Input Tax Credit (Questions) - CA Study€¦ · Input Tax Credit (Questions) 5 ITC on CG, only if...

1 Input Tax Credit (Questions)

Input Tax Credit (Questions)

Items eligible for ITC – Inputs, capital goods and input services

1. “Input” means :

(A) Raw material and trading stock (C) Any goods excluding capital goods which are used or intended to be used in the course or furtherance of business

(B) Any Goods excluding Capital Goods (D) None of the above

2. “Capital Goods” means :

(A) Plant and Machinery only (C) Any goods which are capitalized in books of account and which are used or intended to be used in the course or furtherance of business

(B) All Fixed Assets (D) None of the above

3. Is it mandatory to capitalize the value of capital goods in books of accounts ?

(A) Yes (C) At the option of the recipient

(B) No (D) None of the above

4. Input tax credit on capital goods and Inputs can be availed _________________

(A) In thirty-six installments (C) In one installment

(B) In twelve installments (D) in two installments - 50% in first year and balance in subsequent year

5. Mr A , a garment manufacturer, has purchased sewing machines from a vendor. The installation service has been availed from another vendor. The installation expenses have been capitalized. Whether ITC can be availed of GST element paid on installation service?

(A) Yes as it is an eligible input service (C) No as ITC is blocked

(B) No as expense has been capitalized (D) None of the above

6. The term “used in the course or furtherance of business” means?

(A) supply shall be directly connected to business. (C) Supply may be used for ongoing business activity.

(B) supply may be directly or indirectly connected to business.

(D) Supply may be used for ongoing business activity or for any activity which may lead to furtherance of existing business.

7. Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie ____________ .

(A) On the department (C) On such person

(B) On department as well as such person equally (D) No one

Eligible taxes – Input Tax credit

8. What is the meaning of ‘input tax’ in relation to taxable person?

(A) GST paid on inward supplies (C) GST paid on inward supplies, including customs duty paid on import of goods


(B) Any tax paid on inward supplies (D) GST paid on inward supplies including GST paid on import and GST paid under reverse charge

9. Whether ITC is admissible of following:

(A) BCD paid on import of inputs (C) GST paid on intra-state supply from supplier operating under composition scheme

(B) GST cess paid on intra-state inward supply of inputs

(D) None of the above

10. ………… paid on goods and services allowable as ITC.

(A) GST (C) Excise

(B) VAT / CST (D) Basic Customs Duy

Utilization of ITC – Sec 49

11. Output tax in relation to a taxable person under the CGST Act, 2017 includes:

(A) Tax chargeable on taxable supplies made by him

(C) Tax payable by him under reverse charge

(B) Tax chargeable on taxable supplies made by his agent

(D) Both (a) and (b)

Eligible person – Registered person – Sec 16(1)

12. Supplier eligible for claiming ITC must be a ……….

(A) Taxable person – registered or unregistered (C) Registered person not operating under composition scheme u/Sec 10

(B) Registered person (D) Registered person not operating under composition scheme u/Sec 10 or presumptive levy scheme under N/N 2/2019-CT

13. Which of the following statement is true for a composition tax payer ?

(A) A composition tax payer can avail only 50% of ITC on capital goods.

(C) ITC is not available on inward supplies made by a composition tax payer.

(B) A composition tax payer can avail 100% ITC on inputs

(D) Composition tax will be available as ITC to the recipient only if the tax is mentioned separately in the invoice raised by the composition tax payer.

14. Every registered taxable person shall be entitled to take credit of input tax in his return and such input tax credit shall be credited to —

(A) Personal Ledger Account (C) Electronic Cash Ledger

(B) Refund account (D) Electronic Credit Ledger


Conditions for claiming ITC – Sec 16(2)

15. In which of the following conditions the input tax credit will be available?

(A) Capital goods used for making exempted goods

(C) Depreciation has been claimed on tax component of capital goods

(B) Capital goods used for exclusively non-business (personal) purpose


[ICAI Sample Questions]

16. What are the prior conditions to claim input tax credit?

(A) Tax invoice or debit note should be available (C) Tax charged on the purchases has been deposited/paid to the government by the supplier

(B) The person should have received the goods/services

(D) All of the above


17. Whether credit on inputs should be availed based on receipt of documents or receipt of goods?

(A) Receipt of goods (C) Both

(B) Receipt of Documents (D) Either receipt of documents or Receipt of goods

18. In case supplier has deposited the taxes but the receiver has not received the documents, is receiver entitled to avail credit ?

(A) Yes, it will be auto populated in recipient monthly returns

(C) Yes, if the receiver can prove later that documents are received subsequently

(B) No as one of the conditions of Section 16(2) is not fulfilled


19. Whether credit can be availed without actual receipt of goods where goods are transferred through transfer of document of title before or during the movement of goods?

(A) Yes (C) Yes, in specific instances

(B) No (D) Can be availed only after transfer of document of title after movement of goods

20. If the goods are received in lots / installment, ______________

(A) 50% ITC can be taken on receipt of 1st installment and balance 50% on receipt of last installment.

(C) 100% ITC can be taken on receipt of 1st installment.

(B) ITC can be availed upon receipt of last installment.

(D) Proportionate ITC can be availed on receipt of each lot / installment.

21. Is it mandatory that the tax on the supply has to be paid by the supplier so that the recipient can claim credit?

(A) No (C) No but tax and value of supply is to be paid by recipient to the supplier

(B) Yes (D) Not Applicable


22. XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available with XYZ Ltd. for the month of October, 2019 from the following particulars :

S. No. Inward supplies GST (Rs.) Remarks

(i) Inputs ‘X’ 1,20,000 One invoice on which GST payable was Rs. 10,000, is missing

(ii) Inputs ‘Y’ 1,00,000 Inputs are to be received in two instalments. First instalment has been received in October, 2019.

(A) Rs. 1,10,000 (C) Rs. 2,10,000

(B) Rs. 1,60,000 (D) Rs. 2,20,000

23. In case supplier has deposited the taxes but the receiver has not received the documents, is receiver entitled to avail credit ?

(A) Yes it will be auto populated in recipient monthly returns

(C) Yes if the receiver can prove later that documents are received subsequently

(B) No as one of the conditions of Section 16(2) is not fulfilled


ITC claimed, but supplier remaining unpaid for more than 180 days – consequences thereof

24. In which of the following situations, taxpayer needs to reverse the credit already taken ?

(A) If payment is not made to the supplier within 45 days from the date of invoice

(C) If payment is not made to the supplier within 180 days from the date of invoice

(B) If payment is not made to the supplier within 90 days from the date of invoice


25. The time limit to pay the value of supply with taxes to avail the input tax credit?

(A) 90 days from the date of invoice (C) 180 days from the date of invoice

(B) 30 days from the date of invoice (D) Till the date of filing of Annual Return

26. Can the recipient avail the Input tax credit for the part payment of the amount to the supplier within 180 days?

(A) Yes, on full tax amount and partly value amount (C) Yes, but proportionately to the extent of value and tax paid

(B) No, he can’t until full amount is paid to supplier (D) Not applicable is eligible to claim refund in respect of exports of goods le

27. Supplier entered into supply contract with recipient for consideration of 5,00,000 (GST extra). Later on, recipient incurred certain expenses which otherwise supplier was supposed to incur for providing service under contract. Due to this, supplier ultimately raised invoice of Rs 3,50,000 (GST extra) on the recipient. Recipient made payment of this 3,50,000 on next day. As per Department, value of supply in terms of Sec 15 shall be 5,00,000 (GST extra) and since, recipient has paid only 3,50,000 (GST extra) to the supplier, he shall reverse pro-rata ITC on expiry of 180 days from date of invoice. Which of the following statement is true?

(A) Value of supply is 5,00,000 and pro-rata reversal is required

(C) Value of supply is 5,00,000 but no pro-rata reversal is required

(B) Value of supply is 3,50,000 and no pro-rata reversal is required



ITC on CG, only if depreciation benefit not claimed on Input tax element – Sec 16(3)

28. A supplier takes deduction of depreciation on the GST component of the cost of capital goods as per Income-tax Act,

1961. The supplier can —

(A) avail only 50% of the said tax component as ITC (C) avail 100% ITC of the said tax component

(B) not avail ITC on the said tax component (D) avail only 25% of the said tax component as ITC

29. Whether a registered supplier can simultaneously claim depreciation as well as ITC on capital goods procured by it?

(A) Yes (C) Input tax credit is eligible if depreciation on tax component is not availed


Time limitation for availing ITC – Sec 16(4)

30. What is the time limit for taking input tax credit by a registered taxable person?

(A) No time limit (C) Due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains

(B) 1 year from the date of invoice (D) Due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

31. What is the time limit for taking ITC ?

(A) 180 days from the date of invoice (C) 20th October of the next financial year or the date of filing annual return whichever is earlier

(B) 1 year from the date of Invoice (D) No limit

32. What is the maximum time limit to claim the Input tax credit?

(A) Till the date of filing annual return (C) Earliest of (a) or (b)

(B) Due date of September month which is following the financial year

(D) Later of (a) or (b)

Apportionment of ITC– Sec 17(1) to (4)

33. ITC can be claimed by a registered person for

(A) Taxable supplies for business purpose (D) Non-taxable supplies

(B) Taxable supplies for non-business purpose (E) All of above

(C) Exempted supplies (F) None of above

34. Proportionate credit for capital goods is allowed__________________.

(A) For business and non-business purpose (C) Both of the above

(B) For business or non- business purpose (D) None of the above


35. ITC is allowed only on those goods and / or Services which are intended for making :

(A) Taxable Supplies (C) Both taxable supplies and zero related supplies

(B) Zero Rated Supplies (D) Even on Taxable Inward Supply and Non-Taxable Local or Interstate Supplies

36. Details of supplies of a taxable person in the month of April 2019 are as follows – (i) Value of alcoholic liquor for human consumption of Rs. 1,50,000. (ii) Value of architect services supplied by him in Jamnagar, Gujarat is Rs. 2,00,000. (iii) Securities of face value of Rs. 1,00,000 sold for Rs. 95,000.

What is the value of ‘exempted supply’ for purpose of section 17(2) of the CGST Act, 2017 [proportionate reversal of ITC]?

(A) 1,50,000 (C) 2,45,000

(B) 2,50,000 (D) 1,50,950

[ICAI Final Sample Questions]

37. Exempt supplies under Section 17 (apportionment of credit) includes

(A) Only exempted supplies (C) Exempted supplies, reverse charge supplies, Transaction in securities, sale of land, sale of building

(B) Reverse charge supplies and sale of land (D) None of the above

38. The supply of goods to SEZ unit is treated as _____________ in the hands of the supplier for eligibility of ITC.

(A) Exempt of Supply (C) Export of Supplies

(B) Deemed Taxable Supply (D) Non-Taxable Supply

39. If GTA wants to claim ITC, which of the following conditions shall be satisfied?

(A) Rate of tax shall be 12% (C) Exemption benefit shall not be applicable

(B) RCM shall not be applicable (i.e., GTA shall be liable to pay tax under forward charge)

(D) All of the above

40. Mr. Jolly, lawyer is registered in Delhi. He has income of Rs. 32,00,000 from legal services. Also, he has given a commercial land on rent for which he is charging Rs. 5,00,000 per month. He has also extended loan of Rs. 1 crore for which he received interest amounting to Rs. 12,00,000 annually. What will be the value of exempt supply for the purpose of reversal of input tax credit under rule 42?

(A) Rs. 44,00,000 (C) Rs. 32,00,000

(B) Rs. 12,00,000 (D) Rs. 60,00,000

[ICAI Sample Questions Series]

Special option for Banking Company / FI (including NBFC) – Sec 17(4)

41. Banking company or Financial Institution have an option of claiming :

(A) Eligible Credit or 50% credit of the tax paid on inputs, input services and capital goods

(C) Only Eligible credit

(B) Only 50% Credit (D) Eligible credit and 50% credit of the tax paid on inputs, input services and capital goods

42. For banking companies using inputs and input services partly for taxable supplies and partly for exempt supplies, which of the statement is true ?


(A) ITC shall be compulsorily restricted to credit attributable to taxable supplies including zero rated supplies

(C) Banking company can choose to exercise either option (a) or option (b)

(B) 50% of eligible ITC on inputs, capital goods, and input service shall be mandatorily taken in a month and the rest shall lapse.


43. Can Banking Company or Financial Institution withdraw the option of availing actual credit or 50% credit anytime in the financial year?

(A) Yes (C) Yes, with permission of Authorized officer

(B) No (D) Not applicable

Sec. 17(5) (Blocked ITC)

44. The input tax credit paid on motor vehicles (passenger vehicles) with seating capacity of upto 13 passengers (including

the driver) will be available when they are used for making the taxable supplies of______________.

(A) further supply of such motor vehicles (C) imparting training on driving, flying, navigating such motor vehicles

(B) transportation of passengers (D) All of the above

45. Mr A is into business of taxi services (i.e., transportation of passengers). Mr B is into business of renting of cabs/ cars on per day rental basis. Both of them have purchased two new motor car (6 seaters). Which of the following statement is correct as to ITC

availment by these persons.

(A) Both are entitled to avail ITC in respect of motor vehicles purchased by them.

(C) Mr A is entitled to avail ITC, but Mr B is not entitled to avail ITC.

(B) None of them is entitled to avail ITC in respect of motor vehicles purchased by them.

(D) Mr A is not entitled to avail ITC, but Mr B is entitled to avail ITC.

46. The input tax credit paid on motor vehicles (aassenger vehicles) with seating capacity of more than 13 passengers (including the driver) will be available when they are used for making the taxable supplies of______________.

(A) further supply of such motor vehicles (C) imparting training on driving, flying, navigating such motor vehicles

(B) transportation of passengers (D) All cases where such usage is related to business

47. The input tax credit paid on vessels and aircraft will be available when they are used for making the taxable supply of______________.

(A) further supply of such motor vehicles (C) imparting training on flying such aircraft

(B) transportation of passengers (D) All of the above

48. C Co. is engaged in the business of transportation of goods by vessels. C Co. contracts with R Co. to provide repair and maintenance of vessels in the event of break down. Whether C Co. can avail input tax credit ---

(A) Yes (C) Can’t say


49. XYZ Co. is engaged in the business of providing general insurance. Mr. A, registered under GST engaged in business of transportation of passengers from motor vehicles (capacity upto 13 passengers). Mr A gets his motor vehicle insured from XYZ Co. Whether Mr. A can avail input tax credit ---




50. Mr. Z provides motor vehicle on lease to various companies. D Co. contracts with Mr. Z to provide 10 motor vehicle having seating capacity upto 10 passengers on lease for transportation of passengers at Rs. 50,00,000 each. Whether D Co. can avail input tax credit ---



51. Which of the following Input Tax credit (ITC) is not available to the tax payer:-

(A) ITC on Goods purchased for resale (C) ITC on Goods used in making supplies out of India

(B) ITC on Goods used for providing taxable services

(D) ITC on purchase of Motor vehicle for use by director


52. (i) A software professional providing technical consultancy buys a motorcycle for use of his employee. (ii) A motor driving school buys a car for being used in imparting motor driving training. (iii) A flying school imports an aircraft for use in its training activity. (iv) A manufacturer buys a small truck for the purpose of transporting its inputs and finished goods. Input tax credit cannot be taken on:

(A) (iii) (C) (i)

(B) (i), (ii), (iii), (iv) (D) (i), (iii)


53. Axis Bank has purchased a van for transportation of cash (money). Whether ITC of such motor van is admissible?

(A) ITC is admissible (C) Disputed issue pending for clarification from GST Council

(B) ITC is not admissible (D) None of the above

54. ITC shall be allowed in which of the following options i) work-Trucks ii) Fork-Left Trucks iii) Tippers iv) Dumpers Tick the correction option

(A) (i) & (ii) (C) (i), (ii) & (iii)

(B) (iii) & (iv) (D) (i), (ii), (iii) & (iv)

55. The input tax credit paid on _________________ will not be available

(A) food and beverages (C) beauty treatment

(B) outdoor catering (D) All of the above

56. Which of the following inward supplies are not eligible for ITC in case of a company manufacturing shoes?

(A) Food and beverages (C) Health services

(B) Outdoor catering (D) All of the above

57. Guideline Academy organizes parents meeting and provides meal during meeting to students and their parents. The

supplier of food charged Rs. 72,500 plus GST 18%, under the category of outdoor catering. Whether ITC is admissible?




58. ITC Maratha, a 5-Star hotel in Mumbai, purchases 10 one kg. chocolate cakes for one of its restaurants (to be used for Sunday Buffet lunch). Whether ITC is admissible?



59. Z Ltd. provides life insurance to its employees being provisioning of such life insurance to factory workers is compulsory under Government regulations. Z Ltd. has paid GST of 2,56,000 on insurance premium paid by it on such insurance. Whether ITC is admissible?


(B) ITC is not admissible (D) ITC allowed if Government notifies such service allowing ITC of it

60. In which of the following cases, input tax credit is not allowed?

(A) Packing material used in a factory (C) Inputs used for quality control check

(B) Goods used for providing services during warranty period

(D) Confectionery items for consumption of employees working in the factory

[CMA Inter RTP Dec 2018]

61. Input tax Credit is available on all supplies which are used or intended to be used in the course or furtherance of business. Input tax credit will be available under which of the following situations?

(A) GST paid on motor vehicle (with seating capacity of upto 13 passengers) used in the course and furtherance of business.

(C) GST paid on goods and/or services used for personnel consumption.

(B) GST paid on club membership fees. (D) IGST @18% paid on inputs purchased from a vendor in Bangalore where the supplier is registered in Rajasthan.


62. Input tax credit is not available in respect of ______________.

(A) services on which tax has been paid under composition levy

(C) goods used for personal consumption

(B) free samples (D) all of the above

[ICAI Inter Sample Questions]

63. ITC on works contract service can be availed only if

(A) Engaged in same line of business (C) Service related to immovable property

(B) Service related to movable property (D) All of above

64. Input tax credit of tax paid on works contract services is available when supplied for construction of ______.

(A) Telecommunication towers (C) Plant and Machinery

(B) Pipelines laid outside the factory premises (D) Factory building

65. For the purpose of Input tax credit, Plant and machinery excludes _______________ .

(A) land, building or any other civil structures; (C) pipelines laid outside the factory premises.

(B) telecommunication towers; (D) All of the above


66. Krishna Motors is a car dealer selling cars of an international car company. It also provides maintenance and repair services of the cars sold by it as also of other cars. Determine the amount of input tax credit available with the help of the following information regarding expenses incurred by it during the course of its business operations:

Particulars GST paid (Rs.)

Cars purchased from the manufacturer for making further supply of such cars. [Two of such cars are destroyed in accidents while being used for test drive by potential customers. GST paid on their purchase is Rs. 1,00,000]

20,00,000

Works contract services availed for constructing a car shed in its premises. 50,000

(A) Rs. 19,00,000 (C) Rs. 19,50,000

(B) Rs. 21,10,000 (D) Rs. 20,50,000


67. Kamlesh hires a works contractor for repairing his factory building on a lumpsum payment of Rs. 11,80,000. He debits half of the expenditure in the profit and loss account and the remaining half in the building account.

Assuming the rate of GST to be 18%, Kamlesh can take input tax credit of:

(A) Rs. 90,000 (C) Rs. 2,12,400

(B) Rs. 1,06,200 (D) Nil


68. Input tax credit of tax paid on the ______________ is not available.

(A) Goods used for personal consumption (C) Goods used for construction of an immovable property

(B) Goods stolen (D) All of the above

69. A Ltd. is engaged in making Chocolates. The company on Diwali, distributed the same chocolates to its employees. Can the company claim ITC in respect to the inputs used in making such gifts ?

(A) Yes (C) May be

(B) No (D) Company's discretion

70. Where a supplier of goods or services pays tax under sections 74, 129 and 130 (fraud, willful misstatement etc.), then receiver of goods can avail its credit:

(A) Yes (C) Yes, after receipt of goods or services

(B) No (D) Yes, after receipt of invoice for goods or services

71. M/s. X Ltd. supplied taxable goods from the factory after manufacture in the month of Oct 2018 for sale to a distributor for Rs. 8,00,000. M/s X Ltd has suppressed this transaction. However, he deposited the GST @12% on these goods on 10-1-2020 against show cause notice issued under Section 74 (when there is fraud) of the CGST Act, 2017 by the Central Tax Officer and passed the order accordingly. Whether ITC of GST so paid by X Ltd. is available to the recipient distributor supplier?

(A) Yes as supplier has paid it to the Government (C) Not admissible

(B) Yes but only if supplier issued ‘tax invoice’ covering this tax

(D) ITC is admissible if PO so allowed by passing an order

72. M/s. X Ltd. (face cream manufacturer) has supplied certain goods to a distributor. The goods were transported in own conveyances without E-way bill and invoices. PO intercepted vehicle and detained goods and vehicle as transportation was without coverage of requisite documentations. Such consignment was later on released when X Ltd. (owner of goods) comes forward to release the goods paying tax, interest and penalty in terms of Sec 129 of CGST Act. Whether ITC of GST so paid by X Ltd. is available to the recipient distributor supplier?

(A) Yes as supplier has paid it to the Government (C) Not admissible


(B) Yes but only if supplier issued ‘tax invoice’ covering this tax

(D) ITC is admissible if PO so allowed by passing an order

73. Determine the amount of Input tax credit admissible to PQR ltd. in respect of the following goods procured by it in the month of April, 2019 :

S. No. Inward supplies GST (Rs.)

1. Goods used in construction an additional floor of office building 28,800

2. Packing Materials used in a factory 6,000

3. Goods destroyed due to natural calamities (like flood in Kerala) 12,500

(A) Rs. 28,800 (C) Rs. 12,500

(B) Rs. 6,000 (D) Rs. 34,800

74. Calculate the amount of eligible ITC?

Particulars Amount of credit (Rs.)

Purchase of mobile phones for employees to be used for business purposes 20,000

Taxes paid on telephone expenses 5,000

Taxes paid on security services availed by registered person for his factory 18,000

Motor vehicle purchased for employees to be used for personal as well as business purposes

1,50,000

Motor vehicle purchased for transportation of goods within the factory of registered person 2,00,000

Taxes paid on food expenses incurred by registered person for his employees 2,000

Rent-a-cab facility given to employees as it is obligatory for the employer to provide it under an applicable law.

36,000

Taxes paid on purchase of cement and other material for renovation of the office room (not capitalized)

16,000

(A) Rs. 2,95,000 (C) Rs. 2,43,000

(B) Rs. 4,47,000 (D) Rs. 2,59,000

[ICAI Sample Questions Series - Adapted]

75. Honey Ltd is located in Delhi and engaged in manufacture of mechanical appliances. It submits the following information pertaining to inward supplies during Dec 20X1 — Taxable value of

inward supply (Rs.) GST charged

by supplier (Rs.)

Steel rods for manufacturing (received in factory on December 2, 20X1) (invoice is missing, not available in the records of X Ltd.)

7,50,000 1,35,000

Machine tools (received on December 7, 20X1) (payment is made on April 10, 20X2)

1,00,000 18,000

Stainless steel sheets (first instalment received on December 24, 20X1, second and final instalment will be received on January 10, 20X2) (invoice for both instalments received on December 26, 20X1, taxable value + GST : Rs. 5,90,000)

5,00,000 90,000

Tax consultancy given by a chartered accountant (time of supply : December 10, 20X1)

40,000 7,200

Air-conditioner for office (received in office on December 20, 20X1) (for income-tax purposes depreciation is claimed under section 32 on Rs. 32,000)

25,000 7,000

Heating system for canteen (received on December 28, 20X1, depreciation is claimed on taxable value excluding GST)

1,00,000 28,000

Corporate membership of Times Club (it will be used by directors to 50,000 9,000


entertain foreign collaborators only) The admissible ITC is of ……

(A) Rs. 53,200 (C) Rs. 1,43,200

(B) Rs. 1,88,200 (D) Rs. 62,200

76. A ltd. has procured following inward supplies during April, 2019:

No. Item GST paid (Rs.)

1. Goods used in constructing an additional floor of office building 28,800

2. Goods purchased for being used in repairing the factory shed and same has been capitalized in books

18,8000

3. Cement used for making foundation and structural support to Plant and Machinery 14,000

4. Goods used for repairing the office building and cost of such repairs is debited to profit and loss account

12,000

The admissible ITC is of ……

(A) Rs. 14,000 (C) Rs. 26,000

(B) Rs. 12,000 (D) Rs. 54,800

ITC in special circumstances – availment thereof – Sec 18(1)

77. ITC on goods purchased during pre-registration period is allowed if registration is applied for within _____________ days

from the date on which he is liable for registration.

(A) 15 (C) 90

(B) 30 (D) 60

78. Whether ITC on capital goods held in stock can be availed in case of new Registration / Voluntary Registration

(A) Yes (C) Yes, but of reduced GST


79. A registered person shall not be entitled to take input tax credit in respect of any supply of goods or services or both to him after the expiry of _____________ from the date of issue of tax invoice relating to such supply.

(A) 1 year (C) 3 years

(B) 2 years (D) 6 months

80. An assessee obtains new registration, voluntary registration, change of scheme from composition to regular scheme and from exempted goods / services to taxable goods / services. It can avail credit on inputs lying in stock. What is the time limit for taking said credit under Section 18(1)?

(A) 1 year from the date of invoice (C) 5 years from the date of invoice

(B) 3 years from the date of invoice (D) None of the above

81. In case of compulsory registration (either u/Sec 22 or Sec 24), input tax credit can be availed on —

(A) credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock held on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act provided application for registration is filed within 30 days from the due date

(C) stocks held on the day immediately preceding the date of application of registration under the provisions of this Act.

(B) stocks held on the day immediately preceding the date of grant of registration under the provisions of this Act.



82. In case of voluntary registration (in terms of Sec 25(3) of CGST Act), input tax credit can be availed _____________ .

(A) on stocks of inputs held on the day immediately preceding the date of grant of registration under the provisions of this Act.

(C) on stocks of inputs held on the day immediately preceding the date of application of registration under the provisions of this Act.

(B) on stocks of inputs and capital goods held on the day immediately preceding the date of grant of registration under the provisions of this Act.

(D) on stocks of inputs and capital goods held on the day immediately preceding the date of application of registration under the provisions of this Act.

83. Raj & Co., applied for voluntary registration under CGST Act, 2017 on 5th July, 2019 and the registration was granted on 15th July, 2019. Raj & Co., was having the stock available against the invoices for a period of 3 months old. Raj & Co., shall be eligible for input tax credit on such stock as held as on :

(A) 30th June, 2019 (C) 15th July, 2019

(B) 05th July, 2019 (D) 14th July, 2019

[CS Executive June 2018]

84. Eligibility of credit on capital goods in case of change of scheme from composition scheme to regular scheme

(A) Eligible during application for Regular scheme (C) Yes, immediately before the date from which he becomes liable to pay tax under the Regular scheme

(B) Not eligible (D) None of the above

ITC in special circumstances – transfer of ITC on transfer of business – Sec 18(3)

85. Can the unutilized input tax credit be transferred in case of change in constitution of business on account of de-merger?

(A) Credit cannot be transferred in any circumstances

(C) Yes, it will be transferred only if there is provision for transfer of liabilities

(B) No, it will be exhausted (D) It will be transferred only if it is shown in books of Accounts of transferor

86. The unutilised credit by the transferee of business shall be filed in form?

(A) Form GST ITC-02 (C) Form GST ITC-01

(B) Form GST ITC-03 (D) Form GST ITC-04


87. Vansh Ltd. a registered manufacturer demerged its entity into DG gold Ltd. and DG gold testing Ltd. The total value of Assets of Vansh ltd. is Rs. 45,00,000.

(which include furniture and fixture Rs. 10,00,000 two motor vehicles Rs. 5,00,000 (Rs. 2,50,000 each) plant and machinery Rs. 20,00,000, other assets Rs. 10,00,000)

Unutilized credit on account of CGST, SGST and IGST amounted to Rs. 56,000, Rs. 65,000 and Rs. 75,000 respectively. The above unutilized ITC does not include ITC on motor vehicle it is block credit as per sec. 17(5) of CGST Act. The value of asset of Vansh Ltd. is divided equally in DG Gold Ltd. and DG Gold testing Ltd. except the value of motor

vehicle. Motor vehicle is taken over by DG Gold Ltd. Discuss the eligibility of credit transferred to the new units an account of Demerger.

Calculate the value of asset in which ITC is divided between DG Gold and DG Gold Testing Ltd.

(A) DG Gold Rs. 25,00,000 and DG Testing Ltd. Rs. 20,00,000

(C) DG Gold Rs. 20,00,000 and DG Testing Ltd. rs. 20,00,000

(B) DG Gold Rs. 22,50,000 and DG Testing Ltd. Rs. 22,50,000

(D) DG Gold Rs. 22,50,000 and DG Testing Ltd. Rs. 20,00,000


88. Mr A was running business of supply of goods. He was GST registered proprietorship firm. He died due to heart attack. His only son, Prem, succeeded into his business. Prem has taken GST registration in terms of Sec 22 of CGST Act. Whether ITC lying unutilized in e-credit ledger of his father (linked to his father GSTIN) can be transferred to e-credit ledger (linked to GSTIN of Prem)?

(A) No, such unutilized credit shall lapse with death of proprietor

(C) Yes, such unutilized credit shall be transferred to Prem who has succeeded into the business and Sec 18(3) read with Rule 41 shall be applicable for such succession as they apply in case of transfer of business by some transferor to transferee

(B) Yes, such unutilized credit shall be transferred to Prem who has succeeded into the business but due to lack of transfer provisions will not be transferred


89. Mr. Bhagwanlal, a registered person under GST, was the proprietor of Restaurant. He died and left behind his wife and son on 15-08-2018. His son wants to continue the business of the deceased father.

The GST consultant gave the following advices to the son, how the son could continue the business of his deceased father. Which of the following option is correct in accordance with the provisions of GST law.

(A) The son should get himself registered under his own PAN and file Form ITC-02.

(C) The son should close the old firm and start new business under different name.

(B) The son can get the authorized signatory changed by approaching to the Proper Officer and can continue the same business.

(D) The son should do the business as his mother as the new proprietor and son should act as a Manager.

[ICAI Sample Question]

ITC in special circumstances – reversals thereof – Sec 18(4)

90. What will happen to the rest of credit carried forward in respect of a regular dealer switching over to composition scheme

under GST, after adjusting to the inputs held in stock?

(A) Carry forward the rest of the credit (C) Credit lapses

(B) Credit kept in abeyance till the taxable opts for normal scheme once again

(D) Electronic credit ledger will freeze with the credit available


91. Is Input tax fully restricted in case of switch over from taxable to exempt supplies?

(A) Yes (C) Proportionately restricted

(B) No (D) Not restricted

92. Is Input tax to be paid in case of switchover from taxable to exempt supplies

(A) Yes, equivalent to the credit in respect of inputs held in stock (including semi- finished and finished goods) and on capital goods held in stock

(C) Yes, equivalent to the credit in respect of inputs held in stock (including semi- finished and finished goods) and reduced ITC on capital goods held in stock

(B) No credit once taken is indefeasible (D) None of the above


ITC availed capital goods, now supplied/sold - ITC reversals – Sec 18(6)

93. In case of supply of plant & machinery on which ITC is taken, tax to be paid on is

(A) Amount equal to ITC availed less 5% for every quarter or part thereof

(C) Higher of (A) and (B)

(B) Tax on transaction value (D) Lower of (A) and (B)

94. M/s A Ltd. sold plant and machinery after being used in the manufacture of taxable goods for Rs. 4,00,000 on 1st November 20X1. GST is payable on transaction value of plant and machinery 18%. M/s A Ltd. had purchased this machine vide invoice dated 22nd November 20X0 for Rs. 5,50,000/- plus GST 18%.

M/s A Ltd. availed the credit on said plant and machinery. Find the amount payable by M/s A Ltd. under section 18(6) of the CGST Act, 2017.

(A) Rs 74,250 (C) Rs 99,000

(B) Rs 72,000 (D) Nil

Claim of ITC & Provisional acceptance thereof – Sec 41

Provisions of Sec 41 are out of scope of Nov, 2019 Examination.

Matching of ITC – Sec 42


Utilization of ITC – Sec 49(5)

95. Input Tax credit as credited in Electronic Credit ledger can be utilized for

(A) Payment of Interest (C) Payment of GST – under FCM or RCM

(B) Payment of penalty (D) None of the above

96. Mr A has ITC of IGST, CGST as well as SGST. What should be the ranking of using these ITC?

(A) IGST, CGST and SGST respectively (C) SGST, CGST and IGST respectively

(B) CGST, SGST and IGST respectively (D) Discretion of taxpayer

97. Cross utilization of ITC is not allowed between :

(A) SGST and CGST (C) IGST and CGST

(B) SGST and IGST (D) None of the above

98. M/s ABC Ltd is filing his GSTR-3B for the month of April, 2019. His total credit balance of inputs and total tax liability payable is given in the table below. He needs your guidance to understand the utilization of credit. Guide him with the rules towards credit utilization of IGST, CGST, SGST and cash payable towards tax liability.

Tax Total Credit Balance Total Tax liability payable

IGST 80,000 90,000

CGST 87,000 85,000

SGST 75,000 77,000

TOTAL 2,42,000 2,52,000


(A) IGST payable – 10,000, CGST Payable – 0, SGST payable – 2,000

(C) IGST payable – 0, CGST Payable – 2000, SGST payable – 2,000

(B) IGST payable – 8,000, CGST Payable – 0, SGST payable – 2,000

(D) IGST payable – 10,000, CGST Payable – 1,000, SGST payable – 1,000


99. Unadjusted ITC Credit at the end of a financial Year is carried forwarded to Next Financial Year except in the case of :

(A) Zero-Rated Supply (made under Bond / Letter of Undertaking)

(C) Both (A) and (B) above

(B) Inverted Tax Structure (D) All ITC Carried Forwarded without any Refund

Miscellaneous

100. A person has a single GST registration in respect of two different trade names. Can he set off input tax credit from one

trade name against the output tax liability of the other ?

(A) Yes (C) May be


101. Mr. Rahul Roy, proprietor of M/s. Royal Shoe & Company is running a business of manufacturing shoes with the brand name of ‘JUNOON’. The manufacturing unit is located in Delhi and registered under GST . However, due to low profitability in the business, he has decided to transfer his business to his friend Mr. Dilip Tijori. Mr. Dilip Tijori is already running the business of manufacturing shoes under a proprietorship firm named M/s Hawai Shoes & Company which is located in Mumbai and registered under GST.

Mr. Rahul Roy has approached you to help him with the issue of transfer of unutilized input tax credit in electronic credit ledger of M/s. Royal Shoe & Company to M/s Hawai Shoes & Company.

Advise Mr. Rahul Roy with the correct option in accordance with the provisions of the CGST Act, 2017:

(A) M/s. Royal Shoe & Company cannot transfer unutilised input tax credit in its electronic credit ledger to M/s Hawai Shoes & Company, as the proprietors are different.

(C) M/s. Royal Shoe & Company can transfer unutilized input tax credit in its electronic credit ledger to M/s Hawai Shoes & Company and it can be further utilized in setting off GST liability for a period upto the month of September following the year in which IT C was transferred.

(B) M/s. Royal Shoe & Company can transfer unutilized input tax credit in its electronic credit ledger to M/s Hawai Shoes & Company and it can further be utilized in setting off GST liability for succeeding period.

(D) M/s. Royal Shoe & Company cannot transfer unutilized input tax credit in its electronic credit ledger to M/s Hawai Shoes & Company but can claim refund of such unutilized input tax credit.

[CA Final RTP- Nov 2019]

102. Mr. Pankaj of Delhi supplied goods to Mr. Krishna of Delhi for Rs. 1 lakh, on which total GST was charged @18% Mr. Krishna, after purchase of goods, added 20% margin of profit (on cost) and sold the entire goods to Mr. Ravi of Delhi. The total amount of tax payable after claiming input tax on such transaction by Mr. Krishna is :

(A) Rs. 18,000 (C) Rs. 3,600

(B) Rs. 21,600 (D) None of the above

[CS Executive June 2018]

17 Input Tax Credit (Answers)

Input Tax Credit (Answers)

Items eligible for ITC – Inputs, capital goods and input services

1. (C) Any goods excluding capital goods which are used or intended to be used in the course or furtherance of business

Sec 2 (59) Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business

2. (C) Any goods which are capitalized in books of account and which are used or intended to be used in the course or furtherance of business

Sec 2 (19) Input means any goods which are capitalized in the books of accounts of the person claiming input tax credit and which are used or intended to be used by a supplier in the course or furtherance of business

3. (A) Yes

Whether to capitalize or not? – Prudent accounting principles shall be applied for.

GST officer cannot challenge accounting treatment done by supplier in his books if such accounting treatment is as per widely acceptable accounting principles.

Sec 2(19) Capital Goods means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business

4. (C) In one installment

Sec 16 Regarding availment of ITC, GST law treats input and capital goods equally.

5. (C) Yes as is an eligible input service

Sec 2 (60) Input service means any service used or intended to be used by a supplier in the course or furtherance of business.

Note: 1. It is immaterial whether such service expense is capitalized or not. 2. ITC of this service is not blocked by Sec 17(5).

6. (D) Supply may be used for ongoing business activity or for any activity which may lead to furtherance of existing business

7. (C) On such person

Sec 155 Recipient shall be liable to prove the eligibility of any ITC availed by it.

Eligible taxes – Input Tax credit

8. (D) GST paid on inward supplies including GST paid on import and GST paid under reverse charge

Sec 2 (62) Input Tax defined to mean all types of GST including GST paid on import of goods and GST paid under RCM.


9. (B) GST cess paid on intra-state inward supply of input

BCD = Non-GST tax – ITC not admissible GST Cess = GST – ITC admissible (it can be utilized only for payment of GST cess) GST paid on supply by composition supplier = GST element not shown on bill of supply – ITC not admissible

10. (A) IGST

VAT = Non-GST tax – ITC not admissible Excise = Non-GST tax – ITC not admissible BCD = Non-GST tax – ITC not admissible

Utilization of ITC – Sec 49

11. (D) Both (a) and (b)

Sec 2(82) Output Tax in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis

In simple words, Output tax = GST payable on outward supply [GST payable on inward supply under RCM = input tax = Not output tax]

Eligible person – Registered person – Sec 16(1)

12. (D) Registered person not operating under composition scheme u/Sec 10 or presumptive levy scheme under N/N 2/2019-CT

Sec 16(1) Registered person is eligible to avail ITC

Sec 10 Composition Supplier is not eligible to avail ITC.

N/N 2/2019 Supplier availing presumptive levy scheme (rough called new composition scheme for supplier of services) is not eligible to avail ITC.

13. (C) ITC is not available on inward supplies made by a composition tax payer.

Sec 10(4) Composition facility comes with condition as to non-availment of any ITC.

• For this reason only, Composition supplier is taxed at lower rates.

14. (D) Electronic Credit Ledger

Sec 16(1) ITC shall be credited to e-credit ledger of registered person.

Sec 49(2) ITC as self-assessed in the return of registered person shall be credited to his e-credit ledger.

Conditions for claiming ITC – Sec 16(2)

15. (D) None of the above

Sec 16(3) If a registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery in IT Act, 1961, then ITC on the said tax component shall not be allowed

Sec 17(1) If a registered person has used goods and/or services partly for the purpose of any business and partly for other purposes the ITC shall be restricted to the said business purposes.


Sec 17(2) If a registered person has used goods and/or services partly for taxable supplies including zero-rated supplies and partly for effecting exempt supplies then ITC shall be restricted to the said taxable supplies including zero-rated supplies

16. (D) All of the above

Sec 16(2) The above all conditions are mandatory for booking ITC

17. (C) Both

Sec 16 It lays down condition as to availment of credit.

16(1)(a) Recipient must be in possession of invoice or other specified documents.

16(1)(b) Recipient must be in possession of goods.

18. (B) No as one of the conditions of Section 16(2) is not fulfilled

Sec 16(2) 4 conditions for availment of ITC: All the 4 conditions shall be fulfilled for availment of ITC.

19. (C) Yes, in specific instances

Sec 16(2)(b) read with explanation

One of the condition is that recipient must receive the goods • In case of ‘bill to … ship to ….” transactions, the receipt of goods by the person shall be deemed

to be received by the recipient/buyer of goods. • Similarly, provisions have now been inserted as to receipt of service also. [CGST (Amendment) Act,

2018 – it has now been provided that “where the services are provided by the supplier to any person on the direction of such registered person then it shall be deemed that the registered person has received the goods and that registered person can take ITC”.

20. (B) ITC can be availed upon receipt of last installment.

Sec 16(2) The registered person shall be entitled to take credit upon receipt of the last lot or instalment where the goods against an invoice are received in lots or instalments

21. (B) Yes

Sec 16(2)(c)

ITC availed is valid only if supplier has paid such tax to the Government.

Sec 41 The credit of eligible ITC, as self-assessed in the return shall be credited on a provisional basis to electronic credit ledger. [GST law makes provision for this provisional allowance as ITC availment is subject to GST payment by corresponding supplier and that condition can be verified only post due date of payment. So pending verification of final GST payment by corresponding supplier, recipient was allowed to take ITC provisionally. Law intended to match this provisional ITC as per provisions of Sec 42 of CGST Act]

[Remarks by CAG latest report: As per GST provisions, ITC could not be claimed by a taxpayer unless it had been paid by the supplier, this was supposed to be ensured through the provisions of matching of invoices of suppliers and recipients through filing of returns GSTR-1 and GSTR-2 and generation of return GSTR-3 based on GSTR-1 and GSTR-2 filed by taxpayers, with taxpayers adding details of tax paid in GSTR-3. However, for the time being, filing of GSTR-2 had been kept in abeyance and taxpayers are allowed to claim ITC in GSTR-3B return without any such cross verification. Under GSTR-3B, ITC is claimed by the taxpayer o self-assessment basis.


22. (A) Rs. 1,10,000

Sec 16(2) As pre condition for availment of ITC is possession of invoice. Hence for Rs. 10,000 ITC will not be allowed as invoice is missing

Sec 16(2) As per proviso ITC will be allowed upon the receipt of last lot or installment where goods against invoice are received in lots or installments. Hence Rs. 1,00,000 ITC will not be allowed as it is 1st installment

23. (B) No as one of the conditions of Section 16(2) is not fulfilled

Sec 16(2)(a)

ITC availed is valid only if recipient in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents

[Note: • There is no provision as to provisional allowance of ITC pending receipt of goods or supporting

document. • Provisional allowance (under section 41) is only pending verification of GST payment by supplier.]

ITC claimed, but supplier remaining unpaid for more than 180 days – consequences thereof

24. (C) If payment is not made to the supplier within 180 days from the date of invoice

Proviso to Sec 16(2)

Supplier remaining unpaid for more than 180 days – recipient supplier who has availed ITC shall be required to make ITC reversal with interest @18% p.a.

25. (C) 180 days from the date of invoice


Supplier remaining unpaid for more than 180 days – recipient supplier who has availed ITC shall be required to make ITC reversal with interest @18% p.a.

However, as and when supplier is paid, ITC can be re-booked. [Author: Ofcourse, interest paid is loss for the recipient supplier]

26. (C) Yes, but proportionately to the extent of value and tax paid

27. (C) Value of supply is 5,00,000 but no pro-rata reversal is required

Sec 15 Value of supply = TV + amount incurred by recipient which was liability of supplier = 3,50,000 + 1,50,000 = 5,00,000


ITC reversals if value of supply and GST is not paid to supplier within 180 days of invoice No ITC reversal required in respect of amount incurred by recipient which was liability of supplier

(as such payment = deemed to be made to supplier)

ITC on CG, only if depreciation benefit not claimed on Input tax element – Sec 16(3)

28. (B) not avail ITC on the said tax component



29. (C) Input tax credit is eligible if depreciation on tax component is not availed


• Claim ITC of GST paid on capital goods + claim depreciation on GST exclusive price of capital goods

Time limitation for availing ITC – Sec 16(4)

30. (D) Due date of furnishing of the return under section 39 for the month of September following the end of financial

year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Sec 16(4) Time limitation for claiming ITC: Earlier of the following two: (a) Due date of return of Sept. month following end of relevant FY; (b) Actual date of filing of annual return of relevant FY;

31. (C) 20th October of the next financial year or the date of filing annual return whichever is earlier

Sec 16(4) Time limitation for claiming ITC: Earlier of the following two: (a) Due date of return of Sept. month following end of relevant FY; (b) Actual date of filing of annual return of relevant FY;

32. (C) Earliest of (a) or (b)

Apportionment of ITC– Sec 17(1) to (4)

33. (A) Taxable supplies for business purpose

ITC shall be restricted to the taxable supplies business purposes.

Sec 17(1) ITC shall be restricted to the extent of use of inward supplies for business purposes.

Sec 17(2) ITC shall be restricted to the extent use of inward supplies for making taxable supplies (non-exempt supplies but including zero-rating supply)

Sec 17(5) Apportionment for purposes of Sec 17(1) and Sec 17(2)- shall be made in prescribed manner. • Rule 42 prescribes manner of apportionment of ITC of inputs and input services. • Rule 43 prescribes manner of apportionment of ITC of capital goods.

34. (A) For business and non-business purpose

Sec 17(1) ITC shall be restricted to the extent of use of inward supplies for business purposes.

Sec 17(2) ITC shall be restricted to the extent use of inward supplies for making taxable supplies (non-exempt supplies but including zero-rating supply)

Sec 17(5) Apportionment for purposes of Sec 17(1) and Sec 17(2) - shall be made in prescribed manner. • Rule 42 prescribes manner of apportionment of ITC of inputs and input services. • Rule 43 prescribes manner of apportionment of ITC of capital goods. [Author: While Rule 42 provides for reversal of ITC (deemed 5% of common credit), no such reversals prescribed for Capital Goods under Rule 43.]


35. (C) Both taxable supplies and zero related supplies


36. (D) 1,50,950

Sec 17 Apportionment of ITC – ITC related to ‘exempt supply’

2(47) Exempt Supply includes non-taxable supply [Value = transaction value = 1,50,000]

17(3) Exempt supply also includes transactions in securities. [Value = 1% of sale price = 950]

Thus, value of exempt supply = 1,50,950/-

37. (C) Exempted supplies, reverse charge supplies, Transaction in securities, sale of land, sale of building

Sec 17(3) Transactions which are out of scope of supply • Transaction of sale of land and completed building shall be treated as ‘exempt supply’ -

Explanation to Sec 17(3)

• Other Transactions of Schedule III shall not be treated as ‘exempt supply’ - (Explanation as inserted by The CGST Amendment Act, 2018)

38. (B) Deemed Taxable Supply


Sec 16(1) of IGST Act

Supply of goods and/or services to a SEZ developer or a SEZ unit is Zero rated supply


Sec 9(3) of CGST Act

GST Rate @12%- then RCM not applicable

RCM not applicable- means GTA liable to pay GST

Sec 16 GTA = Registered Person (liable to pay GST) – Eligible o take ITC

Sec 17 If outward supply is exempt (as in certain cases), then related ITC not admissible

40. (C) Rs. 32,00,000

Sec 2(47) Exempt Supply = Nil rate of tax, Wholly exempt from tax and Non-taxable supply

Sec 17(3) Value of exempt supply = Supplies under reverse charge, Transactions in securities and Sale of land and building (subject to paragraph 5(b) of Schedule II)

Rule 43- explanation

While making apportionment of ITC based on TO (under rule 43 and rule 42), following shall not be considered as ‘TO of exempt supply” - Interest/ discount earned on service by way of extending loans, deposits or advances

Value of exempt supply for the purpose of reversal of input tax credit = Legal Services (RCM) = Rs. 32,00,000

Special option for Banking Company / FI (including NBFC) – Sec 17(4)

41. (A) Eligible Credit or 50% credit of the tax paid on inputs, input services and capital goods

Sec 17(4) A banking company or a financial institution including a non-banking financial company have the option either to avail ITC as per normal provisions (Sec 17(2)) or to avail 50% of the eligible input tax credit every month and the rest shall lapse


42. (C) Banking company can choose to exercise either option (a) or option (b)

Sec 17(4) A banking company or a financial institution including a non-banking financial company have the option either to avail ITC as per normal provisions (Sec 17(2)) or to avail 50% of the eligible input tax credit every month and the rest shall lapse

43. (B) No

Sec 17(4) Option of availing actual credit and 50% Ad-hoc ITC: Such option once opted shall not be withdrawn for remaining part of FY

Sec. 17(5) (Blocked ITC)


Sec 17(5)(a) ITC of passenger vehicles with seating capacity upto has been blocked (with exceptional allowance in certain cases)

45. (D) Mr A is entitled to avail ITC, but Mr B is not entitled to avail ITC.

Sec 17(5)(a) ITC of passenger vehicles with seating capacity upto has been blocked (with exceptional allowance in certain cases)

Mr A has used MV for providing taxable service by way of ‘transportation of passengers’ – hence, ITC not blocked (i.e., he can avail ITC)

Mr B has used MV for providing taxable service by way of ‘renting of MV’ – hence, ITC is blocked (i.e., he cannot avail ITC)

Latest Advance Ruling ……………………..- 2019 – AAR Motor vehicles purchased for providing Rent-A-Cab Services – ITC not admissible

Rent-A-Cab service (SAC-9966) is different/distinct from ‘passenger transportation service (SAC-9964)’.

• GST paid on the [purchase] of motor vehicles for supplying passenger transportation service is admissible for credit in terms of section 17(5)(a).

• GST paid on the [purchase] of motor vehicles for supplying rent-a-cab service is not admissible for credit in terms of section 17(5)(a).

46. (D) All cases where such usage is related to business

Sec 17(5)(a) ITC of passenger vehicles with seating capacity upto has been blocked (with exception allowance in certain cases)

ITC of passenger vehicles with seating capacity more than 13 passengers has not been blocked (meaning thereby allowed in all cases)


Sec 17(5)(aa)

ITC of vessels and aircrafts has been blocked (with exception allowance in certain cases)

[in addition to given cases, ITC is allowed where such vessel or aircraft are sued for transportation of goods – such usage may be by way of making taxable supply or for self-use]


48. (A) Yes

Sec 17(5)(ab)

ITC of services of repair and maintenance related to vessel referred in sec 17(5)(aa) is blocked. However ITC is available when vessels referred to in sec 17(5)(aa) are used for the purposes specified therein

In given case, ITC of vessel is admissible (as used for transportation of goods). Thus, ITC of repair and maintenance service is also admissible.

49. (A) Yes

ITC of passenger vehicle (with capacity upto 13 passengers is allowed). Thus, ITC of related insurance service is also admissible.

50. (A) Yes

Sec 17(5)(a) For D & Co., ITC of motor vehicle (if purchased) is allowed as used for making table supply of transportation of passenger

Sec 17(5)(b) Thus, if such MV is taken on lease, then ITC of such leasing service is also allowable to D & Co.

51. (D) ITC on purchase of Motor vehicle for use by director

Sec 17(5)(g) ITC is blocked when goods and/or services are used for personal consumption

[Note: Even otherwise, ITC is blocked of MV (presumed with seating capacity upto 13 passenger) – as being used for self-use / use of entity for travelling of directors]

52. (C) (i)

Sec 17(5) Blocked ITC

(i) Blocked (ii) Not blocked

Reason: ITC of passenger motor vehicle (with seating capacity upto 13 passenger ( including driver) = Blocked [However, allowed if used for imparting training of motor driving]

(iii) Not blocked Reason: ITC of vessels and aircraft = Blocked [However, allowed if used for imparting training (navigation training)]

(iv) Not blocked Reason: ITC of goods vehicle= not blocked (i.e., allowed in all cases)

53. (A) ITC is admissible

As per amended Sec 17(5) of CGST Act (w.e.f. 1st Feb, 2019), ITC of passenger vehicles of seating capacity upto 13 passengers is blocked. Thus, credit is denied only in respect of motor vehicles used for transport of passengers. ITC of all other motor vehicles is admissible. Cash carrying vans are not used for 'transport of passengers' but for 'transport of cash'; hence, they are eligible for credit. Therefore, Axis Bank can avail ITC of van purchased for transportation of cash/money.

54. (D) (i), (ii), (iii) & (iv)

None of these is passenger vehicles – so ITC not blocked in respect of any of these.


Sec 17(5) ITC of all above is blocked in general.

But, same is admissible if such inward supply is used for providing same category of outward supply or is used an element for providing composite or mixed supply. Further, ITC is admissible if such supply are availed by employer to fulfill his statutory obligation towards his employees.

[as amended by The CGST Amendment Act, 2018]



Sec 17(5) ITC of all above is blocked in general

57. (B) ITC is not admissible

Sec 17(5)(b)

ITC of catering services is blocked in general.


Sec 17(5)(b)

ITC of food items is blocked in general.

But, same is admissible as such inward supply is not used for providing same category of outward supply or is not used an element for providing composite or mixed supply - Hotel is using inward supply of cake for providing his lodging service or restaurant service (both

being composite supply). Thus, hotel is entitled to avail ITC of GST paid on cakes.


Sec 17(5)(b)

ITC of life insurance is blocked in general.

- ITC is admissible as such supply is availed by employer to fulfill his statutory obligation towards his employees.

Same is admissible as such inward supply is not used for providing same category of outward supply or is not used an element for providing composite or mixed supply Further, supply made by employer to employee to fulfill his statutory obligation under any law only then ITC is admissible

60. (D) Confectionery items for consumption of employees working in the factory

Sec 17(5)(b)

61. (D) IGST @18% paid on inputs purchased from a vendor in Bangalore where the supplier is registered in Rajasthan.

Sec 17(5) ITC is blocked : ITC of MV is blocked – 17(5)(a) : ITC of club membership fee is blocked – 17(5)(b) : ITC of goods used for personal consumption is blocked – 17(5)(g)

62. (D) all of the above

Sec 17(5) Services on which tax paid under composition levy – Blocked – Sec 17(5)(e) Goods distributed as free samples– Blocked – Sec 17(5)(h) Goods used for personal consumption – Blocked – Sec 17(5)(g)

63. (A) Engaged in same line of business

Sec 2(119) Works Contract Service = Service relating to immovable property (in provisioning of which property of material stands transferred to the recipient)

Sec 17(5)(c)

ITC is blocked of works contract service related to immovable property Exception: when used for further supply of works contract service (i.e., when engaged in same line of business)

64. (C) Plant and Machinery

Eligible Plant and Machinery in this regard have been defined – Explanation to Sec 17.

• Telecom towers and pipeline laid down outside factory are not eligible.


• Land and building shall not be eligible plant and machinery.


Explanation to Sec 17

It defines P&M to exclude all above specified items.

• Construction of all other P&M (immovable property)- ITC is admissible. • Even construction of structural support and foundation for such P&M – ITC is admissible.

66. (A) Rs. 19,00,000

Sec. 17(5) Blocked ITC

Motor Car (motor vehicle with seating capacity upto 13 capacity (including driver)) = ITC blocked But allowed to person who is in business of further supply of such motor vehicle - Thus, ITC of cars purchased is admissible (Rs. 20,00,000) - However, car destroyed in accident shall not be eligible for ITC (Rs. 1,00,000)

ITC of Works Contract service = as to construction of immovable property = ITC Blocked Thus, final admissible ITC = Rs. 19,00,000 (Rs. 20,00,000 – Rs. 1,00,000)

67. (A) Rs. 90,000

Sec 17(5) Blocked ITC

Bill of Building Repair service (works contract service in relation to immovable property as defined in Sec 2(119) of CGST Act, 2017) Billed Amount = Rs. 10,00,000 + Rs. 1,80,000 GST = Total Rs. 11,80,000 ITC of Works Contract service = as to construction of immovable property = ITC Blocked

Construction = covers repairs, renovation etc. to the extent such expenses are capitalized in books of accounts Repair to extent of capitalization (here, 50% of Rs. 10,00,000 = Rs. 5,00,000) = deemed to be construction service of immovable property = ITC disallowed

Rest ITC allowed = 18% on (50% of Rs. 10,00,000 i.e. Rs. 5,00,000) = Rs. 90,000


Sec 17(5)

69. (B) No

A Ltd. = manufacturer supplier

- Gifts of product manufactured by it = Not supply [as it is without consideration and not getting covered in Schedule I]

- Such gifting not being supply, no GST payable - However, related ITC to be reversed (being blocked) in respect of such gifts – Sec 17(5)(h)

Circular No. 92/11/2019-GST - dated 7th march, 2019 section 17(5)(h) provides that ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Thus, it is clarified that ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. - However, where the activity of distribution of gifts or free samples falls within the scope of “supply‟ on

account of the

70. (B) No

Sec 17(5)(i) ITC is blocked when any tax is paid in accordance with the provisions of sections 74, 129 and 130


71. (C) Not admissible


72. (C) Not admissible


73. (B) Rs. 6,000

Sec 17(5) (i) Goods used in construction an additional floor of office building is blocked u/s 17(5)(d) (ii) Packing Materials used in a factory is allowed as ITC (iii) Goods destroyed due to natural calamities is blocked u/s 17(5)(h)

74. (A) Rs. 2,95,000

1) Mobile Phone for employees but for business use – ITC allowed 20,000 2) Telephone services – ITC allowed 5,000 3) Security services for factory – ITC allowed 18,000 4) MV purchased (presuming passenger vehicle with upto 13 passengers capacity) – ITC blocked 5) MV purchased for transportation of goods – ITC allowed Rs 2,00,000 6) Food items for employees – ITC blocked 7) Ren-a-cab service availed to fulfill employer’s statutory obligation towards his employees – ITC

allowed 36,000 8) Goods purchased for use in renovation of office (immovable property) – expense not being

capitalized, it is not construction of immovable property – ITC admissible 16,000

Total admissible ITC = (20,000 + 5,000 + 18,000 + 2,00,000 + 36,000 + 16,000) = 2,95,000

75. (A) Rs 53,200

Computation of input tax credit available to Honey Ltd. for December 20X1 —

Different items Reasons Rs. Steel rods Input tax credit not available, invoice is missing — Machine tools Input tax credit is available for December 20X1, date of payment

is not irrelevant if payment is made within 180 days from the date of invoice

18,000

Stainless steel sheets

When input is received in instalments, input tax credit is available only on receipt of last instalment, input tax credit will be available for January 20X2

—

Tax consultancy Input services are eligible for input tax credit 7,200 Air-conditioner Input tax credit not available as GST is included in “actual cost”

for calculating depreciation under section 32 of Income-tax Act —

Heating system Input tax credit is available even if it is installed in canteen 28,000 Corporate membership

GST on club membership is not eligible for input tax credit —

Total 53,200

76. (C) Rs 26,000

Particulars (Rs.)

1. Goods used in construction of an additional floor of office building [As per Section 17(5)(d), ITC is not allowed in respect of goods or services or both received by a taxable person for construction of an immovable property (other than

Nil


plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Hence, input tax credit shall not be available in respect of gods used in construction of an additional floor of office building]

2. Goods purchased for being used in repairing the factory shed and same has been capitalized to the of factory Shed [As per Section 17(5)(d), input tax credit shall not be available in respect of goods or services or both received by a taxable person for construction of an immovable property [other than plant or machinery] on his own account including when such goods or services or both are used in the course or furtherance of business. Construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. Since the cost of repairs is capitalized in books, no credit of input tax paid on goods used shall be allowed.]

Nil

3. Cement used for making foundation and structural support to Plant and Machinery [As per Explanation to Section 17, "plant and machinery" means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports. Input tax credit is admissible in respect of goods or services or both received by at taxable person for construction of plant or machinery. Hence tax paid cement shall be eligible for input tax credit.]

14,000

4. Goods used for repairing the office building and cost of such repairs is debited to profit and loss account [As per section 17(5)(d), inputs used in construction are barred. As per the explanation, the expression "Construction" incudes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the immovable property. Goods used for revenue repairs are considered as an eligible input and credit shall be allowed on the same.]

12,000

ITC in special circumstances – availment thereof – Sec 18(1)

77. (B) 30

Sec 18(1) ITC in special circumstances

18(1)(a) First time registration when becoming liable for registration: ITC of input is allowed if person apply for registration within 30 days of becoming liable for registration

78. (B) No

Sec 18(1) ITC in special circumstances

18(1)(a) First time registration when becoming liable for registration: ITC of only input is allowed

79. (A) 1 year

Sec 18(2) Time limitation for taking special ITC= 1 year from date of invoice

80. (A) 1 year from the date of invoice


81. (A) 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 provided application for registration is filed within 30 days from the due date

18(1)(a) ITC in special circumstance New registrant entitled to take ITC of stock of inputs if registration is applied for within 30 days of becoming liable for registration.

[Stock as on day immediately preceding the date when person becomes liable for registration shall be


considered]

Rule 40 Manner of claiming ITC • ITC declaration (GST ITC 01) shall be filed over common portal (declaring stocks in relation to which

ITC is being claimed) • If total ITC of more than 2,00,000, then this declaration shall be certified by a CA or Cost Accountant.

82. (A) on stocks of inputs held on the day immediately preceding the date of grant of registration under the provisions of this Act.

18(1)(b) ITC in special circumstance New registrant entitled to take ITC of stock of inputs only. Stock on date immediately preceding the date of grant of registration becomes eligible for ITC.



83. (D) 14th July, 2019

18(1)(b) ITC in special circumstance New registrant entitled to take ITC of stock of inputs only. Stock on date immediately preceding the date of grant of registration becomes eligible for ITC.




84. (C) Yes, immediately before the date from which he becomes liable to pay tax under the Regular scheme

Sec 18(1)(c)

Switching over from composition scheme to regular scheme (such switch over may be at any point of time during the year) RP entitled to take ITC of stock of inputs as well as capital goods. Stock on date immediately preceding the date from which he becomes liable to pay GST under regular scheme (Sec 9) shall be considered.




ITC in special circumstances – transfer of ITC on transfer of business – Sec 18(3)

85. (C) Yes, it will be transferred only if there is provision for transfer of liabilities

Sec 18(3) Transfer of business (with transfer of liabilities) – transfer of ITC by transferor to transferee Transfer the ITC is allowed where there is a change in the constitution of the business but with the specific provisions for transfer of liabilities

Rule 41 Manner of transfer of ITC • Transferor shall file ITC declaration (GST ITC 02) shall be filed over common portal

[Transferor shall submit certification by CA or Cost Accountant to the effect that such sale, amalgamation, demerger etc. has been done with specific provision as to transfer of liabilities]

• Transferee shall accept this declaration.


86. (A) Form GST ITC-02

Sec 18(3) read with Rule 41

87. (A) DG Gold Rs. 25,00,000 and DG Testing Ltd. Rs. 20,00,000

Sec 18(3) Transfer of business (with transfer of liabilities) – transfer of ITC by transferor to transferee

Rule 41 In case of transfer by way of demerger, ITC transferred shall be in the ratio of value of assets transferred. Explanation: Value of Assets to include all assets, whether on such asset ITC was availed or not. (inserted on 29th March, 2019)

Computation of ITC transferrable:

DG Gold Ltd. DG Gold Testing Ltd.

Assets Distribution upon demerger

(a) Value of assets whose ITC was availed

Furniture 10,00,000 5,00,000 5,00,000

P& M 20,00,000 10,00,000 10,00,000

Others 10,00,000 5,00,000 5,00,000

20,00,000 20,00,000

(b) Value of assets whose ITC was not availed

Motor Vehicle 5,00,000 5,00,000 Nil

5,00,000 Nil

Total 25,00,000 20,00,000

88. (C) Yes, such unutilized credit shall be transferred to Prem who has succeeded into the business and Sec 18(3) read with Rule 41 shall be applicable for such succession as they apply in case of transfer of business by some transferor to transferee





CBIC Circular

Circular No. 96/15/2019- GST - For the purpose of Sec 18(3) and Rule 41, transfer or change in ownership of business will include

such transfer or change due to death of the sole proprietor. - Successor of business (legal heir) shall file requisite ITC transfer declaration (GST ITC 02) on behalf of

sole proprietor who has died. (he will also complete cancellation of registration formality) - Successor of business (legal heir) shall accept this declaration in capacity of transferee and then

ITC will stand transferred to his e-credit ledger.

89. (A) The son should get himself registered under his own PAN and file Form ITC-02.






CBIC Circular

Circular No. 96/15/2019- GST - For the purpose of Sec 18(3) and Rule 41, transfer or change in ownership of business will include

such transfer or change due to death of the sole proprietor. - Successor of business (legal heir) shall file requisite ITC transfer declaration (GST ITC 02) on behalf of

sole proprietor who has died. (he will also complete cancellation of registration formality) - Successor of business (legal heir) shall accept this declaration in capacity of transferee and then

ITC will stand transferred to his e-credit ledger.

ITC in special circumstances – reversals thereof – Sec 18(4)

90. (C) Credit lapses

Sec 18(4) Switching over from regular scheme to composition scheme (such switch over is effective from first day of next FY) RP liable to make ITC reversals i.r.o. of stock of inputs as well as capital goods. Stock on date immediately preceding the date of exercise of such option shall be considered. [Any surplus ITC in e-credit ledger after payment of above amount shall lapse]

Time limitation for = no time limitation

Rule 44 Manner of reversal of ITC • ITC declaration (GST ITC 03) shall be filed over common portal (declaring stocks in relation to which

ITC is being reversed) • Declaration shall be certified by a CA or Cost Accountant (if tax invoices of stock not available and

reversal is being made based on prevailing market prices)

91. (A) Yes

Sec 18(4) Switching over from taxable to exempt supply (such switch over is effective immediately) RP liable to make ITC reversals i.r.o. of stock of inputs as well as capital goods. Stock on date immediately preceding the date of exercise of such option shall be considered. [Any surplus ITC in e-credit ledger after payment of above amount shall lapse]





92. (A) Yes, equivalent to the credit in respect of inputs held in stock (including semi- finished and finished goods) and reduced ITC on capital goods held in stock

Sec 18(4) It provides for payment of ITC availed. (Payment may be from e-credit ledger or e-cash ledger) • For input stock, payment equivalent to ITC shall be made. • For CG stock, payment equivalent to reduced ITC shall be made. [Reduced ITC= ITC involved in

the remaining useful life in months, Rule 44]

• Any surplus in e-credit ledger left after payment shall lapse.






ITC availed capital goods, now supplied/sold - ITC reversals – Sec 18(6)

93. (C) Higher of above two

Sec 18(6) read with Rule 40 (2)

[Author: Reduced ITC – ironically, both Rule 40 and 44 covers this situation. ICAI has adopted Rule 40 which provides for reduction of 5% per quarter of part thereof]

94. (A) 74,250

Sec 18(6) read with Rule 40 (2)

Computation of amount payable by M/s A Ltd.

Reduced ITC on such used CG ITC taken on capital goods (5,50,000 x 18%) 99,000 Less: 25% reduction (No. of quarters = 5) (24,750) [5% x 5 = 25% reduction] Balance ITC 74,250 GST on transaction value of such goods

Tax on Transaction value (4,00,000 x 18%)

72,000

Therefore, M/s A Ltd. is liable to pay an amount of Rs. 74,250/-.

Claim of ITC & Provisional acceptance thereof – Sec 41


Matching of ITC – Sec 42


Utilization of ITC – Sec 49(5)

95. (D) None of the above

Sec 49 It lays down provisions as to payment of taxes and other liabilities.

ITC can be utilized only towards payment of ‘output tax’ - Output tax = GST payable on outward supplies (i.e., only FCM liability)

96. (C) IGST, CGST and SGST respectively

Sec 49 read with Sec 49-A read with Sec 49-B and Rule 88-A [w.e.f. 01st April 2019]

[Reason of amendment: Sec 18 of the IGST Act specifies that on utilization of ITC of IGST for payment of CGST and SGST/UTGST, the CG shall transfer the ITC amount from IGST Account (integrated tax account) to Central tax account or State tax account. - To ensure that such utilization happens and state gets funds transferred from integrated tax account,

changes have been made to provide that IGST shall be utilized first.


97. (A) SGST and CGST

Sec 49(5) Manner of utilization of ITC

- CGST and SGST cannot be cross utilized, - Similarly, CGST and UTGST also cannot be cross utilized.

98. (B) IGST payable – 8,000, CGST Payable – 0, SGST payable – 2,000

Computation of GST payable from cash ledger (ITC utilization as per new order as applicable from 1st April, 2019)

ITC ITC amount Liability 1st Adj

(IGST ITC)

Next Adj

(CGST ITC)

Next Adj

(SGST ITC)

Balance to pay in cash

Balance ITC

IGST 80,000 90,000 80,000 2,000 Nil 8,000 Nil

CGST 87,000 85,000 Nil 85,000 N.A. Nil Nil

SGST 75,000 77,000 ….. N.A. 75,000 2,000 Nil

99. (C) Both (A) and (B) above

Sec 54(3) In case of ‘zero-rate supply’ and ‘supply with inverted tax structure’, unutilized ITC can be claimed as refund.

• Hence, in these 2 cases, it is not mandatory to carry forward them further.

Miscellaneous

100. (A) Yes

Single GSTIN = Single RP - All credits going into a single e-credit ledger. - All liabilities going into a single e-liability ledger.

101. (B) M/s. Royal Shoe & Company can transfer unutilized input tax credit in its electronic credit ledger to M/s Hawai Shoes & Company and it can further be utilized in setting off GST liability for succeeding period.

Author Observation

Transferor = Rahul Roy (proprietor) = Registered in Delhi (Delhi State) Transferee = Dilip Tijori (proprietor) = Registered in Mumbai (Maharashtra State) Transferee (Dilip Tijori) shall be required to take separate registration for its newly required business in Delhi. (separate registration is required as newly acquired business will be operated from different state) - Once separate registration is obtained, related ITC shall be transferred to e-credit ledger of this new

Delhi registration.

102. (C) Rs. 3,600

Transaction 1:- Supplier :- Mr. Pankaj Recipient :- Mr. Krishna PoS :- Delhi Nature of Supply :- Intra State Supply Value :- Rs. 1 lakh @ 18% Liability of CGST @ 9% :- Rs. 9,000 SGST @ 9% :- Rs. 9,000


Transaction 2:- Supplier :- Mr. Krishna Recipient :- Mr. Ravi PoS :- Delhi Value :- Rs. 1 lakh + 20% profit on Rs. 1 Lakh = Rs. 1,20,000 @ 18% ITC :- CGST @ 9% :- Rs. 9,000 and SGST @ 9% :- Rs. 9,000 Nature of Supply :- Intra State Supply Liability of CGST @ 9% :- Rs. 10,800 SGST @ 9% :- Rs. 10,800 Net Liability to be paid in cash after utilizing ITC :-

• CGST @ 9% :- Rs. 10,800 – Rs. 9,000 = Rs. 1,800 • SGST @ 9% :- Rs. 10,800 – Rs. 9,000 = Rs. 1,800

Input Tax Credit (Questions) - CA Study€¦ · Input Tax Credit (Questions) 5 ITC on CG, only if...

Documents

Transcript of Input Tax Credit (Questions) - CA Study€¦ · Input Tax Credit (Questions) 5 ITC on CG, only if...