Calaculation of ineligible ITC
This query is : Resolved
31 January 2023
a co.op hsg society raises quarterly bills which contains
1. maintenanace charges taxable
2. property tax exempt
3. water charges exempt
4. electricity charges exempt
The society purchases include
security bills taxable
house keeping charges taxable
accounting charges taxable
printing and stationerytaxable
how to calculate ineligible ITC?
is the input credit on security charges and house keeping charges to be taken on wholly taxable services
and the balance to be taken as common credit and calculated according to sec 17(2)
1. maintenanace charges taxable
2. property tax exempt
3. water charges exempt
4. electricity charges exempt
The society purchases include
security bills taxable
house keeping charges taxable
accounting charges taxable
printing and stationerytaxable
how to calculate ineligible ITC?
is the input credit on security charges and house keeping charges to be taken on wholly taxable services
and the balance to be taken as common credit and calculated according to sec 17(2)
12 July 2024
In a Cooperative Housing Society (CHS) scenario where there are both taxable and exempt supplies, and input tax credit (ITC) needs to be apportioned correctly, the following steps can be followed to calculate the ineligible ITC:
1. **Identify Taxable and Exempt Supplies:**
- Taxable supplies: Maintenance charges, security bills, housekeeping charges, accounting charges, printing and stationery.
- Exempt supplies: Property tax, water charges, electricity charges.
2. **Apportionment of ITC:**
- **Wholly Attributable to Taxable Supplies:** Security bills and housekeeping charges are wholly attributable to taxable supplies. Therefore, ITC on these can be fully claimed as credit.
- **Common Credit (Partially Attributable):** For other expenses that relate to both taxable and exempt supplies (like maintenance charges, accounting charges, printing and stationery), the ITC needs to be apportioned based on the proportion of taxable supplies to total supplies (taxable + exempt).
3. **Calculation of Ineligible ITC:**
- Calculate the total ITC available for the period.
- Determine the amount of ITC attributable to exempt supplies (property tax, water charges, electricity charges).
- The ITC attributable to exempt supplies is considered ineligible ITC, as per Section 17(2) of the CGST Act, 2017.
4. **Sec 17(2) Apportionment Calculation:**
- Use a reasonable method to apportion ITC between taxable and exempt supplies. This is typically done based on turnover of taxable supplies to total turnover, or any other method as may be justifiable and rational.
- The ineligible ITC would be the proportionate amount of ITC related to exempt supplies.
5. **Reporting and Documentation:**
- Maintain proper records and documentation to support the apportionment of ITC.
- Ensure compliance with GST laws and regulations regarding the treatment of ITC for taxable and exempt supplies.
6. **Review and Compliance:**
- Periodically review the methodology used for apportionment to ensure it remains consistent and appropriate.
- Ensure that the methodology and calculations are in line with GST laws and guidelines issued by the GST authorities.
By following these steps, a Cooperative Housing Society can effectively calculate the ineligible ITC on expenses related to both taxable and exempt supplies, ensuring compliance with GST regulations while optimizing the use of available ITC.
1. **Identify Taxable and Exempt Supplies:**
- Taxable supplies: Maintenance charges, security bills, housekeeping charges, accounting charges, printing and stationery.
- Exempt supplies: Property tax, water charges, electricity charges.
2. **Apportionment of ITC:**
- **Wholly Attributable to Taxable Supplies:** Security bills and housekeeping charges are wholly attributable to taxable supplies. Therefore, ITC on these can be fully claimed as credit.
- **Common Credit (Partially Attributable):** For other expenses that relate to both taxable and exempt supplies (like maintenance charges, accounting charges, printing and stationery), the ITC needs to be apportioned based on the proportion of taxable supplies to total supplies (taxable + exempt).
3. **Calculation of Ineligible ITC:**
- Calculate the total ITC available for the period.
- Determine the amount of ITC attributable to exempt supplies (property tax, water charges, electricity charges).
- The ITC attributable to exempt supplies is considered ineligible ITC, as per Section 17(2) of the CGST Act, 2017.
4. **Sec 17(2) Apportionment Calculation:**
- Use a reasonable method to apportion ITC between taxable and exempt supplies. This is typically done based on turnover of taxable supplies to total turnover, or any other method as may be justifiable and rational.
- The ineligible ITC would be the proportionate amount of ITC related to exempt supplies.
5. **Reporting and Documentation:**
- Maintain proper records and documentation to support the apportionment of ITC.
- Ensure compliance with GST laws and regulations regarding the treatment of ITC for taxable and exempt supplies.
6. **Review and Compliance:**
- Periodically review the methodology used for apportionment to ensure it remains consistent and appropriate.
- Ensure that the methodology and calculations are in line with GST laws and guidelines issued by the GST authorities.
By following these steps, a Cooperative Housing Society can effectively calculate the ineligible ITC on expenses related to both taxable and exempt supplies, ensuring compliance with GST regulations while optimizing the use of available ITC.
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