Availing Input Tax Credit

ITC / Input 1054 views 15 replies

Sajith B

Article

41 Points Joined February 2019

Am having a doubt regarding claiming of ITC on expenses which was spent from Grant money received. The company received grant from the State and the Central govt for research and development. The company is in the practice of availing ITC on the expenses which was spent from the grant account. During the audit of 2018-19 the auditor objected that the availing of ITC on the expenses spent from grant account is wrong and the full ITC has to reversed along with interest. The auditor's comment was, the expenses are debited to grant account and not to profit and loss account, hence we cannot establish any correlation while doing the GST audit on the total ITC claimed.

1. Is there any treatment for grant received under GST?

2. Is the company eligible to avail ITC on the expenses spent from grant money?

Thanks and Regards

Sajith B

Replies (15)

RAJA P M

"Do the Right Thing...!!!"

128116 Points Joined January 2015

Are You billing to govt for the amount received...??

Sajith B

Article

41 Points Joined February 2019

No we are not.

Varsha Agarwal

79 Points Joined July 2019

When you provide free or subsidised goods and services, you would usually receive non-business receipts, such as grants or donations to fund your operations. In such a case, you are treated as carrying on both business and non-business activities.

You are not allowed to claim the GST (input tax) incurred on your taxable purchases in full because part of the purchases is for non-business activities. Only GST incurred for business activities is claimable.

RAJA P M

"Do the Right Thing...!!!"

128116 Points Joined January 2015

( No we are not. )

If You are not deal it's Your supply then GST ITC not available for You for the same activities...

Sajith B

Article

41 Points Joined February 2019

Hi Varsha,

How it is possible to differentiate grant received as non business receipt? It is a business receipt only right. It is not a revenue receipt. We are receiving the grant in aid for conducting specific project and the project is related to our business activity only. While receiving the grant we have to follow some terms and conditions in usage of funds and the result coming from the project. So whatever the project we are carrying out from the grant money is only the business activity.

Varsha Agarwal

79 Points Joined July 2019

You are not eligible to take input on grant expenses

Sajith B

Article

41 Points Joined February 2019

Hi Varsha

Thank you for your reply. Can please provide me the section or rule which states about ineligibly of ITC credit on inputs of grant?

Thank you in advance

Sajith B

Article

41 Points Joined February 2019

Hi Raja

Govt is giving the money to support the activities of the company and we cannot treat them as a supply. It is purely a transaction in money. Money which is received without any consideration. Am unable to find in the act or rule that we are ineligible to take credit on inputs which are spent from the money received without consideration. Can please provide me the section or rule?

Thank you in advance

Sajith B

Varsha Agarwal

79 Points Joined July 2019

I think there is no particular section for grant in gst but you have to understand the As 12 for understanding the concept of grant.

Sajith B

Article

41 Points Joined February 2019

Hi Varsha

I know the concept of grant as per AS12. My concern is why am not eligible to take itc credit on hrant expense under gst? Am looking for specific reason for ineligibility.

Thanks

Sajith B

RAJA P M

"Do the Right Thing...!!!"

128116 Points Joined January 2015

Originally posted by : Sajith B
	Hi Raja Govt is giving the money to support the activities of the company and we cannot treat them as a supply. It is purely a transaction in money. Money which is received without any consideration. Am unable to find in the act or rule that we are ineligible to take credit on inputs which are spent from the money received without consideration. Can please provide me the section or rule? Thank you in advance Sajith B

Dear Sajith.,

- As per GST and it's list of Exempted Supplies the Grant Received from Govt is Exempted supply.

- As per Exempted Supply GST ITC not available....

- As Chapter 99

Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by Central Government, State Government, Union territory or local authority against consideration received from Central Government, State Government, Union territory or local authority, in the form of grants.

- As per ICAI's guideline of E-Publication on Exempted Supplies under GST -> see the details in

Page no 96, Sl. No. 9C...

Sajith B

Article

41 Points Joined February 2019

Hi Raja

Thanks for your reply with proofs. I have another doubt. Does the company is required to show the grant received as exempted supply in the gstr 1?

Thanks

Sajith B

RAJA P M

"Do the Right Thing...!!!"

128116 Points Joined January 2015

Originally posted by : Sajith B
	Hi Raja Thanks for your reply with proofs. I have another doubt. Does the company is required to show the grant received as exempted supply in the gstr 1? Thanks Sajith B