GST – ITC

CHAPTER 10 - GST: INPUT TAX CREDIT (SEC 16

TO SEC 21)

PROBLEM
Q 1 – From the following information determine the amount of Input tax credit
admissible to ABC Ltd. in respect of various inputs purchased during the month of
September, 2019.
Inward supplies GST (Rs.)
(1) Goods purchased without invoice 25,000
(2) Goods purchased from PQR Ltd. (Full Payment is made by ABC Ltd to 1,20,000
PQR Ltd. against such supply but tax has not been deposited by PQR
Ltd.)
(3) Purchases of goods not to be used for business purposes 18,000
(4) Purchases of goods from TT Ltd. (Invoice of TT Ltd. is received in month 24,000
of September 2019, but goods were received in month of October
2019)
(5) Goods purchased against valid invoice from FF Ltd. Tax has been 36,000
deposited by FF Ltd. ABC. Ltd. has made payment to FF- Ltd. for such
purchases in the month of October 2019.
Solution: Computation of admissible ITC to ABC Ltd. for the month of September, 2019
(1) Goods purchased without invoice [WN-1] 0
(2) Goods purchased from PQR Ltd. [WN-2] 0
(3) Purchases of goods not to be used for business purposes [WN-3] 0
(4) Purchases of goods from TT Ltd. (Invoice of TT Ltd. is received [WN-4] 0
in month of September 2019, but goods were received in
month of October 2019)
(5) Goods purchased against valid invoice from FF Ltd. tax has [WN-5] 36,000
been deposited by FF Ltd. ABC Ltd. has made payment to FF
Ltd. for such purchases in the month of October 2019.
Total admissible Input Tax credit for the month of September 2019 36,000
Working Notes:
(1) No Input tax credit will be available since ABC Ltd. is not in possession of valid tax
paying document.
(2) As per Section 16(2), no registered person shall be entitled to the credit of any
input tax in respect of any supply of goods unless the tax charged in respect of
such supply has been actually paid to the Government. Since PQR Ltd. has not
deposited the tax to the credit of Government, no ITC can be claimed by ABC Ltd.

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(3) A registered person shall be entitled to take input tax credit on goods which are
used or intended to be used in the course or furtherance of his business. Since
ABC Ltd. has purchased the goods for non business purpose, hence no credit will
be admissible on such purchases.
(4) Input tax credit is admissible only when registered person has received such
goods. Since the goods are received in the month of October, 2019, input tax credit
cannot be taken in the month of September, 2019.
(5) Input tax credit shall be admissible in month of September, 2019, even if payment
is made by ABC Ltd. in month of October, 2019.

Q 2 - S Ltd. a registered manufacturer of Jaipur entered in a contract with a supplier for

supply of Input 'X' in October, 2019. As per contract it was agreed that 10,000 kgs of Inpul
'X’ will be supplied for Rs. 7,28,000 (inclusive of CGST and SGST @ 6% each) in 4 lots. Invoice
of Rs. 7,28,000 has been issued with supply of first lot of Input 'X'. Following further
information has been provided regarding supply of Input received in subsequent lots.
Briefly explain whether S Ltd. eligible to take credit on proportionate basis.
Input 'X (in lots) Quantity in Kgs Date of Receipt of Supply
First lot 2,500 19-10-2019
Second lot 3,000 21-10-2019
Third Lot 1,500 12-11-2019
Fourth Lot 3,000 01-12-2019

Solution: No, S Ltd. is not eligible to take credit on proportionate basis. As per first proviso
to Section 16(2), where the goods against an invoice are received in lots or installments,
the registered person shall be entitled to take credit upon receipt of the last lot or
instalment. Therefore, in the given case Input 'X' has been received in lots hence, the credit
of tax of Rs. 78,000 i.e. (Rs. 7,28,000  12  112) paid on such input shall be taken by S Ltd.
only after receipt of fourth lot i.e., 01-12-2019.

Q 3 - XYZ Ltd. purchased goods valuing Rs. 6,00,000 (exclusive of CGST and SGST @ 9%
each) under the cover of invoice dated 25-12-2019. The company made payment to the
supplier on I he same date-. Since there was a doubt regarding admissibility of tax credit
on such inputs, the companv did not lake the input tax credit at the time of receipt of
input. The company obtained clarification from a legal consultant who opined that the
goods were eligible as inputs under Input tax Credit Rules. The opinion was received on
05-05-2020. The company now wants to avail Input tax credit of the tax paid on such
inputs. Can it do so? The company has filed its annual return for the year 2019-20 on 12-08-
2020.
Solution: As per 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—

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(a) 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 pertains; or
(b) furnishing of the relevant annual return,
In this case the inputs were purchased by invoice dated 25-12-2019, hence Input tax credit
in respect of such inputs can be taken on earlier of following dates —
 20-10-2020 being due date of furnishing return of month of September, 2020; or
 12-08-2020 being the date of furnishing of annual return.
Since, XYZ Ltd. can avail credit of input tax paid on inputs till 12-08-2020. Therefore, it can
avail credit of CGST Rs. 54,000 and SGST of Rs. 54,000 on 05-05-2020.

Q 4 - A registered supplier of taxable goods supplied goods valued at Rs. 2,24,000 (inclusive
of CGST Rs. 12,000 and SGST Rs. 12,000) to Mohan Ltd. urder the forward charge on 15-08-
2019 for which tax invoice was also issued on the same date. The inputs were n-reived by
Mohan Ltd. on 15-08-2019. Mohan Ltd. availed credit of Rs. 24,000 on 18-08-2019. But
Mohan Ltd. did not make any payment towards such supply along with lax thereon to the
supplier. Is Mohan Ltd. eligible to avail input tLax credit on such supply? What are the
consequences of such non-payment by Mohan Ltd.?
Discuss input tax credit provisions if Mohan Ltd. makes the payment of Rs. 2,24,000 to the
supplier on 18-03-2020.

Solution : As per section 16 of the CGST Act, 2017, Mohan Ltd. is eligible to avail input tax
credit (ITC) of the tax paid on inputs received by it on the basis of the invoice issued by
the supplier provided other conditions for availing ITC are fulfilled.
Payment of value of the goods along with the tax to the supplier is not a pre-requisite
at the time of availing credit, but Mohan Ltd. has to pay the said amount within 180 days
from the date of issue of invoice.
If Mohan Ltd. does not make payment within 180 days from the date of invoice : If
Mohan Ltd. did not make any payment towards such supply along with tax thereon to
the supplier, it has to report the fact of non-payment in the ITC return (GSTR-2) for the
month immediately following the period of 180 days from the date of the issue of the
invoice. When such report is made, ITC of Rs. 24,000 will be added to his output tax liability.
Mohan Ltd will be required discharge this liability with interest @ 18% p.a. from the date
of availing credit till the date when the amount added to the output tax liability [Second
proviso to section 16(2) of the CGST Act, 2017 read with rule 37 of the CGST Rules, 2017].
Mohan Ltd liable to general penalty not exceeding Rs. 25,000 : If Mohan Ltd. does not
pay the supplier as mentioned above, subject to the provisions of section 126 of the CGST
Act, 2017, a general penalty which may extend to Rs. 25,000 may also be levied for such
contravention by Mohan Ltd. u/s 125 of the CGST Act, 2017].
Re-credit of input tax if payment made after 180 days : If Mohan Ltd. makes the payment
of Rs. 2,24,000 (Value + tax) to the supplier on 18-03-2020 i.e., after the expiry of 180 days
from date of issue of invoice, Mohan Ltd. will have to report the default in the monthly
report, add the amount of ITC to his output tax liability and when the payment is made
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to the supplier, take the credit of Rs. 24,000. The output tax liability added will have to
paid with interest @18% for the period from the date of availment of credit till the date
of addition of the amount to the output taxability.

Q 5 - X Ltd. a registered manufacturer engaged in taxable supply of goods procured the

following goods during the month of October. The same has been capitalized in the books
of accounts of X Ltd. Determine the amount of Input tax credit available by giving
necessary explanations for treatment of various items.
Inward supplies GST (Rs.)
(1) Electrical transformers used in the factory 2,16,000
(2) Moulds and dies used in the factory 26,000
(3) Pollution control equipment used in the factory 2,34,000
(4) Capital goods purchased on which depreciation has been taken on full 1,35,000
value including input tax thereon
(5) Capital goods used as parts purchased from supplier who paid tax
of Rs. 10,000 under composition scheme and the composite tax has
not been collected from X Ltd.
Solution: Computation of Input tax credit available to X Ltd. (amount in Rs.) :
Electrical transformers used in the factory [WN-1]
Moulds and dies used in the factory [WN-1]
Pollution control equipment used in the factory [WN-1]
Capital goods purchased on which depreciation has been taken on [WN-2]
full value including input tax thereon
Capital goods used as parts purchased from supplier who paid tax [WN-3]
under composition scheme and the composite tax has not been
collected from X Ltd.
Total Input tax credit available
Working Notes:
(1) As per Section 2(19) "Capital goods" means goods, the value of which is capitalized
in the books of account of the person claiming the input tax credit and which are
used or intended to be used in the course or furtherance of business. Hence,—
(a) Electrical transformers
(b) Moulds and dies,
(c) Pollution control equipment,
which are used or intended to be used in the course or furtherance of business are
eligible for ITC as capital goods.
(2) As per Section 16(3), no input tax credit shall be admissible where 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.

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(3) As per Section 17(5)(e), input tax credit shall not be available in respect of goods or
services or both on which tax has been paid under Section 10. Thus, no ITC shall be
allowed of tax paid under composition scheme by the supplier.

Q 6 - Determine the amount of Input lax credit available to Kalyan Ltd. in respect of the
following goods and services procured by them in the month of April 2019 :
Inward supplies GST (Rs.)
(i) Motor vehicles for transportation of persons having approved 70,000
sealing capacity of 7 persons (including driver)
(ii) Motor bus for transportation of persons having approved seating 1,40,000
capacity of 14 persons (including driver)
(iii) Motor lorries for transportation of goods 2,80,000
(iv) Food and Beverages procured from Sweet Caterers for being used in 48,000
dealer's meet
(v) Services of repair and maintenance of motor lorries used for 36,000
transportation of goods
(vi) Services of general insurance of motor vehicles for transportation of 18,000
persons having approved seating capacity of 7 persons (including
driver)
(vii) Services of servicing of motor vehicles for transportation of persons 54,000
having approved sealing capacity of 14 persons (including driver)
Solution: Computation of ITC available with Posco Ltd. (amount in Rs.):
Motor vehicles for transportation of persons having approved [WN-1]
seating capacity of 7 persons (including driver)
Motor bus for transportation of persons having approved seating [WN-2]
capacity of 14 persons (including driver)
Motor lorries for transportation of goods [WN-3]
Food and Beverages procured from Sweet Caterers for being [WN-4]
used in dealer's meet
Services of repair and maintenance of motor lorries used for [WN-5]
transportation of goods
Services of general insurance of motor vehicles for [WN-6]
transportation of persons having approved seating capacity of 7
persons (including driver)
Services of servicing of motor vehicles for transportation of [WN-7]
persons having approved seating capacity of 14 persons
(including driver)
Total Input tax credit available
Working Notes:
(1) As per Section 17(5)(a), no Input tax credit is available in respect of motor
vehicles for transportation of persons having approved seating capacity of not
more than 13 persons (including the driver), unless they are used for making the
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following taxable supplies, namely:— (A) further supply of such motor vehicles;
or (B) transportation of passengers; or (C) imparting training on driving such motor
vehicles. Hence, no input tax credit is available on the said motor vehicles.
(2) As per Section 17(5) (a), no Input tax credit is available in respect of motor vehicles
for transportation of persons having approved seating capacity of not more than 13
persons (including the driver). Thus, input tax credit shall be admissible on motor
bus.
(3) In respect of motor vehicle used for the purpose of transportation of goods, the
same is not be covered under the ambit of blocked credit, hence input tax credit
shall be admissible in respect of such motor vehicles.
(4) As per Section 17(5)(b), no Input tax credit is available in respect of food and
beverages except 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 or if provision of such goods or services is
obligatory for an employer to provide to its employees under any law for the time
being in force. Hence, no input tax credit is available on food and beverages
procured from Sweet Caterers for being used in dealer's meet.
(5) Since motor lorries meant for transportation of goods is not covered under the
ambit of blocked credit, hence services of repair and maintenance of motor lorries
is also eligible for credit.
(6) Services of general insurance of motor vehicles for transportation of persons having
approved seating capacity of 7 persons (including driver) shall not be eligible for
input tax credit since the same is covered under the ambit of blocked credit under
Section 17(5)(ab) of the CGST Act, 2017.
(7) Since Input tax credit is eligible for motor vehicles for transportation of persons
having approved seating capacity of 14 persons, hence services of servicing of such
motor vehicles shall be eligible for input tax credit.

Q 7 - Determine the amount of Input tax credit available to Posco Ltd. in respect of the
following items procured by them in the month of February 2020 :
Inward supplies GST (Rs.)
(i) Input used for the manufacture of the final product 72,000
(ii) Food and Beverages procured from Sweet Caterers for employees 48,000
under statutory obligation
(iii) Goods used for providing services during warranty period 12,000
(iv) Goods used for setting up Telecommunication Towers being 90,000
immovable property

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(v) Inputs stolen from the factory store 13,200

Solution: Computation of Input Tax credit available with Posco Ltd. (amount in Rs.):
Input used for the manufacture of the final product
Food and Beverages procured from Sweet Caterers for employees [WN-1]
under statutory obligation
Goods used for providing services during warranty period (Since
used in course of business hence, input tax credit shall be available)
Goods used for setting up Telecommunication Towers being [WN-2]
immovable property
Inputs stolen from the factory store [WN-3]
Total Input tax credit available
Working Notes:
(1) As per Section 17(5)(b), no Input tax credit is available in respect of food and
beverages except 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 or if provision of such goods or services is
obligatory for an employer to provide to its employees under any law for the time
being in force. Since in this case food and beverages are provided to employees
under statutory obligation, Hence, input tax credit is available.
(2) As per Section 17(5)(d), Goods received by taxable person for construction of an
immovable property (other than Plant and Machinery) on his own account including
when such goods used in course or furtherance of business shall be considered as
ineligible input and no credit shall be allowed of tax paid on such goods. Since
Telecommunication tower is an immovable property, hence, no input tax credit
shall be allowed in respect of goods used for setting it up.
(3) As per Section 17(5) (h), Goods lost, stolen, destroyed, written off or disposed of
by way of gift or free samples are considered as ineligible input and credit of GST
paid on such goods cannot be taken.

Q8- Determine the amount of Input tax credit admissible to PQR Lid. In respect of the
following goods procured by H in the month of January :
Inward supplies GST (Rs.)
(1) Goods used in constructing an additional floor of office building 28,800
(2) Packing Materials used in a factory 6,000
(3) Goods destroyed due to natural calamities 12,500
(4) Goods used for repairing the office building and cost of such repairs 12,000
is debited to profit and loss account
(5) Paper for photocopying machine used in Administrative Office 950
(6) Goods given as gifts 25,000
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(7) Inputs used for tests or quality control check 15,600

Note: (i) All the conditions necessary for availing the ITC have been fulfilled. (ii) Registered
Person is not eligible for any threshold exemption.
Solution: Computation of Input tax credit available with PQR Ltd. (amount in Rs.) :
Goods used in construction of an additional floor of office [WN-1]
building
Packing Materials used in a factory (Since used in course of
business hence, ITC shall be available)
Goods destroyed due to natural calamities [WN-2]
Goods used for repairing the office building and cost of such [WN-3]
repairs is debited to P&L account
Paper for photocopying machine used in Administrative Office
(Since used in course of business hence, ITC shall be available)
Goods given as Gifts [WN-2]
Inputs used for tests or quality control check (Since used in course
of business hence, ITC shall be available)
Total ITC available
Working Notes:
(1) As per Section 17(5) (d), input tax credit shall not be available in respect of 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. Hence,
input tax credit shall not be available in respect of goods used in construction of an
additional floor of office building.
(2) Section 17(5) (h), input tax credit shall not be available in respect of goods lost,
stolen, destroyed, written off or disposed of by way of gift or free samples. Hence,
no ITC shall be available in respect of goods destroyed due to natural calamities.
(3) As per the explanation, the expression "Construction" includes re -construction,
renovation, additions or alterations or repairs, to the extent of capitalisation, to
the immovable property. Goods used for revenue repairs are considered as an
eligible input and credit shall be allowed on the same.
Q 9 –Determine the amount of Input tax credit admissible to P Ltd. in respect of the
following items procured by them in the month of March:
Inward supplies GST (Rs.)
(1) Goods supplied for captive consumption in a factory 9,800
(2) Goods purchased for being usedd in repairing the factory shed and 18,000
same has been capilalised in books
(3) Cement used for making foundation and structural support to Plant 14,000
and Machincrv
(4) Inputs used in trial runs 14,500
(5) Food and beverages purchased for the employees during office 8,400
hours not under statutory obligation
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Note: (i) All the conditions nocessary for availing the ITC have been fulfilled. (ii) Registered
Person is not eligible for any threshold exemption.
Solution: Computation of Input tax credit available with P Ltd. (amount in Rs.) :
Goods used for captive consumption (Since, used in course of
Business hence, input tax credit on same shall be admissible)
Goods purchased for being used in repairing the factory shed and [WN-1]
same has been capitalized to the cost of factory Shed
Cement used for making foundation and structural support to [WN-2]
Plant and Machinery
Inputs used in trial runs (Since used in course of business hence,
input tax credit shall be available)
Food and beverages purchased for the employees during [WN-3]
office hours not under statutory obligation
Total Input tax credit available
Working Notes:
(1) As per Section 17(5)(d), input tax credit shall not be available in respect of 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.
Construction includes re-construction, renovation, additions or alterations or
repairs, to the extent of capitalisation, to the said immovable property. Since the
cost of repairs is capitalized in books, no credit of input tax paid on goods used shall
be allowed.
(2) As per Explanation to Section 17, "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. Input tax credit is admissible in respect of goods
or services or both received by a taxable person for construction of plant or
machinery. Hence, tax paid on cement shall be available for input tax credit.
(3) As per Section 17(5)(b), No input tax credit is available in respect of food and
beverages except 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 or where it is obligatory for an employer to
provide the same to its employees under any law for the time being in force.
Hence, no input tax credit is available on food and beverages for use of employees
during office hours.

Q 10 - An Elite Training institute provides service of training pilot in flying at aircraft so

that candidates become eligible for obtaining Aviation license. Determine whether the
institute is eligible to take credit on aircraft purchased for imparting training.

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Ans: As per Section 17(5)(aa), no credit of input tax shall be allowed on vessels and aircraft
except when they are used —
(i) for making the following taxable supplies, namely: —
(a) further supply of such vessels or aircraft; or
(b) transportation of passengers; or
(c) imparting training on navigating such vessels; or
(d) imparting training on flying such aircraft;
(ii) for transportation of goods.
Since, Aircraft is used to impart training on flying, therefore credit of input tax paid on
purchase of aircraft shall be available to Elite Institute.

Q 11 -Krishna Motors is a air dealer selling cars of an international car company having
seating capacity of 7 persons (excluding driver). It also provides maintenance and repair
services of the cars sold by it as also of other cars. It seeks your advice on availability of ITC
in respect of the following expenses incurred by it during the course of its business
operations:
(i) Cars purchased from the manufacturer for making further supply of such cars.
Two of such cars are destroyed in accidents while being used for test drive by
potential customers.
(ii) Works contract services availed for constructing a car washing shed in its premises.
(RTP May, 2018)
Ans: As per Section 16(1) of the CGST Act, 2017, every registered person can 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. However, Section 17(5)
of CGST Act, 2017 specifies certain goods and services on which the input tax credit is not
available.
In the light of the foregoing provisions, the availability of input tax credit (ITC) in respect of
the various expenses incurred by Krishna Motors is discussed below:
(i) Section 17(5)(a) specifically blocks ITC on motor vehicles for transportation of
persons having approved seating capacity of not more than thirteen persons
(including the driver),.
However, the same is allowed when the motor vehicles are used, inter alia, for
further supply of such motor vehicles. Thus, ITC on cars purchased from the
manufacturer for making further supply of such cars will be allowed.
However, ITC on the cars destroyed in accident will not be allowed as the ITC on
goods destroyed for whichever reason is specifically blocked under Section 17(5)(h) of
CGST Act.
(ii) Section 17(5)(c) specifically blocks ITC on 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. Since, in this

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case the car washing shed is not a plant and machinery and the works contract
service is not used for further supply of works contract service, ITC thereon will not
be allowed.

Q 12 -ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the
following items during the month of July, 2019.
Inward supplies GST (Rs.)
(i) Electrical transformers to be used in the manufacturing process 3,60,000
(ii) Truck used for transportation of inputs in the factory 2,24,000
(iii) Raw material 2,00,000
(iv) Confectionery items for consumption of employees working in the 25,000
factory under statutory obligation
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving
necessary explanations for treatment of various items.
Note : (1) All the conditions necessary for availing the IIC have been fulfilled. (2) ABC Co.
Ltd. is not eligible for any threshold exemption.
Solution: Computation of ITC available with ABC Co. Ltd. for the month of July (amount
in Rs.) :
(i) Electrical transformers [WN-1]
(ii) Trucks used for the transport of inputs in the factory [WN-2]
(iii) Raw material [WN-3]
(iv) Confectionery items for consumption of employees working [WN-4]
in the factory under statutory obligation
Total Input tax credit available
Working Notes:
(1) As per Section 16(1), ITC is admissible in respect of any goods used in the course or
furtherance of business. Hence, ITC is admissible in case of electrical transformers
and raw materials used in course or furtherance of business.
(2) Motor vehicles used for transportation of goods do not fall under the ambit of
blocked credit. Hence, input tax credit shall be allowed on same.
(3) Being goods used in the course or furtherance of business, ITC thereon is available
in terms of Section 16(1).
(4) As per Section 17(5)(b), ITC on food or beverages is specifically disallowed unless the
same is used for making outward taxable supply of the same category or as an
element of the taxable composite or mixed supply or or where it is obligatory for an
employer to provide the same to its employees under any law for the time being in
force. Hence, input tax credit is available on Confectionery items for consumption
of employees working in the factory, since the same is provided under statutory
obligation.

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Q 13 - XYZ Lid., is engaged in manufacture of taxable goods. Compute the ITC available
with XYZ. Ltd. for the month of October, 2019 from the following particulars :
S.No. Inward supplies GST(Rs.) Remarks
(i) Inputs'X' 1,20,000 One invoice on which GST payable was Rs. 10,000, is
missing
(ii) Inputs 'Y' 1,00,000 Inputs are to be received in two instalments. First
instalment has been received in October, 2019.
(iii) Capital goods 1,80,000 XYZ Ltd. has capitalised the capital goods at full invoice
value inclusive of CIST as it will avail depreciation on
the full invoice value.
(iv) Input services 2,50,000 One invoice dated 20-01-2019 on which GST payable
was Rs. 50,000 has been received in October, 2019.
Note:
(i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) XYZ Co. Ltd. is not eligible for any threshold exemption.
(iii) The annual return for the financial year 2018-19 was filed on 15th September, 2019.
Solution: Computation of ITC available with XYZ Ltd. for the month of October, 2019 :
S.No. Inward supplies GST(Rs.)
(i) Inputs 'X' [WN-1]
(ii) Inputs 'Y'
(iii) Capital goods
(iv) Input services
Total
Working Notes:
(1) ITC cannot be taken on missing invoice. The registered person should have the
invoice in its possession to claim ITC - Section 16(2)(a).
(2) When inputs are received in instalments, ITC can be availed only on receipt of last
instalment-First proviso to Section 16(2).
(3) Input tax paid on capital goods cannot be availed as ITC, if depreciation has
been claimed on such tax component - Section 16(3).
(4) As per section 16(4), ITC on an invoice cannot be availed after the due date of
furnishing of the return for the month of September following the end of financial
year to which such invoice pertains or the date of filing annual return, whichever
is earlier.
Since the annual return for the FY 2018-19 has been filed on 15th September, 2019
(prior to due date of filing the return for September, 2019 i.e., 20th October, 2019),
ITC on the invoice pertaining to FY 2018-19 cannot be availed after 15th September,
2019.

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14 - Compute the Input tax credit available with Ujjwal Motors Ltd., manufacturer of
cars, in respect of the following services availed by it in the month of October, 2019 :
Inward supplies GST (Rs.)
(i) Accounting and Auditing Services 7,200
(ii) Heallh insurance services for employees (Services arc not provided 16,200
under Govennment obligation)
(iii) Routine maintenance of the cars manufactured by Ujjwal Motors Ltd. 18,000
(iv) Repair services for office building (Cost of repairs is charged to Profit 14,400
and loss Account)
(v) Travel benefits extended to employees on vacation under statutory 3,360
obligation
(vi) Testing services availed for car engines 9,000
Note: (1) All the conditions necessary for availing the ITC have been fulfilled. (2) Kegistered
Person is not eligible for any threshold exemption.
Solution: Computation of Input tax credit available with Ujjwal Motors Ltd.
Accounting and Auditing Services (ITC is eligible since such
services are used in course of business)
Health insurance services provided to employees (Services are [WN-1]
not provided under Government obligation)
Routine maintenance of the cars manufactured by Ujjwal Motors
Ltd. (ITC eligible since such services are used in course of business)
Repair services for office building, cost of which is charged to profit
and loss Account (Repairs are revenue in nature, hence, credit of
tax paid shall be available)
Travel benefits extended to employees on vacation under [WN-2]
statutory obligation
Testing services availed for car engines (ITC is eligible since such
services are used in course of business)
Total Input tax credit available
Working Notes:
(1) As per Section 17(5)(b)(i), No input tax credit shall be available in respect of health
insurance services availed for employees since the Government has not notified the
said services as obligatory services to be provided to employees.
(2) As per Section 17(5)(b)(iii), Input tax credit shall be allowed on travel benefits
extended to employees on vacation since it is obligatory for an employer to provide
the same to its employees under any law for the time being in force.

Q 15 - XYZ Ltd. engaged in supplying taxable goods has availed following services in
month of September, 2019. Compute the input tax credit admissible on such input
services.
Inward supplies GST (Rs.)
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(1) Sales promotion services 16,200

(2) Health and fitness services availed from Physique Club for upkeep of 10,800
health of their employees. The saiil services are not availed under
Government obligation
(3) Hiring of motor bus for transportation of employees. Seating 4,500
capacity of motor bus is 40 passengers.
(4) Market research services 10,080
(5) Quality control services 18,000
(6) Work contract services for construction of office building 45,000
Note: (i) All the conditions necessary for availing the ITC have been fulfilled, (ii) Registered
Person is not eligible for any threshold exemption.
Solution: Computation of Input tax credit available with XYZ Ltd. (amount in Rs.):
Sales promotion services [WN-1]
Health and fitness services availed from Physique Club for upkeep [WN-2]
of health of their employees, not under Government obligation.
Hiring of motor bus on rent for transportation of employees. [WN-3]
Seating capacity of motor bus is 40 passengers.
Market research services [WN-1]
Quality control services [WN-1]
Work contract services for construction of office building (Not
considered as eligible input service)
Total Input tax credit available
Working Notes:
(1) As per the Section 2(60), "Input service" means any service used or intended to be
used by a supplier in the course or furtherance of business. So, services like —
(a) Sales promotion services;
(b) Market research services;
(c) Quality control services,
are used by supplier in course or furtherance of business. Hence, the credit of the
tax paid on the aforesaid supply of services is available.
(2) As per Section 17(5) (b), No input tax credit is available in respect of health and fitness
centre services where it is obligatory for an employer to provide the same to its
employees under any law for the time being in force. Thus, no input tax credit shall
be admissible on health and fitness services provided to employees.
(3) As per Section 17(5)(b)(i), Input tax credit is not allowed in respect of leasing,
renting or hiring of motor vehicles referred to in clause (a) except when used for
the purposes specified therein. Since bus having seating capacity of 40 passengers
do not fall under the ambit of motor vehicles specified in Section 17(5) (a), hence
input tax credit shall be admissible.

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Q 16- XYZ Ltd., a manufacturer, which is engaged in supply of taxable goods has
purchased 10,000 kg of inputs for Rs. 10,00,000 (exclusive of CGST @ 6% and SGST @ 6%)
on which input tax credit has been taken. Due to technical changes in manufacturing
process, the said inputs become obsolete and their value has been written off in the books
of accounts. Explain Input tax credit treatment in above case.
Solution: As per Section 17(5)(h) of the CGST Act, 2017, if the value of any goods is written
off in the books of account, then no input tax credit shall be allowed in respect of the
said input. Where input tax credit has been taken in respect of the said goods, the same
has to be paid by recipient of input goods. Since in the given case, XYZ Ltd. has availed
input tax credit, thus it has to pay Rs. 60,000 (Rs. 10,00,000 @ 6%) towards CGST and Rs.
60,000 towards SGST liability.

Q 17- XY7. Ltd. is engaged in supply of works contract services for construction of
immovable property. It gives a part of the construction work to a sub-contractor. The sub-
contractor charges GST in his invoice to XYZ Lid. You are required to advice XYZ Ltd. if it
can avail Input tax credit of the GST charged to it by the sub-contractor.
Ans: As per Section 17(5)(c), input tax credit shall not be available in respect of works
contract services when supplied for construction of an immovable property. However,
credit is allowed where it is an input service for further supply of works contract service.
In the given case, the services supplied by the sub-contractor have been used by the XYZ
Ltd. for supply of works contract service. Hence, XYZ Ltd. can avail the Input tax credit of
the GST charged on the input service provided by the sub-contractor.

Q 18 - XYZ Ltd. is engaged in supply of passenger transportation services. In the month of

September, 2019, it has purchased 10 motor cabs for Rs. 30,00,000 plus GST @ 28%. You
are required to advice XYZ Ltd. if it can avail Input tax credit of the GST paid by it on motor
cabs.
Solution: As per Section 17(5)(a), input tax credit shall not be available in respect of motor
vehicles for transportation of persons having approved seating capacity of not more
than 13 persons (including the driver). However, credit will be available when they are
used for making the taxable supplies of transportation of passengers. In this case XYZ Ltd.
is engaged in transportation of passengers it will be entitled to take credit of GST
amounting Rs. 1008000 i.e. [Rs. 36,00,000  28%]

Q 19 - XYZ Ltd. conducted its 50th Annual General meeting at its head office in New Delhi
and availed services of Delicious caterers on that occasion. Delicious caterers charged Rs.
15,00,000 plus GST @ 18% for the supply of outdoor catering services. You are required to
advice XYZ Ltd. if it can avail Input tax credit of the GST paid on outdoor catering service.
Ans: As per Section 17(5) (b), input tax credit shall not be available in respect of supply of
outdoor catering service unless inward supply of such services 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 or where it is obligatory for
an employer to provide the same to its employees under any law for the time being in

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force. Hence, XYZ Ltd. is not entitled to avail ITC of GST paid on outdoor catering services
availed from Delicious caterers.

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