Manner & Utilization of GST Credit & GST Calculator

Updated: Dec 17, 2018

Input Tax Credit under GST

Every registered person shall be entitled to ITC charged on inward supply of goods or services subject to the provisions of section 49. Under GST Regime, the tax has been divided into 3 main parts –

1. Integrated Goods and Services Tax (IGST), 

2. Central Goods and Services Tax (CGST) and

3. State Goods and Services Tax (SGST). 

Manner and Utilization of ITC

Input credit should be availed in the same order mentioned below.

In terms of section 49(5),

- ITC of IGST can be used to pay IGST, CGST and SGST/UTGST in that order.

- ITC of CGST can be used to pay CGST and IGST in that order.

- ITC of SGST/UTGST can be used to pay SGST/UTGST and IGST in that order.

- ITC of CGST cannot be utilized towards payment of SGST/UTGST and vice versa.


​Hence cross-utilization of credit is available only between CGST and IGST and SGST/UTGST and IGST. The main restriction is that the CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST.

Conditions for claiming input tax credit

1. He is in possession of an invoice or debit note

2. He has received the goods and /or services

3. The tax charged in respect of such supply has been actually paid to government either in cash or through utilization of input credit

4. He has furnished the return under section 39

Time limit to claim ITC

An assesse shall be entitled to take ITC relating to any invoice earlier of–

- Due date for furnishing return for September month in next FY, or

- Furnishing annual return for that FY, whichever is earlier.

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Illustration:

Smart Show Ltd. is engaged in the manufacture of heavy machinery. It procured the following items during the month of July and paid the GST as mentioned below.

(i) Electrical transformers to be used in the manufacturing process 5,40,000/-

(ii) Lorry used for the transport of raw material 1,00,000/-

(iii) Raw material Rs.2,00,000/-

(iv) Food items for consumption of employees working in the factory Rs.25,000/-

Determine the amount of ITC available with Smart Show Ltd., for the month of July.

Answer:

Computation of ITC available with Smart Show Ltd for the month of July

ITEMS                                                                                    ITC  

1. Electrical transformers [Being goods used in the course or furtherance          5,40,000/-

of business, ITC thereon is available in terms of section 16(1)]

2. Trucks used for the transport of raw material [Though ITC on motor              1,00,000/-                 

vehicles has been specifically disallowed under section 17(5)(a), ITC

on motor vehicles used for transportation of goods is allowed under       

section 17(5)(a)(ii)]

3. Raw material                                                                                                 2,00,000/-

[Being goods used in the course or furtherance of business, ITC

thereon is available in terms of section 16(1)]

4. Confectionery items for consumption of employees working in the                        Nil  

factory [ITC on food or beverages is specifically disallowed unless the

same is used for making outward taxable supply of the same category

Section 17(5)(b)(i)]

            Total Input Tax Credit                                                                           8,40,000

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