GST Jamku AIAvailability of credit in special circumstances.
Section 18(1)
Subject to such conditions and restrictions as may be prescribed—
(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take 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;
(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take 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 of grant of registration;
(c) where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9: Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed;
(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable:
Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.
The law provides for specific situations where individuals can claim tax credit under certain conditions. Let's break it down:
Registration within Thirty Days (Section 18(1)(a))
If a person applies for registration within 30 days of becoming liable for it and is granted registration, they can claim credit for input tax. This applies to inputs held in stock and those in semi-finished or finished goods held in stock on the day just before becoming liable to pay tax under this Act.
Registration under Section 25(3) (Section 18(1)(b))
Individuals registering under sub-section (3) of section 25 can claim input tax credit for inputs in stock and those in semi-finished or finished goods held in stock on the day just before the date of registration.
Cessation of Tax Payment under Section 10 (Section 18(1)(c))
When a registered person stops paying tax under section 10, they can claim input tax credit for inputs in stock, semi-finished or finished goods held in stock, and capital goods on the day just before becoming liable to pay tax under section 9. However, there's a provision to reduce the credit on capital goods by a prescribed percentage.
Change from Exempt to Taxable Supply (Section 18(1)(d))
If a registered person's exempt supply of goods or services becomes taxable, they can claim input tax credit for inputs in stock and those in semi-finished or finished goods held in stock related to the formerly exempt supply. This also applies to capital goods exclusively used for the exempt supply on the day just before the supply becomes taxable. Similar to the previous case, the credit on capital goods may be reduced by a prescribed percentage.
These provisions aim to facilitate the availability of credit in special circumstances, ensuring fairness and practicality in the implementation of the tax system.
Additional Considerations
It's essential to note that the availability of credit is subject to conditions and restrictions as prescribed by the law. These measures are in place to regulate and streamline the process, ensuring that the benefits are claimed within the framework of the Act and related rules and regulations.
Section 18(2)
A registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.
Section 18(3)
Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.
Section 18(2) outlines a restriction on a registered person's entitlement to input tax credit. According to this provision, a registered person cannot claim input tax credit under sub-section (1) for any supply of goods or services made to them after one year from the date of issue of the tax invoice related to that supply.
Change in Business Constitution
Section 18(3) addresses situations where the constitution of a registered person undergoes changes due to events like sale, merger, demerger, amalgamation, lease, or business transfer, along with specific provisions for the transfer of liabilities. In such cases, the registered person is permitted to transfer any unutilized input tax credit in their electronic credit ledger to the business resulting from the sale, merger, demerger, amalgamation, lease, or transfer. The specific manner of this transfer is subject to prescription.
Heading In summary, these provisions set limitations on the timeline for claiming input tax credit and facilitate the transfer of such credits in cases of changes in business constitution.
Section 18(4)
Where any registered person who has availed of input tax credit opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption:
Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.
In certain situations, a registered person who previously benefited from input tax credit must make adjustments when choosing to pay taxes under section 10 or when the goods or services supplied by them become entirely exempt. This adjustment involves paying an amount, which is debited from the electronic credit ledger or electronic cash ledger. The payment is equal to the input tax credit related to inputs held in stock, inputs in semi-finished or finished goods held in stock, and on capital goods. However, this amount is reduced by a specified percentage, determined by the regulations.
Conditions for Adjustment
The adjustment is applicable on the day immediately preceding the date when the person decides to pay taxes under section 10 or the date when the goods or services supplied by them become wholly exempt. This ensures that the adjustment accurately reflects the circumstances at the time of the decision or exemption.
Provided Safeguard
Once the specified amount is paid, any remaining input tax credit in the electronic credit ledger becomes invalid. This provision ensures that the balance of input tax credit, if any, is not carried forward after the adjustment has been made.
By incorporating these provisions, Section 18(4) aims to streamline the process of transitioning between different tax payment options and adapting to changes in the tax status of supplied goods or services.
Section 18(5)
The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed.
In this section, we discuss how to calculate the amount of credit under sub-section (1) and the amount payable under sub-section (4). The calculation process is determined based on the guidelines prescribed for this purpose.
Credit Calculation
When determining the amount of credit under sub-section (1), specific rules and methods are followed as per the prescribed guidelines. This ensures a standardized approach to calculating the credit in a consistent manner.
Amount Payable Calculation
Similarly, when figuring out the amount payable under sub-section (4), a specific calculation process is applied. The guidelines provide clarity on how to assess the payable amount, ensuring accuracy and fairness in the calculation.
Prescribed Guidelines
The term "prescribed" refers to the rules and regulations established for this particular purpose. These guidelines serve as a framework for calculating both the credit and the amount payable. Adhering to these prescribed rules helps maintain transparency and uniformity in the calculation process.
In summary, Section 18(5) outlines the methodology for calculating credit and the payable amount, emphasizing the importance of following the prescribed guidelines for accurate and consistent results.
Section 18(6)
In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.
Understanding Capital Goods and Machinery Tax Payments
In situations where capital goods or plant and machinery are supplied, and the registered person has claimed input tax credit, there is a specific rule to determine the amount to be paid. This amount is equal to the input tax credit taken on the mentioned capital goods or plant and machinery. However, it is reduced by a certain percentage, as specified, or the tax calculated based on the transaction value, whichever is higher under section 15.
Conditions for Refractory Bricks, Moulds, Dies, Jigs, and Fixtures
There is a provision for specific items such as refractory bricks, moulds and dies, jigs, and fixtures when they are supplied as scrap. In such cases, the taxable person has the option to pay tax based on the transaction value of these goods, as determined under section 15.
In summary, this section outlines the calculation method for payments related to the supply of capital goods or machinery when input tax credit has been claimed. Additionally, it provides flexibility for certain items when supplied as scrap, allowing the taxable person to determine tax based on transaction value.