The claiming of input tax credit (ITC) under special circumstances in the Goods and Services Tax (GST) Act, 2017, is governed by Section 18 and Rule 40 of the Central Goods and Services Tax (CGST) Rules, 2017. Here’s a summary:

Eligible Scenarios:

• Registration:
  • A person who applies for registration within 30 daysof becoming liable and receives it can claim ITC on inputs held in stock on the day before their tax liability begins (Section 18(a)).
  • Similarly, someone taking registration under Section 25(3) can claim ITC on stock held on the day before registration is granted (Section 18(b)).
• Capital Goods:
  • Credit on capital goods can be claimed, but the tax paid on them is reduced by 5% per quarter(or part thereof) from the invoice date (Section 18(1)(c) & (d)).

Claiming Process:

• Form and Deadline:You need to file an electronic declaration in Form GST ITC-01 on the common GST portal within 30 days of becoming eligible (or within an extended period if notified by the Commissioner) (Rule 40(b)).
• Capital Goods Adjustment:When claiming credit for capital goods, remember to factor in the 5% per quarter reduction on the tax paid (Rule 40(a)).

EXAMPLE

While the GST Act, 2017, lays down the broad framework for claiming input tax credit (ITC), the specific procedures and timelines can be further defined by individual state GST rules. Therefore, providing an example specific to a particular state would be challenging as it might not be universally applicable.

However, I can offer a general example based on the Central GST (CGST) Rules, 2017, which can be helpful in understanding the process:

Scenario:

A registered taxpayer in Tamil Nadu receives a capital good (machinery) on July 1st, 2023, with an invoice value of Rs. 100,000 (inclusive of 18% GST). As per Section 18(1)(c) of the GST Act, ITC can be claimed on capital goods, but it’s subject to depreciation.

Steps to claim ITC:

1. Calculate depreciated value:Assuming a quarterly depreciation rate of 5%, the depreciation for the remaining half of the quarter (July-September 2023) is Rs. (100,000 * 5% * 0.5) = Rs. 2,500.
2. Reduced ITC amount:The eligible ITC for July-September 2023 becomes Rs. (18,000 – 2,500) = Rs. 15,500.
3. Declaration on GST portal:Within 30 days from becoming eligible (October 1st, 2023), the taxpayer needs to file a declaration electronically in Form GST ITC-01 on the GST common portal. This declaration should mention details of the capital good, including:
   • Date of receipt (July 1st, 2023)
   • Invoice value (Rs. 100,000)
   • Depreciated value for July-September 2023 (Rs. 2,500)
   • Claimed ITC for July-September 2023 (Rs. 15,500)

FAQ QUESTIONS

1. What are the special circumstances for claiming ITC under the GST Act?

The Act provides ITC in specific scenarios beyond regular purchases, including:

• Capital goods:ITC on capital goods is subject to reduction based on the time elapsed since their acquisition [CGST Rule 40(a)].
• Late receipt of invoices:ITC can be claimed for invoices received after filing GSTR-3B return, but within a specified timeframe and with proper declaration [CGST Rule 43].
• Reversal of input tax:Credit can be reversed in specific situations like return of goods, cancellation of supply, etc. [CGST Rules 42 & 43].
• ITC on exempt supplies:In certain cases, ITC on inputs used for making exempt supplies can be claimed under specific conditions [Section 43 of the Act].

1. How is ITC claimed in these special circumstances?

The process generally involves:

1. Meeting eligibility conditionsas prescribed by the Act and relevant rules.
2. Filing declarations or revisionsin the specified forms (e.g., GST ITC-01 for delayed invoices) on the common portal.
3. Adhering to timelinesfor claiming ITC or making reversals.

CASE LAWS

While case laws can provide valuable insights, the primary source for understanding how to claim input tax credit (ITC) in special circumstances under the GST Act, 2017, are the relevant sections of the Act and the associated rules.

Here’s a breakdown of the key provisions:

Relevant Sections of the GST Act, 2017:

• Section 16:This section outlines the general eligibility and conditions for claiming ITC.
• Section 17:This section deals with the apportionment of credit and lays out specific situations where ITC cannot be claimed (blocked credit).
• Section 18:This section specifically deals with claiming ITC in special circumstances, such as:
  • Clause (a):When a person registers for GST within 30 days of becoming liable and receives credit for input tax on stock held on the day before registration becomes effective.
  • Clause (b):When a registered person receives a refund of tax paid on inputs or capital goods.
  • Clause (c):When a registered person receives capital goods after paying tax and the rate of tax is subsequently reduced.
  • Clause (d):When a registered person receives input services after paying tax and the rate of tax is subsequently reduced.

Relevant Rules under the GST Act, 2017:

• CGST Rules, 2017: Chapter V – Input Tax Credit:This chapter elaborates on the manner, time, conditions, and restrictions for claiming ITC, including specific provisions for claiming ITC in special circumstances outlined in Section 18 of the Act.
  • Rule 40:This rule specifically deals with the manner of claiming ITC on capital goods under Section 18(c) and (d), requiring a reduction in the credit based on the time elapsed since the invoice date.
  • Rule 41:This rule deals with the time limit for claiming ITC in various scenarios, including specific provisions for claiming ITC under Section 18.

It’s important to note that case laws can interpret or clarify the application of these provisions in specific situations, but they don’t override the statutory provisions themselves.

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