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Ayushi
AyushiCurious
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  2. Samar Sparsh
    This answer was edited.

    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:

    1. He is in possession of a Tax Invoice or any other specified tax-paid document.
    2. He has received the goods or services. Includes “Bill to ship” scenarios.
    3. Tax is actually paid by the supplier.
    4. The supplier has furnished the GST Return.
    5. 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.
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Simerpreet
SimerpreetHelpful
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  2. Rahul_Jose Aspiring CA currently doing Bcom
    This answer was edited.

    Under GST, Input Tax Credit (ITC) refers to the tax already paid by a person on input, which is available as a deduction from tax payable on output. This means that if you have paid tax on some purchases, then at the time of paying tax on the sale of goods, you can reduce it by the amount you alreadRead more

    Under GST, Input Tax Credit (ITC) refers to the tax already paid by a person on input, which is available as a deduction from tax payable on output. This means that if you have paid tax on some purchases, then at the time of paying tax on the sale of goods, you can reduce it by the amount you already paid on purchase and pay only the balance amount.

    EXAMPLE

    Suppose Ashok purchased goods worth Rs 100 while paying tax at 10%, that is Rs 10. He now sold the goods for Rs 200, with a tax payable of Rs 20. Now, Ashok can avail input tax credit of Rs 10 that he already paid for the purchase and hence the net tax payable is Rs 10 (20-10).

    METHOD OF UTILISATION OF ITC

    The central government collects CGST, SGST, UTGST or IGST based on whether the transactions are done intrastate or interstate.

    The amount of input tax credit on IGST is first used for paying IGST and then utilised for the payment of CGST and SGST or UTGST. Similarly, the amount of ITC relating to CGST is first utilised for payment of CGST and then for the payment of IGST. It is not used for the payment of SGST or UTGST. Meanwhile, the amount of ITC relating to SGST is utilised for payment of SGST or UTGST and then for the payment of IGST. Such amounts are not used for payment of CGST.

    We can see how Input Tax Credit is used from the below example and table:

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Aadil
AadilCurious
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  2. Pooja_Parikh Aspiring Chartered Accountant

    Goods and services tax (GST) is an indirect tax that was introduced in place of other indirect taxes like value-added tax, service tax, purchase tax, etc. It was introduced to ensure that only one tax would be applicable all over India. Reverse Charge is a mechanism where the liability to pay tax onRead more

    Goods and services tax (GST) is an indirect tax that was introduced in place of other indirect taxes like value-added tax, service tax, purchase tax, etc. It was introduced to ensure that only one tax would be applicable all over India. Reverse Charge is a mechanism where the liability to pay tax on goods and services lies on the recipient instead of the supplier.

    APPLICABILITY

    Reverse charge is applicable when:

    • It is specified by the CBIC for the supply of certain goods and services.
    • Goods are supplied by an unregistered dealer to a registered dealer.
    • There is a supply of services through an E-commerce operator.

    TIME OF SUPPLY

    As per reverse charge in the case of goods, the time of supply is the earliest of the three:

    • Date of receipt of goods
    • Date of payment
    • The date is immediately after 30 days from the date of issue of invoice from the supplier.

    For example, If goods were received by the supplier on 15th June, and the date of the invoice was on 3rd July but the date of entry in the books of the receiver was 25th June, then the time of supply of goods would be on 15th June.

    As per reverse charge in the case of services, the time of supply is the earliest of the two:

    • Date of payment.
    • Date immediately after 60 days from the date of issue of invoice by the supplier.

    For example, if the date of payment of services provided was on 16th July, and the date of issue of the invoice was on 15th May ( 60 days from 15th May is 14th July), then the time of supply of services would be 14th July.

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AbhishekBatabyal
AbhishekBatabyalHelpful
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  2. Ayushi Curious Pursuing CA

    Introduction Like, in the case of excise duty, the taxable event is the manufacture of goods, supply is a taxable event with respect to the Goods and Services Tax regime in India. A taxable event is an event on occurrence of which tax is charged. Excise duty is charged when any specified good is manRead more

    Introduction

    Like, in the case of excise duty, the taxable event is the manufacture of goods, supply is a taxable event with respect to the Goods and Services Tax regime in India. A taxable event is an event on occurrence of which tax is charged.

    Excise duty is charged when any specified good is manufactured, GST is charged when any good or service is supplied.

    Definition of Supply

    The concept of supply is of great significance to the GST architecture. It can be called the ‘bones to the body of GST’.

    Section 7 of the CGST defines ‘supply’.

    At first, I have provided the whole Section 7 which consists of four sub-sections:

    • 7(1)
    • 7(1A)
    • 7(2)
    • 7(3).

    Thereafter will be the explanation of each sub-section in simple language.

    Section 7

    Section 7(1) of the CGST Act, 2017 defines ‘supply’. As per section 7(1) of the CGST Act, 2017, the supply includes:

    • All forms of supply of goods and services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made for a consideration by a person in the course or furtherance of business
    • Importation of service, for a consideration whether or not in the course or furtherance of business and
    • The activities specified in Schedule I, made or agreed to be made with or without consideration.

    Section 7(1A) states, ‘where certain activities or transaction constitute as supply in accordance of with the provisions of sub-section (1), they shall be treated either as a supply of good or supply of services as referred to Schedule II.

    Section 7(2) states, ‘notwithstanding with anything contained in sub-section (1).

    • Activities and transactions stated specified in Schedule III or
    • Such activities and transactions undertaken by the Central government, state government or local authority in which they are engaged as public authorities, as may be notified by the government on the recommendation of the Council

    shall not be treated neither as a supply of goods nor a supply of services.

    Section 7(3) states ‘subject to sub-section (1), (1A) and (2), the government may, on the recommendation of the council specify, by the notification, the transaction that is treated as :

    • a supply of goods and not as a supply of services
    • a supply of services and not as a supply of goods.

    Explanation of Section 7 in simple terms.

    Section 7(1) (a) sets three parameters of an activity or transaction to be a supply.

    • Supply should be only of goods and services. Supply of anything other than goods or services like money, securities do not attract GST.
    • Supply should be made for a consideration
    • Supply should be made in the course or furtherance of business

    Any activity or transaction will be treated as a supply if the above parameters are fulfilled as per sub-section (1) clause (a).

    Section 7(1)(b) is actually an exception to the 3rd parameter of supply. Import of service for a consideration will be considered a supply even if it is not made in furtherance of business,

    Section 7(1)(c) states that item in the schedule I will be treated as supply whether there is consideration or not. This is an exception to the 2nd parameter.

    Section 7(1A) states any activity which is a supply as per sub-section (1), shall be classified either as a supply of goods or as a supply of service as per schedule II. There are many activities and transactions which have the characteristics of both goods and services.

    For example, dining in a restaurant.  Schedule II helps to eliminate this confusion and helps to classify such activities or transactions as either supply of goods or supply of services. As per Schedule II, dining or take-away from a restaurant is a supply of service.

    Section 7(2) states the activities which are neither supply of goods nor neither of services even if they fulfilled the condition of the sub-section (1).

    Section 7(3) says that the central government have the power to notify transactions that are to be treated as supply of goods nor as a supply of service or supply of services not as a supply of services

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Ayushi
AyushiCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    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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