Interim ITC according to New Simplified GST Returns

Would i be able to Claim ITC On Interim Basis Once The New Returns Come In Force?

This inquiry is posed by numerous buyers multiple times. The response to this inquiry has consistently been “Yes”,and continues as before with the new GST returns too.

Numerous taxpayers feel that ITC can be taken just if provider uploads the invoice. But, this is only a myth.

ITC can be taken if below three conditions are fulfilled:

  • Buyer holds the tax invoice of goods/services consumed by him/her.
  • Buyer really consumes the goods/services purchased by him/her.
  • Buyer makes payment to provider.

In new returns, when the provider will upload an invoice in ANX-1, it will be noticeable to the buyer in his ANX-2 and he can acknowledge the invoice by locking his ITC. This acknowledged invoice will frame some portion of accessible ITC in RET-1.

So the query emerges at that point,

what occurs if the Invoices are not uploaded by the provider, does the buyer lose that ITC?

No.

Interim ITC On Missing Invoices

In New Returns Table 4A.10 Interim input tax credit on records not uploaded by the providers [net of ineligible credit] gives the arrangement to the buyer to take ITC on temporary premise. In this manner invoices on which buyer is qualified to take acknowledgment however provider didn’t transfer the receipt can be considered for guaranteeing interim ITC in the given table.

What Is The Capping To Interim ITC?

Segment 43A of CGST Act states credit accessible in case of interim ITC would not be over 20% of ITC accessible to the beneficiary. This accessible credit based on details uploaded by the provider. In this way, So the upper limit stipulated under Section 43A for profiting ITC on an interim premise is 20%. This area would supplant the arrangements of Section 16(2), Section 37 and Section 38 of the CGST Act which manages the conditions to benefit ITC, details of outward supplies, and details of internal supplies.

Treatment Of Invoices If Supplier Uploads The Missing Invoices In Upcoming Months

Presently when interim ITC is taken by the beneficiary in one month and in upcoming months, if the provider transfers the invoice on which interim ITC is taken, at that point buyer will acknowledge that invoice in his ANX-2. By considering the invoice in ANX-2, it will be auto registered as accessible ITC in RET-1. Anyway such credit should be turned around by the buyer in table 4B(3) of the fundamental return (FORM GST RET-1) as this credit was at that point benefited interim prior and can’t be profited twice..

For instance, say a registered provider A sells products to a registered taxpayer B in the month of April. B consumes the products and pays to A. A neglects to upload the invoice while filing return of April. But, since the previously mentioned conditions are met, B is qualified to take ITC in April.

Presently say B need to take ITC in April. He should demonstrate this amount in Table 4A.10 of RET-1 since invoice isn’t uploaded by A. While uploading information for the month of May provider A uploads the invoice. In such case B can’t reject the invoice since it is substantial. So B will acknowledge this invoice and since it is acknowledged it will shape a piece of RET-1 table 4A.1. Since B has just taken credit on this invoice, he will turn around this invoice in table 4B.3 of RET-1.

Treatment Of Invoices If Supplier Fails To Upload The Missing Invoices In Coming Months

The government is taking a risk to the extent of the interim ITC announced. Anyway they have additionally taken precautions by giving a time limit for example if the provider doesn’t upload such invoice till next two filing periods for monthly filers and one filing periods for quarterly filers, at that point buyer can upload such invoice as missing invoices in ANX-1 Table 3L.

Table 3L is also an additional announcing of missing invoices by buyers which won’t have any effect on RET-1 being filed.

In a similar method, say provider A doesn’t upload the invoice till he files the return of month of June. At that point buyer can upload the invoice in ANX-1 Table 3L while filing return for July.

 

Enquire with Certicom Consulting for any further information or in case of any query.

Conditions made to claim Input tax credit

The enrolled individual will be qualified for ITC on an inventory in particular if ALL the accompanying four conditions are satisfied:

  1. Possession of tax paying document [Section 16(2)(a) read with rule 36 of the CGST Rules]

ITC can be benefited based on any of the accompanying documents:

I) Invoice issued by a provider of goods or services

ii) Invoice issued by beneficiary (getting goods or services from unregistered provider) alongside confirmation of payment of tax (if there should arise an occurrence of reverse charge)

iii)A debit note issued by provider

iv) Bill of entry or similar document recommended under Customs Act

v) Revised invoice

vi) Document issued by Input Service Distributor

The documents premise which ITC is being taken ought to contain atleast the accompanying details:

 

  • Measure of tax charged
  • Describing goods or services
  • All out estimation of supply of goods as well as services
  • GSTIN of the provider and beneficiary
  • Place of supply in case of inter State supply

 

No ITC of tax paid towards requests including fraud [Rule 36(3)]:

Tax paid in compatibility of any order where any demand has been affirmed because of any fraud, resolved error or concealment of facts can’t be benefited as ITC

 

  1. Receipt of the goods and/or services [Section 16(2)(b)]

The registered individual taking the ITC probably got the goods and/or services.

“Bill to Ship to” Model likewise included:

Under this model, the goods are delivered to an outsider on the direction of the client (registered individual) who buys the products from the seller (provider) i.e., the client (registered individual) who buys such goods doesn’t get the said goods.

However, in such a situation, section 16(2)(b) regards that the enlisted individual (client) has received the products. In other term, delivery of products to someone else on the direction of the enlisted individual by method for transfer of docs of title to goods or generally either previously or during the movement of products, is regarded to be the receipt of products by the enrolled person. So, ITC will be accessible to the enrolled person on whose request the products are delivered to a third person.

For Example – A will be a person who puts in a request on B for a consignment of soda ash. A gets a purchasing order from C for similar amount of soda ash. An educates B to deliver the products to C, and thus he raises an invoice on C. Despite the fact that the goods are not physically received at the premises of A, section 16(2)(b) permits ITC of the products to A.

 

  1. Tax leviable on stock really paid to Government [Section 16(2)(c)]

Tax ought to really have been paid, with cash or through usage of ITC, on the goods and/or services for which ITC is being taken.

 

  1. Filing of return [Section 16(2)(d)]

The registered individual taking the ITC must have filed his return under section 39.

Contact us for any further queries.

Inversion of ITC for Real Estate Developers

The 34th GST Council meeting on 19 March 2019, declared the modalities for the lower successful GST rate for Real Estate Sector. The reduced GST rate which is 1% in case of reasonable houses and 5% on development of houses other than cheap house became effective from April 1, 2019, through Notification No. 03/2019 – CT(R) dated 29th March 2019 to empower the demands for properties.

Also, these new GST rates were accessible subject to specific conditions, including the inaccessibility of ITC for manufacturers/developers picking in for the advantages of low GST rate. In case of progressing projects(projects for which development and booking started before first April 2019 yet not finished by 31st March 2019), the builder will be subject to reverse Input Tax Credit (ITC) by applying the formula expressed in Annexure of notice, inside the due date of 20th September.

Calculating ITC Reversal

As expressed in the Annexure of notification, the accompanying builders/developers are required to consent to the underneath offered formula in calculating the reversal of ITC.

Segments of the Formula

Tx = ITC on inputs and input services inferable from the development of private and business section, where ToS (time of supply) is on or after 01.04.2019

T = Total ITC profited from 01.07.2017 to 31.03.2019 including progress credit (regardless of whether used)

Tr = ITC owing to development of residential bit in the REP where ToS (time of supply) is before 01/04/2019.

Tc = ITC owing to the construction of a business portion in the REP.

Tr = ITC inferable from construction of private portion in the REP where ToS (time of supply) is before 01/04/2019.

Te = ITC owing to the construction of commercial and residential bit where ToS (time of supply) is before 01/04/2019 and Te will be determined as Tc + Tr.

F1 = carpet region of private apartment /Total floor covering territory of the private and business apartment.

F2 = Total carpet area of residential apartment booked before 01.04.2019/Total carpet area of a residential apartment.

F3 = Value of supply for private apartment booked before 01/04/2019 where ToS (time of supply) is before 01/04/2019/Total estimation of supply for such reserved apartments.

F4 = 1 % completion of construction as on 31.03.2019.

Computation of ITC in case of a Residential Real Estate Project (RREP) or a project other than RREP having just private apartments:

Where % of finishing isn’t zero or where there is inventory in stock

ITC to be reversed Tx will be determined as:

Tx= T-Te

Where, Te=T*F1*F2*F3*F4

Where % of finishing is zero as on 31/03/2019 yet invoicing has been finished having ToS (time of supply) before 31/03/2019 and no sources of info or input services has been received as on 31/03/2019.

The enrolled individual will be qualified to take ITC on goods and services received on or after first April 2019 for development of private or business portion in the RREP, for which he will not generally be qualified, to the degree of the measure of Te.

Te will be determined as:

Te=Tn*F1*F2*F3

Where, Tn = Tax paid on such inputs and input benefits on which ITC is accessible under the CGST Act, got in 2019-20 for development of private and business apartments in the RREP.

Figuring of ITC in case a project other than RREP having both residential apartments as well as business apartments:

Where % of completion isn’t zero or where there is inventory in stock:

Tx = T – Te

Where, Te = Tc + Tr Tc = T* (carpet area of business apartments in task/complete carpet area of commercial and residential apartments); and Tr = T*F1*F2*F3*F4

In case the ITC inferable solely to the development of business portion (T1) and ITC inferable only to development of private portion (T2) are accessible, an enrolled individual can figure ‘Te’ as underneath:

Te = Tc + T1 + Tr

Where, Tc is the ITC owing to the development of business portion in the REP, determined as Tc =T3* (carpet zone of business apartments in the REP/all carpet area of commercial and residential apartments in the REP);

T3 = T-(T1 + T2)

T1 = ITC inferable only to the development of commercial portion in the REP.

T2 = ITC inferable solely to development of residential portion in the REP.

Tr is the ITC inferable from the development of residential portion in the REP which has time of supply at the very latest 31.03.2019 and which will be determined as under,

Tr = (T3 + T2)* F1 * F2 * F3* F4, or

Tr = (T-T1)* F1 * F2 * F3* F4

Where % completion as on 31st March 2019 is zero yet invoicing has been finished having time of supply before 31st March 2019, and no input services or information have been received as on 31st March 2019, “Te” will be determined as below

The enrolled individual will be qualified to take ITC on goods and services got on or after first April 2019 for development of residential portion in the REP, for which he will not generally be qualified, to the degree of the measure of Te determined as underneath:

Te = Tc + Tr

Where, Tr = Tn* F1 * F2 * F3

Tn= Tax paid on such inputs and input services on which ITC is accessible received in 2019-20 for development of REP.

Tc =Tn* (carpet area of business apartments in the REP/all carpet region of business and private apartments in the REP)

While the computation of the ITC reversal seems, by all accounts, to be a mind boggling process in itself, the enlisted individual is required to pay the sum in either cash or using the accumulated ITC and fill the subtleties in FORM GST ITC-03.

Furnishing form ITC 03

ITC 03 form is filed by a taxpayer who needs to pay an amount equivalent to the ITC through electronic credit or money ledger. However, GST ITC 03 is commonly required to be filed in two cases, for example taxpayer has selected composition plan, or goods or services provided by the taxpayer become entirely excluded. Moreover, goods related information must be transferred in one of the two tabs in form, for example

  • Tab for outfitting details of goods with Invoices
  • Tab for outfitting details of goods without Invoices

So as to outfit form ITC 03, an assessee needs to figure GSTIN/Invoice wise absolute inversion amount and outfit receipt wise details in the utility, which can demonstrate to be a tedious activity for big traders who may have numerous invoices and mass information.

Besides, Form GST ITC – 03 has no sections for the ITC inversion. Considering most of Input services being manufacturers and real estate engineers, the absence of a proper section for Input Services in Form GST ITC – 03 has been playing a noteworthy obstruction for the builders.

Form GST DRC – 20

In case of a financial emergency, a builder can look for consent to either pay the ITC in instalments or a period expansion by filing an application in FORM GST DRC – 20 looking for authorization to pay the taxes in portions (if the alternative is there) or time augmentation for the payment of taxes if he is confronting financial emergency.

Alternative for paying off the liability via Form DRC-20 is unavailable in Form ITC-03.

  • Is ITC-03 the correct form for outfitting the ITC reversal?
  • By what method would it be a good idea for one to report Invoices reversal for Input Services?
  • If there should arise an occurrence of installment in portion, is the builder required to transfer Form ITC 03 for each incomplete payment?

As the due date to outfit the respective forms has been shutting in, a brief arrangement is anticipated from the GST council to sort the difficulties looked by the builders and Real Estate developers in India. In case that you happen to confront any comparable issues, do make reference to it in the remarks underneath and we will attempt to update you when any update is reported.

Enquire with Certicom Consulting for any further queries.