Goods and service tax more popularly known as GST is knocking on the
door. Merits & demerits of GST would
be evaluated in due course of time however we need to get ready before its
entry in our system. Input tax credit system is the one of the core area of GST
where we can see major changes and benefits. Here just trying to brief the mechanism
of Input credit under GST.
Proposed GST has three type taxes to be levied CGST, SGST, and IGST. CGST
is tax levied by the Central Government while SGST is taxes levied by the State’
Governments while IGST is the tax which shall be levied by central Government
for transactions happened during inter-state supply.
Input tax credit
on CGST will be adjusted against the payment of CGST
Similarly input tax
credit on SGST will be adjusted against the payment of SGST.
Input tax credit
on IGST will be adjusted against the payment of IGST.
Now question arise
whether these can be used vice versa or not, answer is as follows:-
CGST can be used
for payment if IGST but not for the payment of SGST.
Similarly SGST can
be used for payment if IGST but not for the payment of CGST. However IGST can
be used for the payment of CGST or SGST if there is excess after payment of
IGST for the relevant period.
Under GST also
there would be some restriction on availment of input tax credit as exists in
present system of VAT/CENVAT. GST restrict the input tax credit for the
following types of transactions:-
à motor vehicles, except when they are supplied
in the usual course of business or are used for providing the following taxable
services—
(i) Transportation
of passengers,
(ii) Transportation
of goods,
(iii) Imparting
training on motor driving skills;
à High speed diesel
oil, motor spirit, aviation turbine fuel, petroleum crude oil, aviation
gasoline,
à goods or services provided in relation to
outdoor catering, beauty treatment, health services, cosmetic and plastic
surgery, membership of a club, health and fitness centre, life insurance,
health insurance and travel benefits extended to employees on vacation such as
leave or home travel concession, when such goods and/or services are
used primarily for personal use or consumption of any employee.
à Goods and/or services acquired by the
principal in the execution of works contract when such contract results in
construction of immovable property, other than plant and machinery;
à Goods acquired by a principal, the property in
which is not transferred (whether as goods or in some other form) to any other
person, which are used in the construction of immovable property, other than
plant and machinery;
à Goods and/or services on which tax has been
paid under section 8 of the Act (Compound levy)
à Goods and/or services used for private or
personal consumption, to the extent they are so consumed
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