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MODULE 13 OTHER MISCELLANEOUS PROVISIONS
SECTION B
INPUT TAX CREDIT
MODULE
A QUICK REVIEW
Eligibility for taking ITC:
16(1): (a) Person should be registered under GST (b) Goods/Services should be used for business purpose
16(2): Conditions for taking ITC:
Conditions for taking ITC (All to be satisfied)
Possession of tax paying document
Receipt of goods or services
Tax leviable on supply actually paid to govt. Return has been filed
- If goods are received in lots, then entire ITC can be claimed only on receipt of last lot.
- Payment for invoice is to be made within 180 days. On non payment the ITC so claimed to be reversed with interest @18% p.a. The ITC so reversed can be claimed again on payment made to supplier.
The time limit of 180 days is not applicable in the following cases:
1. Supplies on which tax is payable under reverse charge.
2. Deemed supplies without consideration.
3. Expenses paid on behalf of the supplier by the recipient.
- If depreciation is claimed on GST component, then ITC shall not be claimed.
16(4) Time limit for availing ITC:
ITC related to any goods or services cannot be claimed after:
30th November of the end of the FY OR
5.2
SECTION A : GOODS & SERVICES TAX ACT & RULES
Filing of annual return – Whichever is earlier
The above-mentioned time limit is not applicable for availing credit again which was reversed earlier.
Rule 37A of CGST Rules, 2017: Reversal of input tax credit in case of nonpayment of tax by the supplier and re-availment thereof:
If Form 3B has not been filed by the supplier and recipient has claimed ITC as per GSTR-2B
Then the said ITC shall be reversed by the recipient on or before 30th November of the end of the FY.
If not reversed till 30th November then interest @ 18% p.a. applicable
When supplier has paid tax then the same can be reclaimed.
Section 17: Apportionment of credit & Blocked credits:
17(1): Goods or services are used partly for business purpose and partly for other purpose: 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.
17(2): Goods or services are used partly for effecting taxable supply and partly for effecting exempted supply: Where the goods or services or both are used by the registered person partly for effecting taxable supplies (including zero-rated supplies) and partly for effecting exempt supplies, 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).
Rule 42: Apportionment of credit on inputs and input services and reversal thereof:
Total input tax involved on inputs & input services in a tax period T
Less: Input tax on input services that are intended to be used exclusively for non-business purpose (T1)
Less: Input tax on inputs & input services that are intended to be used exclusively for exempt supplies (T2)
Less: Input tax on inputs & input services which are ineligible credit (Section 17(5)) (T3)
ITC credited to Electronic Credit Ledger C1
Less: ITC on inputs & input services that are intended to be used exclusively for taxable supplies including zero rated supplies (T4)
Common ITC available for apportionment C2
Step 2 – Compute credit attributable to exempt supplies (ineligible credit) by apportionment of common credit
D1 = (E/F) × C2
E = Aggregate value of exempt supplies during the tax period
F = Total turnover in the State during the tax period. Compute credit attributable to non-business purposes
Either comply with the provisions of section 17(2)
Or
Avail every month an amount equal to 50% of the eligible ITC on inputs, Capital goods and services and the rest shall lapse.
Option once exercised shall not be withdrawn during the remaining part of the financial year.
The restriction of 50% shall not apply to the tax paid on supplies made by one registered person to another registered person having the same PAN.
Section 17(5)-Blocked credits
Capital goods: Inputs & Input Services:
1. Motor vehicles used for transportation of persons with seating capacity of less than or equal to 13 persons (including driver)
1. Food, beverages, outdoor catering, beauty treatment, health services, cosmetic & plastic surgery, Life & health insurance
Exceptions:
SECTION A : GOODS & SERVICES TAX ACT & RULES
- making further supply of such motor vehicles
- transportation of passengers
- supply of imparting training on such vehicles
2. Vessels & Aircrafts:
Exceptions:
- making further supply of the same
- transportation of passengers
- training on navigating such vessels or ying aircrafts
- transportation of goods
3. General Insurance, servicing, R&M in relation to above mentioned vehicles, vessels & aircrafts
(If ITC of asset allowed then the expenses also allowed; if ITC of asset blocked then ITC of expenses also blocked)
Meaning of plant & machinery:
Exceptions: If supplied together as a mixed or composite supply then ITC can be claimed.
If provided by employer to employee under statutory obligation
2. Membership of a club, health and fitness centre
If provided by employer to employee under statutory obligation
3. LTA given to employees
Can be claimed only if given under statutory obligation
4. Works contract service for construction of immovable property:
Eligible if used as an input service for further supply of works contract service or is used for plant & machinery.
5. Self construction of immovable property:
Eligible if for construction of plant & machinery; value of goods or services not capitalized in books; when the construction is not on own account.
6. Inward supplies charges to tax under composition scheme
7. Inward supplies received by non resident taxable person except goods imported by him.
8. Inward supplies used for personal consumption.
9. Tax paid in fraud cases, detention, confiscation, etc.
“Plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural supports that are used for making outward supply of goods and/or services and includes such foundation or structural support, But excludes land, building or other civil structures telecommunication towers pipelines laid outside the factory premises.
Section 18: ITC in special circumstances: For claiming ITC:
Provision
Sec. 18(1)(a): Person got registered ≤ 30 days from date need arises
Sec. 18(1)( b ): Person voluntarily registered.
Sec. 18(1)( c ): Person who ceases to pay composition tax.
Sec. 18(1)( d ): Exempt supply becomes taxable.
Sec. 18(3): Change in constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business.
Goods eligible for ITC Condition
Inputs held in stock, WIP or F.G. as on the day immediately preceding the date from which he becomes liable to pay GST.
Inputs held in stock, WIP or F.G. as on the day immediately preceding the date of grant of registration
Inputs held in stock, WIP or F.G. and capital goods as on the day immediately preceding the date from which be becomes liable to pay GST under regular scheme. ITC on capital goods as stated in rule 40(1)(a) of the CGST Rules, 2017.
Inputs held in stock, WIP or F.G. and capital goods as on the day immediately preceding the date from which such supply becomes taxable. ITC on capital goods as stated in rule 40(1)(a) of the CGST Rules, 2017.
ITC remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, lease or transferred business
18(2): ITC not allowed to take under Sec. 18(1) in respect of goods > 1 Year from the date of issue of tax invoice.
ITC Capital goods sec. 18(1)(c) or (d) Xxx
Less: 5% p.q of a year or part thereof from the date of invoice (rule 40(1)(a) of the CGST Rules, 2017 (xx)
ITC allowed on C.G. XX
If the claim of ITC pertaining to CGST, SGST/UTGST, IGST put together exceeds 2,00,000, the declaration needs to be certified by a practicing Chartered Accountant/ Cost Accountant.
If ITC to be reversed:
Provision
Sec. 18(4): Person opted to pay GST u/s 10 or goods or services are wholly exempt.
Goods eligible for ITC Condition
Total ITC as on the day other than C.G. Xx
Less: input tax on RM, WIP or F.G. (xx)
Pay an amount through electronic cash ledger account (If excess ITC if any shall lapse). [In case of input tax credit on C.G. Xx
SECTION A : GOODS & SERVICES TAX ACT & RULES
Provision
Goods eligible for ITC Condition involved in the remaining useful life in months shall be computed on pro-rata basis, taking useful life as 5 Years (Rule 44(1)(b) of the CGST Rules, 2017]
Sec. 18(6): Supply of capital Goods ITC taken on Capital Goods
Less: 5% p.q. of a year or part thereof from the date of invoice (rule 40(2) of the CGST Rules, 2017
Balance ITC (i.e. Tax on notional value) or Tax on Transaction value u/s 15 –Whichever is higher
Section 19: Taking input tax credit in respect of inputs and capital goods sent for job work
ITC in cases of goods sent for job work
Inputs should be received back to the principal within 1 year of being sent out
Capital goods should be received back to the principal within 3 years of being sent out
However, where the inputs or capital goods are sent directly to a job worker, the period of 1 year/3 years shall be counted from the date of receipt of inputs by the job worker. Period of 1 year/3 years shall not apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.
If goods not returned then same shall be treated as supply.
Section 20: Input Service Distributor
Input Service Distributor (ISD) means an office of the supplier of goods or services or both which receives tax invoices towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax (CGST), State tax (SGST)/Union territory tax (UTGST) or integrated tax (IGST) paid on the said services to a supplier of taxable goods or services or both having same PAN as that of the ISD.
ITC attributable to specific recipient
Distributed to such recipient only
DISTRIBUTION OF CREDIT
ITC attributable to more than one recipient
ITC attributable to all recipients
Pro rata distribution
ITC to be distributed =
Turnover of recipient (having nexus with ITC) during relevant period = Turnover excludes central excise duty. State excise duty, Central sales tax and VAT
Turnover of all recipients (having nexus with ITC) during relevant period
Relevant period =
Previous nancial year OR
Last quarter prior to the month of distribution for which turnover of all recipients is available
Ineligible credit also to be distributed in the above manner
PAST EXAMINATION
QUESTIONS
OBJECTIVE QUESTIONS
Q1. A manufacturer who is a registered person under GST has purchased 10000 kgs of raw material during February, 2019, on which IGST of
` 1,00,000 has been paid. He has taken 100 kgs for personal use. 200 kgs were stolen from the factory. Only 80% of the raw materials were consumed
5.8
SECTION A : GOODS & SERVICES TAX ACT & RULES
during the month for production. The input tax credit available to him for February, 2019 is
(a) ` 99,000
(b) ` 97,000
(c) ` 98,000
(d) ` 1,00,000
[June 2019, 2 Marks]
Ans. (b) ` 97,000.
(ITC is not available in respect of goods taken for personal use as well as those stolen from the factory. The quantity of raw materials consumed in production is irrelevant.)
Q2. Time limit to pay the value of supply with taxes to avail the input tax credit is
(a) Three months
(b) Six months
(c) One hundred and eighty days
(d) Till the date of ling annual return or 30th September of following year whichever is earlier.
[Dec. 2019, 2 Marks]
Ans. (c) One hundred and eighty days.
Q3. M/s. A Ltd. appoints M/s B Ltd. for laying of pipelines inside its factory premises which resulting into movable property. For which M/s A Ltd. purchased pipelines for ` 12,00,000 plus GST 12%. On completion of works contract service M/s B Ltd for ` 2,50,000 plus GST 18%. Find the eligible input tax credit to M/s P Ltd.
(a) ` 1,44,000
(b) ` 45,000
(c) ` 1,89,000
(d) Nil
Ans. (d) Nil
[Dec. 2022, 2 Marks]
Q4. Under which of the following situations, input tax credit will be available under GST law?
(
a) Cars purchased by a manufacturing company for of cial use of its employees.
(
b) Aircraft purchased by a manufacturing company for of cial use of its CEO.
(
c) Maintenance and repair services availed by a company for a truck used for its nished goods.
(
d) General insurance taken on a car used by employees of a manufacturing company for of cial purposes.
[June 2023 (O), 2 Marks]
Ans. (c) Maintenance and repair services availed by a company for a truck used for its nished goods.
Q5. R, a registered person under normal provisions, purchased (first purchase) taxable goods from a registered supplier S on 1-5-2022 for ` 1,00,000 plus IGST at 18%. He has paid 40% to S within 180 days and balance is pending as on 1st June, 2023. R Purchased taxable goods from S on 2-11-2022 for ` 2,00,000 plus IGST at 18%. He has paid 60% to S within 180 days and balance is pending as on 1st June, 2023. As regards the availment of ITC and reversal thereof, the position is
(a) For rst and second purchases, entire ITC of ` 54,000 (18,000 + 36,000) has to be reversed by R
(
b) For both first and second purchases, entire ITC of ` 54,000 (18,000 + 36,000) need not be reversed by R
(c) For both first and second purchases, proportionate ITC of ` 25,200 (18,000 × 60% + 36,000×40%) need not be reversed by R
(
d) For the rst purchase, entire amount of ITC has to be reversed
and for second purchase, only 40% has to be reversed by R.
[June 2023 (N), 2 Marks]
Ans. (c) For both rst and second purchases, proportionate ITC of ` 25,200 (18,000×60% + 36,000×40%) need not be re-versed by R
Q6. Y, a registered person purchased taxable goods from S on 12-4-2022. Y was forced to reverse ITC to the tune of ` 3,00,000 since S did not furnish GSTR-3B till 30th November, 2022. Subsequently on 1-1-2023, S has furnished GSTR-3B. As regards Y, the option as regards fresh availment of the above ` 3,00,000 is:
(a) Y cannot avail the ITC in any future period
(b) Y can avail ` 1,50,000 in any subsequent tax period.
(c) Y can avail ` 3,00,000 in any subsequent tax period, without the prior permission of the Department.
(d) Y can avail ` 3,00,000 in any subsequent tax period, with the prior permission of the Department.
[June 2023 (N), 2 Marks]
Ans. (c) Y can avail ` 3,00,000 in any subsequent tax period, without the prior permission of the Department.
As per Rule 37A, if 3B has been filed by the supplier then ITC can be re-claimed by the recipient.
Q7. Mr. Sanjay, a registered taxable person pays ` 28,320/- for purchase of capital goods worth ` 24,000 with GST (18%) of ` 4,320/-. These capital goods are eligible for input tax credit. Mr. Sanjay is proprietor of a manufacturing firm and is entitled to claim depreciation on the above capital goods. His accountant thinks of the following entries:
1. He capitalizes the goods at ` 24,000 and claims depreciation on the same. For GST amount, he can claim input tax credit of ` 4,320.
2. He capitalizes the goods at ` 24,000 and claims depreciation on the same. For GST amount, he cannot claim input tax credit.
3. He capitalizes the goods at ` 28,320 and claims depreciation on the same. For GST amount, he can claim input tax credit of ` 3.542 (82 % of ` 4,320).
4. He capitalizes the goods at ` 28,320 and claims depreciation on the same. For GST amount, he cannot claim input tax credit. Which of the two treatments from the above are correct?
(a) 1, 3
(b) 1, 4
(c) 2, 3
(d) 2, 4
Ans. (b) 1, 4.
[Dec. 2023, 2 Marks]
Q8. The time limit beyond which if goods are not returned, the capital goods sent for job work shall be treated as supply:
(a) One year
(b) Five years
(c) Six months
(d) Three years
[Dec. 2023, 2 Marks; Dec. 2024, 2 Marks]
Ans. (d) Three years.
Q9. A manufacturer who is a registered person under GST has purchased 11000 kgs of raw material during February, 2023, on which IGST of ` 1,10,000 has been paid. He has taken 100 kgs for personal use. 200 kgs were stolen from the factory. Only 80% of
5.10
SECTION A : GOODS & SERVICES TAX ACT & RULES
the raw materials were consumed during the month for production. The input tax credit available to him for February, 2023 is:
(a) ` 1,09,000
(b) ` 1,07,000
(c) ` 1,08,000
(d) ` 1,10,000
[Dec. 2023, 2 Marks]
Ans. (b) ` 1,07,000.
Q10. Mr. DD a supplier of goods, pays GST under regular scheme. The amount of Input Tax Credit (ITC) available and output tax liability under different tax heads for a tax period are as under: -
Head Output tax liability (`) ITC Available (`)
CGST 60,500 68,000
SGST/ UTGST 60,500 49,000
IGST 60,500 75,000
Compute the minimum net GST payable in cash by Mr. DD and also closing balance of ITC of each head.
(a) Payable SGST ` 3,000 Balance of IGST ITC Nil and CGST ITC ` 7,500
(b) Payable SGST ` 1,500 Balance of IGST ITC Nil and CGST ITC ` 7,500
(c) Payable SGST ` 11,500 Balance of IGST ITC Nil and CGST ITC `17,500
(d) Payable SGST ` 6,500 Balance of IGST ITC Nil and CGST ITC ` 12,500
[Dec. 2024, 2 Marks]
Ans. There is no correct option for the given situation.
ITC of IGST set off against SGST payment (11,500) - 11,500
Balance ITC 3,000 7,500 -
Q11. Under GST input tax credit cannot be claimed on goods and services used as inputs if
(a) Goods are purchased on credit.
(b) Goods are received and utilized, the invoice is received after two weeks from the supplier.
(c) Good are destroyed by re. (d) Services are provided by a law rm on which GST has been paid under RCM.
[Dec. 2018, 2 Marks]
Ans. (c) Good are destroyed by re.
Q12. In a case where recipient of deemed export supplies claims the refund on such supplies, there is no restriction on such recipient in availing ITC of the tax paid on such supplies is a statement (true/not true)
[Dec. 2021, 1 Mark]
Ans. True
Q13. Mr. Rithvik a registered taxable person, was paying tax at composition scheme upto 30th August 2020. However, w.e.f. 31st August, 2020 Mr. Rithvik becomes liable to pay tax under regular scheme. If Input as on 30th August 2020 is ` 5,66,400 (inclusive of GST 18% ) and capital goods purchased for ` 7,60,000 (invoice date 25th July 2020, GST
Indirect Tax Laws & Practice (ITLP) |
CRACKER
AUTHOR : NIDHI MODY
PUBLISHER :
TAXMANN
DATE OF PUBLICATION : AUGUST 2025
EDITION : 2025 EDITION
ISBN NO : 9789371268967
NO. OF PAGES : 332
BINDING TYPE : PAPERBACK
DESCRIPTION
Indirect Tax Laws & Practice | CRACKER is a focused exam resource for CMA Final (Group III –Paper 14), expertly designed to ensure thorough preparation and high performance. Covering all solved past exam questions up to June 2025, it blends analytical insights, step-by-step solutions, and module-wise mapping to bridge conceptual learning with exam success. The Present Publication is the 1st Edition for the Dec. 2025/June 2026 Exams. This book is authored by CA. Tarun Agarwal, with the following noteworthy features:
• [Comprehensive Coverage of Solved Past Exam Papers] Includes all relevant CMA-Final Indirect Tax exam questions fully solved, up to June 2025
• [Module-wise Marks Distribution & Trend Analysis] Visual breakdown of marks across modules, enabling students to identify high-weightage areas and prioritise their revision
• [Tabular Summaries] Each chapter opens with a tabular summary for quick and easy revision
• [Module-wise Comparison with Study Material] Direct mapping of chapters to the CMA Study Material for focused preparation
• [Examiner-style Step-by-step Solutions] Solutions are presented in a clear, structured format that mirrors examiner expectations
• [Designed for the Latest Syllabus] Updated as per the 2022 syllabus and recent legal changes, including FTP 2023
• [Ideal for Exam Revision] The CRACKER format is tailored for quick last-mile revision and self-assessment
• [Authored by an Expert] CMA Nidhi Mody ensures academic accuracy and clarity throughout
• [Comprehensive and Practice-driven] Addresses all needs—from conceptual clarity to exam strategy
