Section 18: Availability Of ITC Under Special Circumstances

What does Section 18 say?

Section 18 of the CGST ACT 2017 talks about the Input Tax Credit availability under special circumstances such as in case of exempt supply, credit of capital goods, credit period availability etc.

Input Tax Credit is the very basic backbone of GST mechanism and how it has to be made available to the Registered GST Dealers is a matter of concern for which appropriate explanation has been provided in the GST Law.

The Reference from the GST Law has been described as below:

(1) Subject to such conditions and restrictions as may be prescribed -

(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;

(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;

(c) where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semifinished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomesliable to pay tax under section 9: Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed;

(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable: Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.

(2) A registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.

(3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisionsfortransfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.

(4) Where any registered person who has availed of input tax credit opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption: Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

(5) The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed.

(6) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:

Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.

Now let us understand the above Section in a Question and Answer format.

FAQs ON ITC UNDER SPECIAL CIRCUMSTANCES

Q1 Can Input Tax Credit be taken immediately preceding date of gstregistration?

Ans Yes Input Tax Credit lying in stock can be taken immediately preceding the date liable to take registration.

Q2 Can Input Tax Credit be taken under Voluntary Registration?

Ans Yes a date immediately preceding the date of registration granted.

Q3 Can Input Tax Credit can be taken where a taxpayer migrate from Composition to Normal Tax Scheme?

Ans Yes a date immediately preceding the date normal tax payer becomes.

Q4 What is time limit to claim the ITC on Goods and Services?

Ans Within One year from date of issue of invoice.

Q5 Can Input Tax Credit be taken where an exempt supply becomes Taxable Supply?

Ans Yes the ITC till date it becomes taxable supply can be claimed.

Q6 How Input Tax Credit in case of Capital Goods can be taken?

Ans Input Tax Credit in case of Capital Goods shall be taken at actual value as reduced by some percentage basis points.

Q7 How Input Tax Credit be available to the Transferee in case of Business being amalgamated, transferred, leased or merged?

Ans The Transferor shall transfer the Unutilised Input Tax Credit lying in the electronic account to the transferee through GST-ITC02 .

Q8 What to do with Input Tax Credit left unutilised where any goods or services or both becomes exempt or a taxpayer becomes composite dealer?

Ans. The entire Input Tax Credit lying unutilised in the electronic credit ledger shall be reversed by way of debiting the electronic credit ledger or deposit in cash through electronic cash ledger and the ITC left afterwards any shall be lapsed.

Q9 What is the Treatment of Input Tax Credit in case of Capital Goods?

Ans The Input Tax Credit in case of Capital Goods shall be reduced by such percentage basis point as prescribed under the GST ACT 2017 and shall be made available to the GST registered dealer.

Q10 Is there any contradiction with respect to the availability of ITC u/s 16 and u/s 18?

Ans Yes as per section 16 ITC left any shall be taken in the GSTR-3B to be filed for the month of September of Succeeding year or annual return date whichever is earlier but as per Section 18 ITC left with respect to any invoice is entitled to be taken within One year from date of invoice, hence some differences in both the sections prevails.

So in the above article we have today discussed about the Section 18 availability of input tax credit under special circumstances through GST ACT reference and some FAQ’S. A brief gist on applicability of Section 18 has been described as below:

The Special Circumstances under ITC is available has been described as below:

1. Registration where turnover exceed prescribed registration limit.
2. Voluntary GST Registration.
3. Change in GST Constitution from Composition Taxpayer to Regular Tax payer.
4. Change in GST Constitution from Regular Tax Payer to Composition or Exempt Taxpayer.
5. Change in GST Constitution from Exempt Tax Payer to Regula Tax Payer.
6. Transfer, Amalgamation, Merger, Sale of Business etc.
7. Sale of Capital Goods.
8. Reversal of Input Tax Credit.

We have above mentioned the conditions or special circumstances under which  GST Input Tax Credit is available to the GST Taxpayers.

Disclaimer: The above said article is author view point only,please refer respective sections,rules framed under GST Law.