Input Tax Credit

Input Tax Credit under Special Circumstances in GST

Section 18 of the CGST Act provides for credit of input tax in respect of inputs held in stock and inputs contained in semi-finished goods and finished goods held in stock on the specified day in the following manner:

1) New Registration

A Person applied for registration within 30 days from the date on which he becomes liable to registration and has been granted such registration.  He 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

2) Registration under voluntary basis

A Person who is not required to register, but obtains voluntary 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 of grant of registration.

3) Person ceases to pay under composition scheme

A person who ceases to pay tax under composition scheme 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 regular scheme. In this case, even the capital goods are eligible for credit.

4) Exempt supply becomes a taxable supply

Due to withdrawal of the exemption, if any exempt supply of goods or services becoming a taxable supply, a 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 on the day immediately preceding the date from which he becomes liable to pay tax such supply becomes taxable. In this case, even the capital goods are eligible for credit.

5) Change in constitution

Where there is a change in the constitution of a registered person on account of sale, amalgamation, merger, demerger, lease or transfer of business with provision for transfer of liabilities, the registered person shall be allowed to transfer the input tax credit remaining unutilized to such sold, amalgamated, merged, demerged, leased or transferred business

6) Switching over to composition scheme or goods becoming absolutely exempt

After switching over to composition scheme or goods becoming absolutely exempt, the credit of input tax shall be reversed in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date of exercising of such option or the date of such exemption.

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