ITC Under GST

INPUT TAX CREDIT

(Section 16 to 21)/(Rule 36 to 45)

CONTENT:

S.No.	Particulars	Section	Rules
1.	Eligibility and condition for taking tax Credit	16	36
2.	Apportionment of Credit and blocked credits	17	38
3.	Availability of credit in special circumstances	18	40,41
4.	Taking ITC in respect of inputs and Capital goods sent to job work	19	-
5.	Manner of distribution of credit by ISD	20	39
6.	Manner of Recovery of Credit distributed in excess	21	-
7.	Reversal of input tax credit in the case of non-payment of consideration.	-	37
8.	Manner of determination of input tax credit in respect of inputs or input serviceand reversal thereof.	-	42
9.	Manner of determination of input tax credit in respect of capital goods and reversalthereof in certain cases.	-	43
	Notification No.3/2018-CGST
10.	Manner of reversal of credit under special circumstances.	-	44
11.	Manner of reversal of credit of Additional duty of Customs in respect of Golddore bar.	-	44A
12.	Conditions and restrictions in respect of inputs and capital goods sent to the job worker.	-	45
	Notification No. 14/2018-CGST

Section 16: -Eligibility and condition for taking tax Credit

Section 16(1): -

Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person

Section 16(2): -

Notwithstanding anything contained in this section, no registered person shall beentitled tothe credit of any input tax in respect of any supply of goods or services or both tohim unless, -

(a) he is in possession of a tax invoice or debit noteissued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

Explanation:

For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(c) subject to the provisions of section 41, the tax charged in respect of such supply has been paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment.

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

Section 16(3): -

Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.

Section 16(4): -

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the 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.

Rule 36:Documentary requirements and conditions for claiming input tax credit. –

(1) The input tax credit shall be availed by a registered person, including the Input Service

Distributor, on the basis of any of the following documents, namely, -

(a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31;

(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax;

(c) a debit note issued by a supplier in accordance with the provisions of section 34;

(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports;

(e) an Input Service Distributor invoice or Input Service Distributor credit note or anydocument issued by an Input Service Distributor in accordance with the provisions of sub-rule (1) of rule 54.

(2) Input tax credit shall be availed by a registered person only if all the applicableparticulars as specified in the provisions of Chapter VI are contained in the said document,and the relevant information, as contained in the said document, is furnished inFORMGSTR-2 by such person.

(3) No input tax credit shall be availed by a registered person in respect of any tax thathas been paid in pursuance of any order where any demand has been confirmed on accountof any fraud, willful misstatement or suppression of facts.

Section 17: -Apportionment of Credit and blocked credits

Section 17(1): -

Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

Section 17(2): -

Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Section 17(3): -

The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Section 17(4): -

A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year

Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.

Rule 38:Claim of credit by a banking company or a financial institution. -

A banking company or a financial institution, including a non-banking financial company,engaged in the supply of services by way of accepting deposits or extending loans or advances that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance with the option permitted under sub-section (4) of that section, shall follow the followingprocedure, namely, -

(a) the said company or institution shall not avail the credit of, -

(i) the tax paid on inputs and input services that are used for non-business purposes; and

(ii)the credit attributable to the supplies specified in sub-section (5) of section 17, in FORM GSTR-2;

(b) the said company or institution shall avail the credit of tax paid on inputs and inputservices referred to in the second proviso to sub-section (4) of section 17 and notcovered under clause (a);

(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit admissible to the company or the institution and shall be furnished in FORM GSTR-2;

(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of sections41, 42 and 43, be credited to the electronic credit ledger of the said company or the institution.

Section 17(5): -

Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: —

(a) motor vehicles and other conveyances except when they are used–

(i)for making the following taxable supplies, namely: —

(A)further supply of such vehicles or conveyances; or

(B) transportation of passengers; or

(ii) for transportation of goods;

(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgeryexcept where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii)membership of a club, health and fitness center;

(iii)rent-a-cab, life insurance and health insurance except where––

the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iv.) travel benefits extended to employees on vacation such as leave or home travel concession;

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

(d) 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.

Explanation. –

For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10;

(f) goods or services or both received by a non-resident taxable person except on goods imported by him;

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

Section 17(6): -

The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.

Explanation. –

For the purposes of this Chapter and Chapter VI, the expression “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 but excludes—

(i) land, building or any other civil structures;

(ii) telecommunication towers; and

(iii) pipelines laid outside the factory premises.

Section 18:-Availability of credit in special circumstances

Section 18(1): -

Subject to such conditions and restrictions as may be prescribed—

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;
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;
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;

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.

Rule 40:Manner of claiming credit in special circumstances. -

(1) The input tax creditclaimed in accordance with the provisions of sub-section (1) of section 18 on the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or the credit claimed on capital goods in accordance with the provisions of clauses (c) and (d) of the saidsub-section, shall be subject to the following conditions, namely, -

(a) the input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section(1) of section 18, shall be claimed after reducing the tax paid on such capital goodsby five percentage points per quarter of a year or part thereof from the date of theinvoice or such other documents on which the capital goods were received by thetaxable person.

[(b) the registered person shall within a period of thirty days from the date of becoming eligible to avail the input tax credit under sub-section (1) of section 18, or within such further period as may be extended by the Commissioner by a notification in this behalf, shall make a declaration, electronically, on the common portal in FORM GST ITC-01 to the effect that he is eligible to avail the input tax credit as aforesaid:

Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by theCommissioner.]

(c) the declaration under clause (b) shall clearly specify the details relating to theinputs held in stock or inputs contained in semi-finished or finished goods held instock, or as the case may be, capital goods–

(i) on the day immediately preceding the date from which he becomesliable to pay taxunder the provisions of the Act, in the case of a claim underclause (a) of sub-section (1) of section 18;

(ii) on the day immediately preceding the date of the grant of registration,in the case of a claim under clause (b) of sub-section (1) of section 18;

(iii) on the day immediately preceding the date from which he becomes liable to pay tax under section 9, in the case of a claim under clause (c) ofsub-section (1) of section 18;

(iv) on the day immediately preceding the date from which the suppliesmade by the registered person becomes taxable, in the case of a claim underclause (d) of sub-section (1) of section 18;

(d) the details furnished in the declaration under clause (b) shall be duly certified bya practicing-chartered accountant or a cost accountant if the aggregate value of theclaim on account of central tax, State tax, Union territory tax and integrated taxexceeds two lakh rupees;

(e) the input tax credit claimed in accordance with the provisions of clauses (c) and(d) of sub-section (1) of section 18 shall be verified with the corresponding detailsfurnished by the corresponding supplier in FORM GSTR-1 or as the case may be,inFORM GSTR- 4, on the common portal.

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.

Rule 41: Transfer of credit on sale, merger, amalgamation, lease or transfer of a business.

(1) A registered person shall, in the event of sale, merger, de-merger,amalgamation, lease or transfer or change in the ownership of business for any reason,furnish the details of sale,merger, de-merger, amalgamation, lease or transfer of business, inFORM GST ITC-02, electronically on the common portal along with a request for transferof unutilized input tax credit lying in his electronic credit ledger to the transferee:

Provided that in the case of demerger, the input tax credit shall be apportioned in theratio of the value of assets of the new units as specified in the demerger scheme.

(2) The transferor shall also submit a copy of a certificate issued by a practicing-chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation,lease or transfer of business has been done with a specific provision for the transfer ofliabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by thetransferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee

in his books of account.

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 whollyexempt, he shall pay an amount, by way of debit in the electronic credit ledger or electroniccash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputscontained in semi-finished or finished goods held in stock and on capital goods, reduced bysuch percentage points as may be prescribed, on the day immediately preceding the date ofexercising 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.

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.

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 takenon the said capital goods or plant and machinery reduced by such percentage points as maybe prescribed or the tax on the transaction value of such capital goods or plant and machinerydetermined 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 determinedunder section 15.

Rule 40(2):

The amount of credit in the case of supply of capital goods or plant and machinery, forthe purposes of sub-section (6) of section 18, shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter or part thereof from thedate of the issue of the invoice for such goods.

Section 19:- Taking ITC in respect of inputs and Capital goods sent to job work

Section 19(1): -

The principal shall, subject to such conditions and restrictions as may beprescribed, be allowed input tax credit on inputs sent to a job worker for job work

Section 19(2): -

Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business.

Section 19(3): -

Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the jobworker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 withinone year of being sent out, it shall be deemed that such inputs had been supplied by theprincipal to the job worker on the day when the said inputs were sent out:

Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker.

Section 19(4): -

The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job worker for job work.

Section 19(5): -

Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on capital goods even if the capitalgoods are directly sent to a job worker for job work without being first brought to his placeof business.

Section 19(6): -

Where the capital goods sent for job work are not received back by the principal within a period of three years of being sent out, it shall be deemed that such capital goodshad been supplied by the principal to the job worker on the day when the said capital goodswere sent out:

Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker.

Section 19(7): -

Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.

Explanation.––For the purpose of this section, “principal” means the person referred to in section 143.

Section 20:- Manner of distribution of credit by ISD

Section 20(1): -

The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of adocument containing the amount of input tax credit being distributed in such manner as maybe prescribed.

Section 20(2): -

The Input Service Distributor may distribute the credit subject to the following conditions, namely:–

the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed;

the amount of the credit distributed shall not exceed the amount of credit available for distribution;

the credit of tax paid on input services attributable to a recipient of credit shallbe distributed only to that recipient;

the credit of tax paid on input services attributable to more than one recipientof credit shall be distributed amongst such recipients to whom the input service isattributable and such distribution shall be pro rata on the basis of the turnover in aState or turnover in a Union territory of such recipient, during the relevant period, tothe aggregate of the turnover of all such recipients to whom such input service isattributable and which are operational in the current year, during the said relevantperiod;

the credit of tax paid on input services attributable to all recipients of creditshall be distributed amongst such recipients and such distribution shall be pro rata onthe basis of the turnover in a State or turnover in a Union territory of such recipient,during the relevant period, to the aggregate of the turnover of all recipients and whichare operational in the current year, during the said relevant period.

Explanation.––For the purposes of this section,––

the “relevant period” shall be––

if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is tobe distributed, the said financial year; or
if some or all recipients of the credit do not have any turnover intheir States or Union territories in the financial year preceding the yearduring which the credit is to be distributed, the last quarter for whichdetails of such turnover of all the recipients are available, previous to themonth during which credit is to be distributed;

the expression “recipient of credit” means the supplier of goods or services or both having the same Permanent Account Number as that of theInput Service Distributor;

the term ‘‘turnover’’, in relation to any registered person engaged inthe supply of taxable goods as well as goods not taxable under this Act, meansthe value of turnover, reduced by the amount of any duty or tax levied underentry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and54 of List II of the said Schedule.

Rule39: Procedure for distribution of input tax credit by Input Service Distributor.

(1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the

following conditions, namely, -

(a) the input tax credit available for distribution in a month shall be distributed in thesame month and the details thereof shall be furnished in FORM GSTR-6in accordance with the provisions of Chapter VIII of these rules;

(b) the Input Service Distributor shall, in accordance with the provisions of clause (d),separately distribute the amount of ineligible input tax credit (ineligible under the provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible input tax credit;

(c) the input tax credit on account of central tax, State tax, Union territory taxand integrated tax shall be distributed separately in accordance with theprovisions of clause (d);

(d) the input tax credit that is required to be distributed in accordance with theprovisions of clause (d) and (e) of sub-section (2) of section 20 to one of therecipients ‘R1’, whether registered or not, from amongst the total of all therecipients to whom input tax credit is attributable, including the recipient(s)who are engaged in making exempt supply, or are otherwise not registered forany reason, shall be the amount, “C1”, to be calculated by applying thefollowing formula -

C1 = (t1÷T) × C

where,

“C” is the amount of credit to be distributed,

“t1” is the turnover, as referred to in section 20, of person R1 during the relevant

period, and

“T” is the aggregate of the turnover, during the relevant period, of all recipients

to whom the input service is attributable in accordance with the provisions of

section 20;

(e) the input tax credit on account of integrated tax shall be distributed as input taxcredit of integrated tax to every recipient;

(f) the input tax credit on account of central tax and State tax or Union territory taxshall-

(i) in respect of a recipient located in the same State or Union territory in whichthe Input Service Distributor is located, be distributed as input tax credit ofcentral tax and State tax or Union territory tax respectively;

(ii) in respect of a recipient located in a State or Union territory other than thatof the Input Service Distributor, be distributed as integrated tax and the amountto be so distributed shall be equal to the aggregate of the amount of input taxcredit of central tax and State tax or Union territory tax that qualifies fordistribution to such recipient in accordance with clause (d);

(g) the Input Service Distributor shall issue an Input Service Distributor invoice, asprescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issuedonly for distribution of input tax credit;

(h) the Input Service Distributor shall issue an Input Service Distributor credit note, asprescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit

already distributed gets reduced for any reason;

(i)any additional amount of input tax credit on account of issuance of a debit note to anInput Service Distributor by the supplier shall be distributed in the manner and subjectto the conditions specified in clauses (a) to (f) and the amount attributable to anyrecipient shall be calculated in the manner provided in clause (d) and such credit shallbe distributed in the month in which the debit note is included in the return in FORMGSTR-6;

(j) any input tax credit required to be reduced on account of issuance of a credit note tothe Input Service Distributor by the supplier shall be apportioned to each recipient inthe same ratio in which the input tax credit contained in the original invoice wasdistributed in terms of clause (d), and the amount so apportioned shall be-

i) reduced from the amount to be distributed in the month in which the creditnote is includedin the return in FORM GSTR-6; or

(ii) added to the output tax liability of the recipient where the amount so

apportioned is in the negative by virtue of the amount of credit under distribution

being less than the amount to be adjusted.

(2) If the amount of input tax credit distributed by an Input Service Distributor is reducedlater on for any other reason for any of the recipients, including that it was distributed to awrongrecipient by the Input Service Distributor, the process specified in clause (j) of subrule(1) shall apply, mutatis mutandis, for reduction of credit.

(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the InputService Distributor credit note specified in clause (h) of sub-rule (1), issue an Input ServiceDistributorinvoice to the recipient entitled to such credit and include the Input ServiceDistributor credit note and the Input Service Distributor invoice in the return in FORMGSTR-6 for the month in which such credit note and invoice was issued.

Section 21: -Manner of Recovery of Credit distributed in excess

Section 21: -

Where the Input Service Distributor distributes the credit in contraventionof the provisions contained in section 20 resulting in excess distribution of credit toone or more recipients of credit, the excess credit so distributed shall be recovered from such recipients along with interest, and the provisions of section 73 or section 74,as the case may be, shall, mutatis mutandis, apply for determination of amount to berecovered.

Rule 37: Reversal of input tax credit in the case of non-payment of consideration. -

(1)A registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof, the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to subsection (2) of section 16, shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of one hundred and eighty days from the date of the issue of the invoice:

Provided that the value of supplies made without consideration as specified inSchedule I of thesaid Act shall be deemed to have been paid for the purposes of the secondproviso to subsection (2) of section 16.

(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output taxliability of the registered person for the month in which the details are furnished.

(3) The registered person shall be liable to pay interest at the rate notified under sub-section(1) of section 50 for the period starting from the date of availing credit on such supplies tillthe date when the amount added to the output tax liability, as mentioned in sub-rule (2), ispaid.

(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for reavailingof any credit, in accordance with the provisions of the Act or the provisions of this

Chapter, that had been reversed earlier.

Rule 42: Manner of determination of input tax credit in respect of inputs or input services

and reversal thereof. -

(1) The input tax credit in respect of inputs or input services, whichattract the provisions of sub-section (1) or sub-section (2) of section 17, being partly usedfor the purposes of business and partly for other purposes, or partly used for effectingtaxable supplies including zero ratedsupplies and partly for effecting exempt supplies, shallbe attributed to the purposes of business or for effecting taxable supplies in the followingmanner, namely,-

(a) the total input tax involved on inputs and input services in a tax period, bedenoted as ‘T’;

(b) the amount of input tax, out of ‘T’, attributable to inputs and input servicesintended to be used exclusively for the purposes other than business, be denoted as‘T1’;

(c) the amount of input tax, out of ‘T’, attributable to inputs and input servicesintended to be used exclusively for effecting exempt supplies, be denoted as ‘T2’;

(d) the amount of input tax, out of ‘T’, in respect of inputs and input services onwhich credit is not available under sub-section (5) of section 17, be denoted as ‘T3’;

(e) the amount of input tax credit credited to the electronic credit ledger of registeredperson, be denoted as ‘C1’ and calculated as-

C1 = T- (T1+T2+T3);

(f) the amount of input tax credit attributable to inputs and input services intended tobe used exclusively for effecting supplies other than exempted but including zerorated supplies, be denoted as ‘T4’;

(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered personat the invoice level in FORM GSTR-2;

(h) input tax credit left after attribution of input tax credit under clause (g) shall becalled common credit, be denoted as ‘C2’ and calculated as-

C2 = C1- T4;

(i) the amount of input tax credit attributable towards exempt supplies, be denoted as‘D1’ and calculated as-

D1= (E÷F) × C2

where,

‘E’ is the aggregate value of exempt supplies during the tax period, and

‘F’ is the total turnover in the State of the registered person during the tax period:

Provided that where the registered person does not have any turnover duringthe said tax period or the aforesaid information is not available, the value of ‘E/F’shall be calculated by takingvalues of ‘E’ and ‘F’ of the last tax period for which thedetails of such turnover are available, previous to the month during which the saidvalue of ‘E/F’ is to be calculated;

Explanation:

For the purposes of this clause, it is hereby clarified that the aggregate

value of exempt supplies and the total turnover shall exclude the amount of any duty

or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and

entry 51 and 54 of List II of the said Schedule;

(j) the amount of credit attributable to non-business purposes if common inputs andinput services are used partly for business and partly for non-business purposes, bedenoted as ‘D2’, and shall be equal to five per cent. of C2; and

(k) the remainder of the common credit shall be the eligible input tax creditattributed to the purposes of business and for effecting supplies other than exemptedsupplies but including zero rated supplies and shall be denoted as ‘C3’, where, -

C3 = C2 - (D1+D2);

(l) the amount ‘C3’ shall be computed separately for input tax credit of central tax,State tax, Union territory tax and integrated tax;

(m) the amount equal to aggregate of ‘D1’ and ‘D2’ shall be added to the output taxliability of the registered person:

Provided that where the amount of input tax relating to inputs or inputservices used partly forthe purposes other than business and partly for effectingexempt supplies has been identified and segregated at the invoice level by theregistered person, the same shall be included in ‘T1’ and ‘T2’ respectively, and theremaining amount of credit on such inputs or input services shall be included in ‘T4’.

(2) The input tax credit determined under sub-rule (1) shall be calculated finally for thefinancial year before the due date for furnishing of the return for the month of Septemberfollowing theend of the financial year to which such credit relates, in the manner specifiedin the said sub-rule and-

(a) where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and‘D2’, such excess shall be added to the output tax liability of the registered person in themonth not later than the month of September following the end of the financial year towhich such credit relates and the said person shall be liable to pay interest on the said excessamount at the rate specified in sub-section (1) of section 50 for the period starting from thefirst day of April of the succeeding financial year till the date of payment; or

(b) where the aggregate of the amounts determined under sub-rule (1) in respect of‘D1’ and ‘D2’ exceeds the aggregate of the amounts calculated finally in respect of ‘D1’ and‘D2’, such excess amount shall be claimed as credit by the registered person in his return fora month not later than the month of September following the end of the financial year towhich such credit relates.

Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal

thereof in certain cases. -

(1) Subject to the provisions of sub-section (3) of section 16, theinput tax credit in respect of capital goods, which attract the provisions of sub-sections (1)and (2) of section 17, being partly used for the purposes of business and partly for otherpurposes, or partly used for effectingtaxable supplies including zero rated supplies andpartly for effecting exempt supplies, shall be attributed to the purposes of business or foreffecting taxable supplies in the following manner, namely,-

(a) the amount of input tax in respect of capital goods used or intended to be usedexclusively for non-business purposes or used or intended to be used exclusively foreffecting exempt supplies shall be indicated in FORM GSTR-2 and shall not becredited to his electronic credit ledger;

(b) the amount of input tax in respect of capital goods used or intended to be usedexclusively for effecting supplies other than exempted supplies but including zeroratedsupplies shall be indicated in FORM GSTR-2 and shall be credited to theelectronic credit ledger;

(c) the amount of input tax in respect of capital goods not covered under clauses (a)and (b),denoted as ‘A’, shall be credited to the electronic credit ledger and the usefullife of such goods shall be taken as five years from the date of the invoice for suchgoods:

Provided that where any capital goods earlier covered under clause (a) issubsequently covered under this clause, the value of ‘A’ shall be arrived at by31reducing the input tax at the rate of five percentage points for every quarter or partthereof and the amount ‘A’ shall be credited to the electronic credit ledger;

Explanation.-

An item of capital goods declared under clause (a) on its receipt shallnot attract the provisions of sub-section (4) of section 18, if it is subsequently coveredunder this clause.

(d) the aggregate of the amounts of ‘A’ credited to the electronic credit ledger underclause (c), to be denoted as ‘Tc’, shall be the common credit in respect of capital goodsfor a tax period:

Provided that where any capital goods earlier covered under clause (b) issubsequently covered under clause (c), the value of ‘A’ arrived at by reducing theinput tax at the rate of five percentage points for every quarter or part thereof shall beadded to the aggregate value ‘Tc’;

(e) the amount of input tax credit attributable to a tax period on common capital goodsduring their useful life, be denoted as ‘Tm’ and calculated as-

Tm= Tc÷60

(f) the amount of input tax credit, at the beginning of a tax period, on all commoncapitalgoods whose useful life remains during the tax period, be denoted as ‘Tr’and shall be the aggregate of ‘Tm’ for all such capital goods;

(g) the amount of common credit attributable towards exempted supplies, be denotedas ‘Te’, and calculated as-

Te= (E÷ F) x Tr

where,

‘E’ is the aggregate value of exempt supplies, made, during the tax period, and

‘F’ is the total turnover of the registered person during the tax period:

Provided that where the registered person does not have any turnover duringthe said tax period or the aforesaid information is not available, the value of ‘E/F’shall be calculated by taking values of ‘E’ and ‘F’ of the last tax period for which thedetails of such turnover are available, previous to the month during which the saidvalue of ‘E/F’ is to be calculated;

Explanation. -

For the purposes of this clause, it is hereby clarified that the aggregate valueof exempt supplies and the total turnover shall exclude the amount of any duty or tax leviedunder entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 ofList II of the said Schedule;

(h) the amount Te along with the applicable interest shall, during every tax period ofthe useful life of the concerned capital goods, be added to the output tax liability of theperson making such claim of credit.

(2) The amount Te shall be computed separately for central tax, State tax, Union territory tax

and integrated tax.

[Explanation –For the purposes of rule 42 and this rule, it is hereby clarified that the aggregate value of exempt supplies shall exclude:-

(a) the value of supply of services specified in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 42/2017-Integrated Tax (Rate), dated the 27th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1338(E) dated the 27th October, 2017;

(b) the value of services by way of accepting deposits, extending loans or advances in so far as the consideration is represented by way of interest or discount, except in case of a banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances; and

(c) the value of supply of services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India.”;

(Inserted vide Notification No. 3/2018-CGST)

Rule 44: Manner of reversal of credit under special circumstances. -

(1) The amount of inputtax credit relating to inputs held in stock, inputs contained in semi-finished and finishedgoods held in stock, and capital goods held in stock shall, for the purposes of sub-section (4)of section 18 or sub-section (5) of section 29, be determined in the following manner,namely, -

for inputs held in stock and inputs contained in semi-finished and finished goodsheld in stock, the input tax credit shall be calculated proportionately on the basis ofthe corresponding invoices on which credit had been availed by the registeredtaxable person on such inputs;

for capital goods held in stock, the input tax credit involved in the remaining usefullife in months shall be computed on pro-rata basis, taking the useful life as fiveyears.

(2) The amount, as specified in sub-rule (1) shall be determined separately for input taxcredit of central tax, State tax, Union territory tax and integrated tax.

(3) Where the tax invoices related to the inputs held in stock are not available, the registeredperson shall estimate the amount under sub-rule (1) based on the prevailing market price ofthe goods on the effective date of the occurrence of any of the events specified in subsection(4) of section 18 or, as the case may be, sub-section (5) of section 29.

(4) The amount determined under sub-rule (1) shall form part of the output tax liability ofthe registered person and the details of the amount shall be furnished in FORM GST ITC-03,where such amount relates to any event specified in sub-section (4) of section 18 and inFORM GSTR-10, where such amount relates to the cancellation of registration.

(5) The details furnished in accordance with sub-rule (3) shall be duly certified by apracticing-chartered accountant or cost accountant.

(6) The amount of input tax credit for the purposes of sub-section (6) of section 18 relatingtocapital goods shall be determined in the same manner as specified in clause (b) of subrule(1) and the amount shall be determined separately for input tax credit of central tax,State tax, Union territory tax and integrated tax:

Provided that where the amount so determined is more than the tax determined onthetransaction value of the capital goods, the amount determined shall form part of theoutput tax liability and the same shall be furnished in FORM GSTR-1.

Rule 44A: Manner of reversal of credit of Additional duty of Customs in respect of Golddorebar.-

The credit of Central tax in the electronic credit ledger taken in terms of theprovisions of section 140 relating to the CENVAT Credit carried forward which had accruedon account of payment of the additional duty of customs levied under sub-section (1) ofsection 3 of the Customs Tariff Act, 1975 (51 of 1975), paid at the time of importation ofgold dore bar, on thestock of gold dore bar held on the 1st day of July, 2017 or contained ingold or gold jewelleryheld in stock on the 1stday of July, 2017 made out of such importedgold dore bar, shall be restricted to one-sixth of such credit and five-sixth of such credit shallbe debited from the electronic credit ledger at the time of supply of such gold dore bar or thegold or the gold jewellery made therefrom and where such supply has already been made,such debit shall be within one week from the date of commencement of these Rules.

Rule 45: Conditions and restrictions in respect of inputs and capital goods sent to the jobworker.-

(1)The inputs, semi-finished goods or capital goods shall be sent to the job workerunder the cover of a challan issued by the principal, including where such goods are sentdirectly to a job-worker.

Provided that the challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal:

Provided further that the challan endorsed by the job worker may be further endorsed byanother job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal.”;

(Inserted vide Notification no. 14/2018-CGST dated 23^rd March 2018)

(2) The challan issued by the principal to the job worker shall contain the details specified inrule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from ajob worker or sent from one job worker to another during a quarter shall be included inFORM GST ITC-04furnished for that period on or before the twenty-fifth day of the monthsucceeding the said quarter[or within such further period as may be extended by theCommissioner by anotification in this behalf:

Provided that any extension of the time limit notified by the Commissioner of Statetax or the Commissioner of Union territory tax shall be deemed to be notified by theCommissioner.

(4) Where the inputs or capital goods are not returned to the principal within the timestipulated in section 143,it shall be deemed that such inputs or capital goods had beensupplied by the principal to the job worker on the day when the said inputs or capital goodswere sent out and the said supply shall be declared in FORM GSTR-1 and the principalshall be liable to pay the tax along with applicable interest.

Explanation.-

For the purposes of this Chapter,-

(1) the expressions “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17;

(2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17(a) the value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and

(b)the value of security shall be taken as one per cent. of the sale value of such security.