Booster part 2 (1)

Chapter 7

Value of Supply

Table of Content

Section Index
Sec 15
Description
Value of Taxable Supply

Rules Description (CGST Rules 2017) Excellence is not
27 Value of supply of goods or services where the a Skill
consideration is not wholly in money It is an
28 Value of Supply of Goods or services or both between Attitude
29 distinct or related persons, other than through an agent
30 Value of supply of goods made or received through an agent
31 Value of supply of goods or services or both based on cost
32 Residual method for determination of value of supply of goods
33 or services or both
34 Determination of value in respect of certain supplies
Value of supply of services in case of pure agent
35 Rate of exchange of currency, other than Indian rupees,
for determination of value
Value of supply inclusive of integrated tax, central tax,
State tax, Union territory tax

GST

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

33

Section 15 - Valuation

Sec 15(1) Sec 15(2) Sec 15(3)

Value of = Transation value Inclusion to Transaction Value Deduction
Taxable of discount
Supply Price actually ab c de

paid or payable Duties & Taxes All 3rd party payment Incidental expenses: Interest, late Subsidy Any discount Any discount
for Supply taxes levied under Any payment Any incidental fee penalty for Subsidy given before given after supply
any law incurred by the expenses charged by delay directly or at the time of
Conditions: for time being in recipient for supplier & any amount payment of linked to price Time of Supply
1) Not related party force other than which supplier is charged for anything consideration by person
2) Price is sole consideration GST Acts if liable to pay done by the supplier other than Deductible
charged separately at the time of supply or govt. from value
before delivery Agreed at the Not Agreed

Time or before

supply Deduction

not allowed

Deduction allowed

Tobacco & Tobacco Products Examples of additional i) linked to the invoice
recoveries by supplier
store ii) ITC reversed by recipient
Ü Packing, labeling, designing etc
Invoice Analysis : Subsidy
Ü Excise duty, Customs duty or
Basic Price other taxes except GST Given by Govt.
Ex. Duty@30% Not to be added
Total Ü Royalty, warranty charges, etc. to the value
GST@28% of supply
ÜInsurance charges if goods are
seller buyer insured by the seller.

ÜDharmada collected by the Given by others
dealer
Example : Isha Time Gallery has been appointed as an authorized center Subsidy Not linked
of Sony electronics, On sales of worth ` 20,00,000 electronic items. Sony ÜWeightment charges. linked to the price
electronics is liable to pay commission @ 10 % on such sale i.e. ` 2,00,000 to the price
but such selling commission to be paid by Sony electronics has been paid ÜAll expenses before the delivery of supply it will not
by Isha Time Gallery for the month of August. In this case such expense (loading, weighing, coolie) be added to
shall be included in transaction value. it would be the value
ÜFreight shown separately in added to of supply
invoice value of
supply
ÜSalesman commission
GST
ÜRental charges for durable and
returnable packing

Ü Erection installation charges

Ü Pre Delivery Inspection Charges

REVISION V’Smart Academy www.vsmar tacademy.com CA VISHAL BHATTAD 09850850800

34

Sec 15(4) Sec 15(5)

If value of supply cannot be determind u/s 15(1) i.e Notwithstanding anything contained in sec 15(1)/15(4) Value of supply notified by the govt.shall be determined
Ü Supply without price Ü Related party transaction as per Rules
Ü Supply without consideration or any other considerations then apply
Amendment Rule 31 A : Value of Supply in case of lottery, betting Gambling & Horse racing
CGST Rules 2017

Lottery run by Value Lottery run by Value

Rule 27 Rule 28 Rule 29 (a) The value of Value shall be deemed to be (b) The value of Value shall be deemed to be

When consideration is not Supply between distinct or related person Supply between supply of face value of ticket supply of face value of ticket
wholly in money (a) Open Market Value (OMV) principle & agent
(a) Open market value (OMV) (b) If (a) is not available lottery run by 100/112 or lottery 100/128 or
(a) Open Market Value of the price as notified in the Official
(b) If (a) is not available value = value of like kind & quality (OMV ) State Govt. Gazette by the organising State, authorised by of the price as notified in the Official
value = consideration in money + (c) If (a) & (b) not determinable then apply
OR State Govt. Gazette by the organising State,
FMV of consideration not in money Rule 30 or 31 in that order 90% of price of like kind
Proviso 1: If further supply is as such by & quality by the whichever is higher. whichever is higher.
(c) If (a) & (b) not determinable recipient at option of supplier recipient.
Value = value of like kind & quality Value = 90% of price charged for like kind & (b) Value of betting, gambling and horse racing = Face Value of Bet or Amount paid to totalisator
Where such goods are
(d) If (a) (b) or (c) not determinable quality by recipient. intended for further supply. (c) “Organising State” has the same meaning as assigned to it in clause (f) of sub-rule (1) of rule 2 of the Lotteries (Regulation) Rules, 2010.
then apply Rule 30 or 31 in that Proviso 2 : If recipient is eligible Full ITC then
order OMV = Value declared in invoice for supply of (b) If (a) is not available Valuation in special cases [Rule 32] Note :
goods or services. then Rule 30 or 31 in order. 32(2) :Purchase or sale of foreign currency FC= Foreign currency
EV = Exchange Value

Option 1 Option 2
(a) Exchange value up to `
FC to ` FC to FC 1,00,000.
Value = 1% of gross amount
Rule 30 & 31 are applicable in order in following cases RBI Ref. rate is availabe RBI Ref. not availabe convert both the exchange value but min ` 250
1) If situation covered in rule 27,28,29 but Valuation can not be done by applying the principles Stated in rules currencies in
2) If situation not covered in a fore said rules. –Value = Dealers RBI Value =1% of Indian ` by (b) Exchange value more than 1
gross amount Lac but below 10Lac
buying or base of currency applying RBI rate Value = 1000+0.5% of (E.V. -
exchanged in ` Value = 1% of 1,00,000)
selling rate rate lower of above
amount (c) Exchange Value above 10 L
Rule 30: Value of supply Rule 31: Residual method Value = 5500+0.1% of (E.V. -
10,00,000) but max 60,000
based on Cost
Cost of production or Best judgement by using 32 (3) : Value of the supply of Services in relation to booking of tickets for travel by air
reasonable means (a) Domestic Booking - Value = 5% of basic fare
Value = 110% of Cost of acquisition (b) International Booking - Value = 10% of basic fare
Cost of provision of – Consistent with the principles & Note: Basic fare means airfare on which commission is payable to air travel agent. i.e. It doesn’t includes other
service general provision of Sec 15 charges & taxes.

– Provision of this chapter (i.e. earlier rules) 32 (4) : Life insurance business

Note: In case of supply of services supplier may option for rule 31 instead of rule 30

Rule 33 : Deduction of expenses incurred as a pure agent Definition of pure agent : Means a person - Saving policy Single Annual Policy Risk Policy
This rule is applicable for all supply of services not with (a) entering into contractual agreement with
standing to anything contained in the provision on this chapter Value =10% of single value shall be determined as per
Value shall exclude the expenditure & cost incurred by the the recipient to incurred the expenditure premium charged Sec15(1) i.e. gross premium charged
supplier as a pure agent subject to following conditions. as pure agent
1) Supplier act as pure agent of the recipient while making (b) Neither holding any title on supplies Investment or saving
procured as a pure agent intimated to policy holder
Investment not intimated to policy holder -
payment to 3rd party (c) Doesn’t use such supplies for his own Value = gross Premium (a) 1st year value = 25% of premium charged
(b) 2nd year value = 12.5% of premium charged
2) Amount separately shown in invoice interest

3) Supplies of goods / services procured by the supplier as a pure (d) Received only the actual amount incurred -Investment

agent are in addition to services he supplies on his own A/c. to procure supplies under pure agent. Note : If this option is exercised it can’t withdrawn in the same financial year GST

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

35

32 (5) : Buying & Selling of 2nd hand goods. 32 (6) : Value of token, Rule - 34 : Rate of exchange of currency, other than Indian rupees, for determination of value.-

voucher, coupon. (1) Supply of Goods : the rate of exchange for determination of value of taxable goods shall be
Value = money value of goods /
If ITC is not taken on If ITC is taken on purchase of services / both redeemable against Ü the applicable rate of exchange as notified by the Board under section 14 of the CustomsAct, 1962
purchase of such goods such goods such coupon, token, voucher, stamp
Ü for the date of time of supply of such goods in terms of section 12 of theAct.
32 (7) : Value of supply of
Value = selling price - Value = Transaction value U/S 15(1) Example : Exchange Rate
purchase price or outward supply of such goods service to distinct person.
In case of notified supply of services CBEC RBI GAAP
by govt. the value of supply made to
–In case of reposed goods from defaulting borrowers. distinct person where ITC is available upto 15th Oct. 1$ = 63.20 1$ = 62.80 1$ = 63.80
shall be Nil
Purchase = Purchase price 5% of each qtr or part there of 15th Oct.& onward 1$ = 63.80 1$ = 63.30 1$ = 64.30

price of defaulting between date of purchase of defaulting TOS provisions here are relevant as based on that the liability for charging GST shall aries

borrower borrower & date of disposal by person Normal Charge (As per Sec 12)

Rule 33 - Value of supply of services in case of pure agent Sr. Date of Date of Last date of Date of Receipt Time of Applicable
No. Removal Invoice Invoice
Notwithstanding anything contained in the provisions of this Chapter, the expenditure or of Payment supply as Exchange
costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded of goods
from the value of supply, if all the following conditions are satisfied, namely,- as per In suppliers Credit in per Rate

Section 3(1) book Bank a/c N/N 66/2017 (CBEC)

1. 20.10.2017 10.10.2017 20.10.2017 28.10.2017 30.10.2017 10.10.2017 63.20

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment 2. 20.10.2017 20.10.2017 20.10.2017 28.10.2017 30.10.2017 20.10.2017 63.80
to the third party on authorisation by such recipient;
3. 20.10.2017 20.10.2017 20.10.2017 10.10.2017 13.10.2017 20.10.2017 63.80

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately (2) Supply of Service : The rate of exchange for determination of value of taxable services shall be
indicated in the invoice issued by the pure agent to the recipient of service; and
Ü the applicable rate of exchange determined as per the generally accepted accounting principles
(iii) the supplies procured by the pure agent from the third party as a pure agent of the
recipient of supply are in addition to the services he supplies on his own account. Ü for the date of time of supply of such services in terms of section 13 of theAct.

Explanation For the purposes of this rule, the Example : CBEC RBI GAAP
Exchange Rate upto 15th Oct. 1$ = 63.20 1$ = 62.80 1$ = 63.80
expression “pure agent” means a person who-
15th Oct.& onward 1$ = 63.80 1$ = 63.30 1$ = 64.30
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent
to incur expenditure or costs in the course of supply of goods or services or both; In case of reverse charge

(b) neither intends to hold nor holds any title to the goods or services or both so procured Sr. Date of Date of 61st day Date of Time of Applicable
or supplied as pure agent of the recipient of supply; No. Supply issue of after Supply Exchange
Payment in Payment as per Rate (GAAP)
(c) does not use for his own interest such goods or services so procured; and of Service Invoice by invoice books of debited sec 13(3)
(d) receives only the actual amount incurred to procure such goods or services in addition supplier recipient in bank a/c

to the amount received for supply he provides on his own account. 1. 22.10.2017 20.10.2017 20.12.2017 23.10.2017 25.10.2017 23.1G0S.2T017 64.30
2. 22.10.2017 15.10.2017 64.30
4. 22.10.2017 10.10.2017 15.12.2017 17.1V0’.S2m01a7rt A18c.a10d.e20m1y7 17R.1EV0I.S2IO0N17 64.30
10.12.2017 23.113.32017
23.11.2017 25.11.2017

Rule 35 : Value of supply inclusive of integrated tax, central tax, State tax,Union territory tax.

Example 1: X contracts with Y, a real estate agent to sell his house and thereupon Y gives an Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax,

advertisement in television. Y billed X including charges for Television advertisement and paid service Union territory tax, the tax amount shall be determined in the following manner, namely,-

tax on the total consideration billed. Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST)

In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent behalf of X ÷ (100+ sum of tax rates, as applicable, in %)

when obtaining the television advertisement even if the cost of television advertisement is mentioned separately Example of Question: M/s BMR pvt ltd purchased goods worth ` 220000 inclusive of GST of 18% of which CGST is 9% and
in the invoice issued by X. Goods SGST is 9%. What will be the amount of tax included in the value of supply?
Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his
services as an estate agent. Ans:- The tax amount paid by BMR pvt ltd shall be computed as per provisions of rule 35 i.e. Tax amount =
220000*18/118 i.e. ` 33560 of which amount of CGST will be ` 16780 & SGST will be ` 16780.
GST

REVISION V’Smart Academy www.vsmar tacademy.com CA VISHAL BHATTAD 09850850800

36

Chapter 8

Input Tax Credit

Important Definitions

Section Table of Content Sec 2(59) Input : Means any goods Sec 2(60) Input Service : Means

Section 16 Description used other than capital goods used or any service used or intended to be used
Section 17 intended to be used by supplier in course by a supplier in the course or furtherance
Section 18 Eligibility & conditions for taking input tax credit of furtherance of business. of business
Section 19 Apportionment of credit & blocked credits
Section 20 Availability of credit in special circumstances Sec 2(19) Capital Goods : Means goods, the value of which is capitalised
Section 21 Taking input tax credit in respect of inputs & capital goods for job work
Manner of distribution of credit by Input Service Distributor in the books of account of the person claiming the input tax credit and which are
Manner of recovery of credit distributed in excess used or intended to be used in the course or furtherance of business

CGST rules pertaining to Input tax credit Sec 2(46) Electronic Credit Ledger: means the electronic credit ledger as

referred in Sec 49(2) i.e. the input tax credit as self assessed in return of registered
person shall be credited to electronic credit ledger in accordance with section 41, to be
maintained in the manner as may be prescribed.

Rule No. Description Sec 2(47) Inward Supply : in relation to a person, shall mean receipt of goods or
36 Documentary requirements and conditions for claiming input tax credit
37 Reversal of input tax credit in case of non-payment of consideration services or both whether by purchase acquisition or any other with or without
38 Claim of credit by a banking company or a financial institution. consideration.

39 Procedure for distribution of input tax credit by Input Service Distributor Sec 16(1) of IGST Act “Zero-rated supply”: means an of the following supplies of
goods or services or both namely-
40 Manner of claiming credit in special circumstances (a) export of goods or services or both; or
(b) Supply of goods or services or both to a Special Economic Zone (SEZ) developer or a Special
41 Transfer of credit on sale, merger, amalgamation, lease or transfer of a business
Economic Zone unit
42 Manner of determination of input tax credit in respect of inputs or input services and Detailed discussion in Chapter IGST Act.
reversal thereof
Sec 2(82) “Output Tax”: “Output tax” in relation to a taxable person,
43 Manner of determination of input tax credit in respect of capital goods and reversal means the tax chargeable under thisAct on
thereof in certain cases
Ü taxable supply
44 Manner of reversal of credit in special circumstances Ü of goods or services or both

45 Conditions and restrictions in respect of inputs and capital goods sent to the job
worker

Ü made by him or by his agent

but excludes tax payable by him on reverse charge basis. GST

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

37

Sec 16 : Eligibility & Conditions & Time limit

Sec. 16(1) : 1) Person should be registered person to take ITC d) Should have furnished the periodical Returns
Eligibility
criteria : 2) Goods or Services are used/intented to be used in the course or Furtherance Status of Jan, 2018 Feb, 2018 Mar, 2018
of business. GSTR-3 Filed Not filed Cannot be filed unless return
Sec. 16(2) : for tax period is filed Sec 39(10)
Conditions for 3) Amount should have Credited to Electronic Ledger of such person. ITC allowed
Availment of ITC ITC not allowed ITC not allowed
a) Tax invoice /Debit note or other Tax Paying documents is
in possession ITC if Goods Where the goods against an invoice are received in lots or instalments, the registered person
are received in shall be entitled to take credit upon receipt of the last lot or instalment
Documents for claiming ITC (Rule 36) Lot (Proviso to
(a) An Invoice issued by the Supplier u/s 31 Sec 16)
(b) An invoice issued by recipient
(c) Revised Invoice Payment for the 1. Default : Failure by Recipient to pay to the supplier the within 180 days from Invoice date.
(d) Debit Note Issued by a Supplier u/s 34 invoice to be
(e) Bill of Entry or documents prescribed under the Customs Act, for 2. Consequence : Amount equal to the ITC availed by the recipient + Interest @ 18% P.A.
made within 180 shall be added to the output tax liability.
assessment of IGST on Imports
(f) An ISD invoice or ISD credit notes or any document issued by an Input days (Proviso to 3. Details to be furnished : Details of defaulted supply, value not paid, ITC availed to be

Service Distributor Sec 16) mentioned in FORM GSTR-2 for the month immediately after the expiry of 180 days from

Invoice date.

b) Should have received the goods or services or both. 4. Regain of Credit : Regain when payment is made (below time limit not applicable for
regaining of ITC
Analysis of above Clause (a) & (b) 5. Non Applicability : This provision not applicable

Situation Invoice Receipt of G/S ITC Eligibility a) Tax payable under RCM b) Deemed supplies without consideration [Sch.I]
A ü ü Yes
B û ü No No ITC if Where the registered person has claimed depreciation on the tax component of
C ü û No depreciation is the cost of capital goods and plant and machinery under the provisions of the
claimed on Tax Income-taxAct, 1961,
Exception : Bill to ship to component of
Capital Goods the input tax credit on the said tax component shall not be allowed.
If goods are supplied on direction of third person then goods are deemed to (Sec 16(3))
be received by third person when supplied by supplier to the recipient

Invoice 1 Third person ‘C’ In the given image, Mr. B is Time limit to No ITC for any invoice or debit note (pertaining to Invoice in F.Y.) for supply of goods
‘B’ eligible of ITC even though avail ITC-Debit or services or both after -
‘A’ Recipient goods are not received as Note (Sec 16(4)) (a) The due date of furnishing of the return for the month of September following the
per the above explanation
Supplier given for built to ship model end of F.Y. to which invoice/ debit note pertains or
(b) The due date of furnishing of the relevant annual return,

whichever is earlier

c) the tax charged in respect of such supply has been
actually paid to the Government

GST Example : Mr Vishal purchased spare parts worth ` 75000 as on 01/8/2017 on which
REVISION CGST @ 9% i.e. ` 6750 & SGST @ 9% i.e. ` 6750 were charged, thus total amount
payable against such purchases is 88500/-. The consignment is received on same
38 date explain the eligibility of ITC of Mr Vishal if supplier is failed to make the payment of
GST to Government within due date.
Solution As pers Sec 16 (2), ITC is available on inward supply only if tax on such supply
has actually been paid to the Govt. In given case, it supplier fails to make payment of
GST to Govt within due date then Mr. Vishal is not eligible for ITC.

V’Smart Academy www.vsmar tacademy.com CA VISHAL BHATTAD 09850850800

Sec - 17(5) Blocked Credit

Cases, where ITC Exceptions, where ITC allowed Cases, where ITC Exceptions, where ITC allowed
not available not available

(a) Motor (A) Motor vehicle & other conveyance used for making taxable supplies of (b)(i) Where a particular category of such inward supplies is used for
Vehicle and (i) such motor vehicle & other conveyance Food and Ü making an outward taxable supply of the same category - [Sub-contracting] or
other (ii) transportation of passengers beverages, Ü as an element of a taxable composite or mixed supply.
Conveyance (iii) imparting training on driving / flying/ navigation such motor vehicle & other Outdoor
conveyance catering, Determine whether in the following cases, ITC shall be available or not and also State reasons for
Beauty it?
(B) Motor vehicle & other conveyance used for transportation of goods Treatment,
Health S.N. Case ITC Reasons
Services, Eligibility
Determine whether in the following cases, ITC shall be available or not and also Cosmetic &
Plastic
State reasons for it? Surgery 1 As in the given case, it is used by

S.N. Case ITC Reasons Yes the registered person for making
1 Eligibility outward supply of same category
Manufacturer As in the given case, motor vehicle is used
Yes for transportation of goods which is in of goods & it falls in the exceptional
course of Business & it falls in the
exceptional clause of the given sec 17(5)(a) Inward Supply of Food& Beverages by Reliance clause of the given sec 17(5)(b)

Fresh who is further supplying Food & Beverages

mmmmmmmmmmmmammmmaammammmmaaaemaemememaaaeeemamammaammmarmaaemamaamrarreeerrremcaeeemmecacameceareeeeccrcmrarmammaammmaraameeamrmcaarmrareeeerereccrcrrreeemcaeceemcmceaaemceacreccececcrcmrcreameammccmaacmmaraaemeamrmmeaarraerererccireccerreerieiiccemccaeiiememicemcaeaceccarcecceececrcmrcearccmicamcmcaamcmmaiirmaeaiemarmeaamrarererericceercceirreirieicceimiccaieiieeimmecacamecceaccreeccecccrrceacrcmeicaccaacmimairaamieearceaarrareeereircecrcceirrreeiieicceiicciaeiieeiceacaeceacrecceccecrcrcrecceicaccciiraaeiearerrerererccirecceirreerieiiciciccieiiiccececcrceecccccrrceercceicccciieireeerericceercceieeiieicciiciiiiccceccccceecceicccciiieieeceiiiicciiciiiiccciciiiiiii 2 Café & Restaurant Service As in the given case, it is used by

Truck used for Goods Transportation in factory Inward Supply of Food& Yes the registered person for making
Beverages to a supplier is outward supply of same category of
providing restaurant service
2 goods as an element of composite

Authorised Dealer Yes As in the given case, motor vehicle is used supply & it falls in the exceptional

for further supply of such vehicles & it falls in clause of the given sec 17(5)(b)

the exceptional clause of the given sec As in the given case, it is used by the

Motor Vehicle purchased by authorised 17(5)(a) Inward supply of food
dealer for further supply packets to Airline. The Yes registered person for making outward

3 Yes As in the given case, motor vehicle is used 3 packets are used for in- supply of same category of goods &
Contract for transportation of passengers & it falls in
Carriage flight catering which is considered as a part of the

composite supply of air travel services

1. Bus used by travel company for the exceptional clause of the given sec & it falls in the exceptional clause of
transportation of Passenger 17(5)(a)
the given sec 17(5)(b)

2. Motor car used by supplier of taxi

service Inward supply of As in the given case, it is used by the

3. Aircraft purchased by Indigo for 4 Health care service registered person for making outward

passenger transportation to a Hospital who is Yes supply of same category of services &

4 DRIVING SCHOOL Yes As in the given case, motor vehicle is used providing healthcare it falls in the exceptional clause of the
services given sec 17(5)(b)
for imparting training on driving & flying thus

it falls in the exceptional clause of the given 5 Inward supply of As in the given case, it is not used

sec 17(5)(a) Health care service No by the registered person for
to a Manufacturer/ making outward supply of same
1. Aircraft used by Institute imparting Trader/ Service
navigation training to pilots
Factory Provider category of services
2. Motor vehicle used by motor driving
school 6 Factory Inward Supply of As in the given case, it is not used by
outdoor catering to a No the registered person for making
5 PROMOTER GOODS TRANSPORT CO. As in the given case, motor vehicle is used manufacturing
company for outward supply of same category of
& Goods Transport for Transportation of goods thus it falls in
Yes the exceptional clause of the given sec
BUILDER

celebrating its 25 services & is used for its own

years of success company

17(5)(a) Inward Supply of As in the given case, it is not used by
beauty treatment
1. Truck used by GTA for 7 services by a Film the registered person for making
Production outward supply of same category of
transportation of goods No
2. Truck used by builder contractor for
Company. services & is used for its own company
transportation of goods

GST

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

39

(b)(ii) Membership of No Exceptions (d) Inward (A) Construction of Plant & Machinery
Club, health and supplies of (B) Construction of immovable property for others
fitness center goods or
services
(b)(iii) (A) Services notified by the Government as being obligatory for an employer to provide to received by Case : 1 Construction of building of manufacturer/ Case : 2 Construction of Plant & Machinery of
taxable person
its employees under any law for construction trader or service provider manufacturer / trader or service provider
(B) Where a particular category of such inward supplies is used for making of immovable Labour &
Rent a cab, property on his
own account Material
including when
Life Ü an outward taxable supply fo the same category [Sub-contracting] or such supplies Labour &
are used in the Material
i n s u r a n c e Ü as part of a taxable composite or mixed supply. course or Construction of
furtherance of Construction of Plant & Machinery
and health ITC business Buildings
insurance Eligibility
Case Reasons

Royal Tours & Travel As in the given case, it is not used by Case 3 Construction Service & Construction Material Case 4 Construction Service & Construction
the registered person for making Material used builder for further
No outward supply of same category of used construction of tele-communication
services as used for its own
employees tower.As telecom tower is excluded from Labour & Construction supply intended for sale.
done by contractor
Contractor explanation given to P & M.

Inward Supply of rent a Cab service taken
by software company.

TOUR OPERATOR As in the given case, it is used by the Explanation 1 : For the purposes of clauses (c) and (d), the expression “construction” includes re-
registered person for making outward construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said
Inward Supply of rent-a-cab service to a supply of same category of services in immovable property
Tour Operator Part of composite supply course of its business & is a part of
Yes composite supply Explanation 2 : the expression “plant and machinery”

means apparatus, equipment, and machinery but excludes

Ü fixed to earth by foundation or structural (i) Land, building or any other civil

Inward Supply of life support structures
insurance/health insurance services
to A ltd. running a factory employing As in the given case, it is notified by Ü that are used for making outward supply of (ii) Telecommunication towers; and
600 workers (ICAI Material) the Govt. & also not made obligatory
No under any law for time being. goods or services or both and (iii) Pipelines laid outside the factory

includes such foundation and structural supports premises

(b)(iv) Travel benefits extended to No Exceptions (e) goods or services or both on which tax has been paid under section 10
employees on vacation such as (f) goods or services or both received by a non-resident taxable person
leave or home travel concession

(c) Works (A) Works Contract services for Plant & Machinery except on goods imported by him.
(g) goods or services or both used for personal consumption
contract (B) Where Works contract service for immovable property is input service for further
supply of works contract services [Sub-contracting] (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or
service for free samples; and
Case : 1 Works Contract Service used construction of Case : 2 Works Contract Service used construction of
construction
building of manufacturer/ trader or service Plant & Machinery of manufacturer / trader or

of Labour & provider service provider
Material

immovable maerceci maerceci maerceci maerceci maerceci maerceci
property
Labour & maerceci maerceci maerceci maerceci maerceci maerceci
Material maerceci maerceci maerceci maerceci maerceci maerceci

Works Contractor maerceci maerceci maerceci maerceci
maerceci maerceci maerceci
maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci
maerceci maerceci maerceci
maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci
maerceci maerceci maerceci maerceci maerceci maerceci

maerceci maerceci maerceci maerceci maerceci maerceci
maerceci maerceci maerceci maerceci maerceci maerceci

Works Contractor Construction of Destroyed maerceci maerceci maerceci maerceci maerceci maerceci
Plant & Machinery
maerceci maerceci maerceci Gift maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci maerceci
maerceci maerceci maerceci maerceci
Lostmaerceci
Construction of Stolen
Buildings
(i) any tax paid in accordance with the provisions of sections 74, 129 and

Comment of above clauses :- Thus on analysis it means that if any manufactures, trader or a service 130. Sec 74 IT deals with recovery of tax not paid or short paid by reason of fraud, willful misstatement or suppression of facts
provider purchases any works contract services or any other services for construction of his own Sec 129 It deals with detention, seizure and release of goods in transit which had been removed in contravention of
immovable property then ITC is not available.But if some is purchased for outward supply of works legal provisions
contract service including a builder to a buyer intended to a sale then ITC is available.
Sec 130 It deals with confiscation of goods in certain circumstances
GST
REVISION V’Smart Academy www.vsmar tacademy.com CA VISHAL BHATTAD 09850850800

40

Sec - 17(1), 17(2) & 17(3) Apportionment of Credit Sec 17(4) : Special
option of ITC to banking
T (Rule 42) (Rule 43) Total input tax (IT) on capital goods (CG)
Total IT on I + IS and F.I.

T1 T2 T3 C1 (a) (b) ‘A’ 1. Availment of Tax Credit : Banking
Company/FI including NBFC’s have the
IT on I+IS used IT on I=IS used Blocked credit u/s Remaining ITC IT on CG used exclusively IT on CG used exclusively IT on CG not covered following options -
exclusively for non- exclusively for 75(5) credited to ECrL for non-business/exempt for taxable supplies under (a) & (b). Useful life
business purposes exempt supplies = T-(T1 + T2 +T3) supplies including zero rated of CG – 5 years from date (a) Option 1 : To comply with the
supply (ZRS) of inovice provisions u/s 17(2), or

(i) Exempt supplies include reverse charge Not to be credited to Credited to ECrL Credited to ECrL (b) Option 2 : To avail of, every month,
supplies, transactions in securities, sale Electronic Credit Ledger Tc an amount equal to 50% of the
of building when entire consideration is T4 C2 (ECrL) eligible ITC in that month and the
received after CC. balance 50% shall lapse.
Credit attributable to I+IS Common credit Common credit on CG = TC =Σ (A)
(ii) Aggregate value of exempt supplies and used exclusively in taxable = C1 – T4 if CG under (a)/(b) subsequently get covered 2. Conditions on choosing option of
total turnover exclude the CED, SED & supplies including ZRS Tm under ‘A’, = (a)/(b) - 5% of IT for a quarter or part 50% availment :
VAT
thereof (a) The said Company or Institutions
hall not avail the credit of -
D1 D2 C3 Common credit of CG for a tax Tr (i) Inputs and Input Services that
period during their useful life are used for non-business
Credit attributable to exempt supplies - Credit attributable to non- Remaining Common credit at the beginning of a tax period purposes, and
D1 = —FE x C2 business purpose if Common credit Tm = Tc/60 for all CG having useful life in that tax period (ii) the credit attributable to blocked
E= Value of ES during tax period common I + IS used partly = C2 - (D1 + D2) Credits
F = Total turnover during tax period if no for business + non-business Tr = Tm of such CG
turnover during the tax period/values not purposes Eligible ITC 3. Withdrawal : Option once exercised,
available, values for last period may be attributable to Te shall not be withdrawn during the
used. D2 = 5% x C2 business & remaining part of F.Y.
taxable supplies
including ZRS Common credit towards exempted supplies 4. No Restriction : 50% of ITC
Restriction shall not apply when
supplies are made between branches

Te = —E x Tr
F
Ineligible credits E – Aggregate value of exempt supplies during

To be added to output tax liability the tax period; F — Tutal turnover during the tax

Ü C3 will be computed separately for ITC of CGST, SGST/ UTGST and IGST. Added to output tax liability along period.
Ü Σ(D1 + D2) will be computed for the whole financial year, by taking exempted turnover and with interest
If no turnover during the tax period/values not
aggregate turnover for the whole financial year.
If this amount is more than the amount already added to output tax liability every month, the available, values for last tax period may be used.
differential amount will be added to the output tax liability in any of the month till September of
succeeding year along with interest @ 18% from 1st April of succeeding year till the date of Ü Te will be computed separately for ITC of CGST, SGST/UTGST and IGST.
payment. Ü Exempt suppliies include reverse charge supplies, transactions in securities, sale of
Ü If this amount is less than the amount added to output tax liability every month, the additional
amount paid has to be claimed back as credit in GSTR 3 or any month till September of the land and sale of building when entire consideration is received after completion
succeeding year. certificate.
Ü Aggregate value of exempt supplies and total turnover excludes the central excise duty,
State excise duty & VAT.

GST

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

41

Sec 18 : Reversal of Credit Sec 18 (3) Transfer of ITC

Sec 18(1) Availment of Credit

(a) (b) (c) (d) In case of In case of
Person applied or Person obtaining Registered person switching from Registered person is exempt - Sale, Amalgamation, Demerger
registration within composition levy to normal tax payment supplies becoming a taxable supply Lease, Transfer of business
30 days & becoming voluntary
liable for registration Registration

Person entitled for ITC on No benefit Person entitled for ITC on The Registered Registered person
- Input as such held in stock on Capital - Input as such held in stock person shall transfer his apportion his ITC in ratio of
- Inputs contained in semi-finished goods goods - Inputs contained in semi finished goods unutilized ITC in Ecr ledger Value of asset transfered to
- Inputs contained in finished goods held in stcok - Inputs contained in finished goods held instock
- Capital goods or transferee demerged unit

[ITC = Input tax - 5% per qtr. or part these of from the date of invoice.] Conditions
1) There is a specific provision for transfer of liabilities
If person liable for registration Voluntary Registration Composition to normal : on the date immediately Exempt to taxable : on the date 2) Conditions of Rule 41

On the date immediately preceding on the date immediately preceding the date from which person become immediately preceding the date from (a) declaration of details in the form GST ITC 02 for
the date from which he becomes preceding the date of transfer of credit .
liable to pay tax registration liable to pay tax under normal scheme which such supply become taxable.
(b) Certification of transfer of liabilities from CA/CMA
Important Comment : 1) As per Sec 18(2) person is not entitled to take ITC if supply of input or capital goods is after expiry (c) Acceptance of transferred credit by transferee on
If person failed to apply for reg. within 30 days then he is not of 1 year from the date of issue of tax invoice.
eligible to take such ITC. common portal
2) Imp provisions of rule 40 : (d) inputs & capital goods so transferred are duly
a) Declaration in form GST ITC of within 30 days
b) If the aggregate claim amt is more than ` 2,00,000 it should be duly certified by practicing CA accounted by transferee in his books of A/c
or CMA
c) ITC claimed under clause (c) & (d) of Sec 18(1) shall be crossverified by with details furnished
by supplier in form GSTR-1 & GSTR-4 on Common portal.

Reversal of Credit

Sec 18(4) Reversal of credit in Special Cases Sec 18 (6) : Reversal of credit on supply of Capital Goods/ Plant &
Machinery on which ITC has been taken

Registered person switching from normal scheme of Taxable supply becoming Cancellation of 1) If capital goods or plant & machinery on which ITC has been taken
payment of tax to composition Levy exempt Supply Registration are supplied [Removed as such by way of sale transfer barter etc.]
then registered person shall pay higher of the following
1) Amt to be reversed is equivalent to ITC on Rule 44 : Procedure & conditions a) Payment = ITC - 5% per at or part thereof
- Input as such held in stock 1) Reversal of inputs shall be determined with
- Inputs contained in semi finished goods OR
- Inputs contained in finished goods held in stock corresponding invoices. If invoice is not available then
- Capital goods [reversal on prorata basis pertaining to reversal is based on prevailing market price of inputs. b) GST on transaction value
remaining useful life in a month (taking useful life as 5 yrs. 2) Reversal of ITC shall be calculated separately for CGST,
After reversal balance if any in Ecr. ledger shall lapse SGST & IGST. 2) In case of refectories bricks, modules & die, jugs & fixtures supplied
3) Reversal amt. will be added in output tax liability & details as a scrap then person may pay tax on transaction value instead of
V’Smart Academy to be furnished in GST ITC 03 above 2 options.

GST www.vsmar tacademy.com CA VISHAL BHATTAD 09850850800
REVISION

42

Sec 19- Goods sent by principal for Job Work Sec 20 – Distribution of credit by Input Service Distributor

The principal shall be allowed input tax credit on inputs sent to a job- Input Service Distributor Distribution Unit 1
worker for job-work. of ITC
ISD M.P.
Unit 2
Common
Inputs sent for Capital Goods sent Input tax
Job work for Job work Credit

Where inputs sent for job work – Where capital goods sent for MUnait h3 arashtra Chattisgad
job work –
> Are not received back by the Manufacturing unit
principal after completion of job- > are not received back by
work or otherwise or principal The above pictorial image is designed to show the role of an input service distributor in an

> Are not supplied from the place of Within a period of 3 years of organisation and how the common input tax credit is distributed amongst various units.
business of the job worker as per being sent, it shall be treated as
sec 143 deemed supply by principal to The Input Service Distributor shall distribute the Sec 2(61) “Input Service Distributor”
job worker credit of
Within 1 year of being sent, it shall
be treated as deemed supply and Means an office of the supplier of goods or
ITC if availed shall be reversed
Ü central tax as 1central tax or 2 integrated services or both

and tax which receives tax invoices issued under
section 31 towards the receipt of input
3
Ü integrated as 1 integrated or services and
2central , State
issues a prescribed document for the
> Nothing contained in this section shall apply to moulds, dies, jigs & tax tax tax tax purposes of distributing the credit of
fixtures or tools sent out for job work Ü State tax as 1State tax or 2 integrated
Ü Central tax, Ü State tax,
tax ÜIntegrated tax or

Note:- For inputs – The period of 1 year shall be counted from the date of receipt of inputs by the job by way of issue of a document containing the amount of Ü Union territory tax paid on the said services
worker input tax credit being distributed in such manner as may to a supplier of taxable goods or
be prescribed.
For Capital goods – The period of 3 years shall be counted from the date of receipt of capital services or both having the same Permanent
Account Number as that of the said office.

goods by the job worker The Input Service Distributor may distribute the credit of central tax, integrated tax, and state tax subject to the following conditions

namely:-

As per sec 2(68) “job work” means any treatment or process undertaken by a person on goods a) The credit can be distributed to the recipients of credit against a document containing such details as may be prescribed
belonging to another registered person and the expression “job worker” shall be construed b) the amount of the credit distributed shall not exceed the amount of credit available for distribution
accordingly; c) the credit of tax paid on input services attributable to a recipient of credit, shall be distributed only to that recipient
d) the credit of tax paid on input services attributable to more than one recipient, shall be distributed on pro rata basis of

As per sec 2(88)“principal” means a person on whose behalf an agent carries on the business of - the turnover in state / union territory of such recipient during the relevant period to the aggregate of the turnover of all such
supply or receipt of goods or services or both recipients to whom such input service is attributable & which are operational in the current year, during the said relevant period

e) The credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipient on pro

For detailed discussion of this section refer chapter notes of Input tax credit rata on the basis of

- - the turnover in state / union territory of such recipient during the relevant period to the aggregate of the turnover of all such GST
recipients to whom such input service is attributable & which are operational in the current year, during the said relevant period

CA VISHAL BHATTAD 09850850800 www.vsmar tacademy.com V’Smart Academy REVISION

43

Example 3 : VSmart Ltd. a registered supplier of goods having Head Office at pune, also registered as ISD, Note :
furnishes the following information for month of July, 2018 and asks you to distibute the credit to various units : 1) Credit of Input tax attributable to input service to a particular unit to be distributed to only that unit even if it

Input Service Particulars CGST SGST IGST Total is engaged in exempt supply.
29,000 2) Distribution of ITC is done as per formula : C1=(t1/T) x c
“Training” Used exclusively in Unit-III 29,000 — 58,000 3) If T.O. of precessing F.Y. is available then relevant period for calculate of aggregate T.O. is such F.Y. (4)
— - 48,000 48,000
“Advertisement” Used in Unit-I,II and III 14,600 29,200 Tour operator service - not eligible for ITC U/S 17(5) but it should be distributed.
1,280 14,600 — 2,560
“Auditing” Used in Unit-I,II,III and IV 1,280 — SEC 21 : MANNER OF RECOVERY OF CREDIT
44,880 DISTRIBUTED IN EXCESS
“Tour Operator” Used in Unit-I (Input service
Where the Input Service Distributor distributes the credit in contravention of the provisions
is availed for employee on contained in section 20 resulting in excess distribution of credit to one or more recipients of
credit, the excess credit so distributed shall be recovered from such recipients along with
vacation during the month to interest, and the provisions of section 73 or section 74, as the case may be, shall, mutatis
mutandis, apply for determination of amount to be recovered.
its Unit I)
Sec 41: Claim of input tax credit and provisional
Total Amount of Credit 73,880 48,000 acceptance thereof

Total Turnover of the units for year ending 31st March, 2018 are as under: 30,00,000
20,00,000
Unit-I — 75,00,000
Unit -II ----
Unit - III Not registered as exclusively engaged in supply of 60,00,000
1,85,00,000
exempt goods
Unit- IV
Total Turnover of Vsmart Ltd.

All units are operational during the current year. 1 Every registered person shall, subject to such conditions and restrictions as may be prescribed,
Unit I is located in Pune whereas units II, III and IV are located in Mumbai, Delhi and Gujarat respectively
Solution: - Compute credit attributable to each of the units. be entitled to take the credit of eligible input tax, as self-assessed, in his return
and such amount shall be credited on a provisional basis to his electronic credit ledger
Units
2 The credit referred to in sub-section (1) shall be utilised only for payment of self-assessed
1) Distribution of Credit 12 34
output tax as per the return referred to in the said sub-section

CGST CGST CGST IGST IGST
SGST SGST SGST IGST IGST
IGST IGST IGST IGST IGST

2) Computable of ITC to be distributed :-

Particulars Total Credit Avail Unit 1 Unit 2 Unit 3 Unit 4

CGST SGST IGST CGST SGST IGST CGST SGST IGST IGST IGST

1) Training 29,000 29,000 - - -- - -- 58,000 -

2) Advertisement - - 48,000 - - 11,520 - - 7680 28,800 -

3) Auditing 14,600 14,600 - 2367 2367 - 1578 1578 - 11838 9470
-
4) Tour Operator 1280 1280 1280 1280 - - -- --
(Ineligible Credit)

GST Total 3647 3647 11,520 1578 1578 7680 98638 9470 CA VISHAL BHATTAD 09850850800
REVISION
V’Smart Academy www.vsmar tacademy.com
44