚ Motor vehicles with a seating capacity of less than thirteen can also avail the ITC if they are used for specific outward taxable supplies.

⮚ The same goes for leased or rental vehicles.

⮚ Due to the amendments, a registered person can take credit on buses and other motor vehicles used to transport employees.

● Section 24(x) of the CGST Act – Compulsory registration of e-commerce businesses

⮚ Only the e-commerce businesses that are required to comply with TCS i.e. Tax collected at source, are compulsorily required to take registration.

● Revision of returns

          A new provision has been introduced to allow amendment of the section that relates to inward supplies in the returns filed.

● The period for filing of return claim has been revised under the GST Amendment Act 2018. This has been done to facilitate the smooth flow of working capital.

● Schedule III of CGST Act

          Activities and transactions that are not considered as supply under GST. The hold of Schedule has been expanded to include high seas sales, the supply of goods to any person in customs bonded warehouse before clearance for final consumption and the supply of goods from a place in non-taxable territory to another place in the non-taxable territory without such goods entering into India.

● Place of supply of services in case of transportation of goods to a place outside India

The provision has been introduced to clarify the place of supply, if it is a foreign location, even if the supplier and receiver are in India. It complies with the old service tax provisions.

    With so many new amendments, businesses in India stand to make progress. Now you can freely conduct business, without worrying about varying compliances. Only one rule book exists now. The government hopes to take the country to new heights globally with these amendments.

Last updated:12/28/2019 6:41:51 AM
Evana Adams

Evana Adams

I enjoy writing and I write quality guest posts on topics of my interest and passion. My special interests are in fashion, Jewelry and following the latest trends in these areas.


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