QUESTION
1. Whether ITC of any HSN code can be utilised for any HSN code outward supply? It may happen there may be certain inputs commonly used for different HSN 2. Towards imports all duites are paid as per suppliers invoice but when material is received there is a shortages in qty received -whether to take GST credit on actual receipt or duty paid on invoice value and qty thereon? 3 if any allowance paid to employee exceeding value of INR 50000/- not forming part of CTC , For examply petrol used in car reimursement whether require to pay GST? if so after INR 50000 limit crosses?
ANSWER
FACTS OF THE CASE:
1. Whether ITC of any HSN code can be utilised for any HSN code outward supply?
2. Towards imports all duties are paid as per suppliers invoice but when
material is received there is a shortage in qty received. Whether to take GST
credit on actual receipt or duty paid on invoice value and qty thereon?
3. GST liability on any allowance paid to employee exceeding value of INR
50000/- not forming part of CTC, For example petrol used in car reimbursement.
LAW APPLICABLE:
SECTION 16 OF CGST ACT
(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.
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,''
a) he is in possession of a tax invoice or debit note issued 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.
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SECTION 17 OF CGST ACT
(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.
(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.
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SCHEDULE I OF CGST ACT
(ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION)
Provided that gifts not exceeding fifty thousand rupees in value in a
financial year by an employer to an employee shall not be treated as supply of
goods or services or both.
INTERPRETATION:
1. The provisions related to eligibility and restrictions on ITC is given in
Section 16 and Section 17 of CGST Act. There is no bar in section 16 or section
17 read with Rules 36 to 38 and 42/43 of CGST Rules that ITC related to specific
HSN Code is to be utilized for tax payment of outward supply of specific HSN
code.
2. As per Section 16(2)(b) credit can be availed only when the goods are received, therefore credit of goods not received (shortage in quantity) is not available.
3. As per Proviso to Schedule I clause 2, gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. However if allowance/reimbursement (Petrol expenses) paid to employees exceeds Rs 50000/-, then it is taxable under GST, if the same is not paid as Pure agent.
CONCLUSION:
1. ITC related to any HSN inward supply can be utilised for payment of any HSN
outward supply.
2. ITC is not available for goods not received (shortage).
3. Any allowance not being part of CTC(as per the terms of appointment ) paid to
employee exceeding the value of INR 50000/- is taxable if not paid as Pure
agent. (Reply dt. 14/09/2021)