Let us assume that we are discussing Input Tax Credit in GST of India. Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sRead more
Let us assume that we are discussing Input Tax Credit in GST of India.
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sale product), you can reduce the tax you have already paid on inputs (Purchase).
Example For a manufacturer, tax payable on output (Final product) is Rs 500 and tax paid on input A is Rs 100, input B is Rs 50 and, input C is Rs50. You can claim INPUT CREDIT of Rs 200(100+50+50) and you only need to deposit Rs 300(500-200) in taxes.
Conditions- Only a Registered Person would be able to claim the benefit of Input Tax Credit of GST after satisfying the following:
- He is in possession of a Tax Invoice or any other specified tax-paid document.
- He has received the goods or services. Includes “Bill to ship” scenarios.
- Tax is actually paid by the supplier.
- The supplier has furnished the GST Return.
- To claim ITC, the buyer should pay the supplier for the supplies received (inclusive of tax) within 180 days from the date of issuing the invoice.
Claiming of ITC – Discussed by taking an example, seller A sold his goods to B. Now B who is a buyer will be eligible to claim the input tax credit on purchases based on the invoices when he makes further sales. Now,
- S will upload the details of all the tax invoices in GSTR 1.
- All the details in accordance with the sales to B will reflect in GSTR 2A, and the same data will be taken by B to file GSTR 2 (i.e. details of inward supply).
- B will accept the details about the purchase that has been made and uploaded by the seller, the tax on purchases will be credited to ‘Electronic Credit Ledger’ of B and he can adjust it against future output tax liability and get the refund.
Introduction In GST, a supply is a taxable event. This means whenever there is a supply of goods or services or both, GST is charged. Supply includes the exchange of goods or services between supplier and recipient by way of sale, barter, lease etc for consideration and in the course or furtheranceRead more
Introduction
In GST, a supply is a taxable event. This means whenever there is a supply of goods or services or both, GST is charged. Supply includes the exchange of goods or services between supplier and recipient by way of sale, barter, lease etc for consideration and in the course or furtherance of business. The rate of GST on any supply depends on the type of good or service supplied.
Composite supply and mixed supply are two special types of supplies, in which two or more goods or services or both are offered together in a bundle. As two or more goods are supplied together, the question arises at which rate the GST is to be charged on such supplies as such goods or services may have different rates of GST applicable to them. Sections 8 of the CGST act, 2017 deals with the tax liability of such supplies.
Composite supply
A composite supply is a type of supply in which two or more goods or services or both are supplied together in the ordinary course of business. Such goods or services are natural bundles. By natural bundle, we mean the goods or services are complementary to each, they are naturally provided together and are to be used along with each other.
For example, mobile phones and chargers are supplied as a bundle. This concept of the natural bundle is the main determiner of a composite supply.
In such supplies, there is one main product which is called the principal supply. Like in the above example, the mobile phone is the principal supply. Other goods or services are dependent on the principal supply.
A composite supply will be taxable as the rate of GST applicable on the principal supply.
For example, suppose the rate of GST on mobile phones is 18% and that on the charger is 12%, then the whole supply will be taxable at the rate of 18%.
Mixed supply
A mixed supply is a type of supply in which two or more goods or services or both are supplied together but they do not complement each other and are not a natural bundle. They are not supplied in the ordinary course of business, For example, a combo of bottled honey and face cream.
In mixed supply, the good or service which attracts the highest rate of GST is considered the rate of supply for the whole supply.
For example, suppose bottled honey attracts 5% GST and face cream 18% GST, then the whole supply will be charged 18% GST.
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