Availability of Credit in special circumstances (Section 18)
Change from Composition scheme to Regular scheme
- Input tax credit is eligible on the stock held (inputs, semi-finished goods or finished goods) and on the capital goods preceding the day when he is liable to pay tax under the regular scheme.
- However, the credit of capital goods shall stand reduced by five percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods.
Exempt supply becomes taxable supply
- In such case person will be entitled to claim credit of tax paid on stock held (inputs, semi-finished goods or finished goods) relatable to exempt supply and on the capital goods exclusively used for exempt supply preceding the day when the supply becomes taxable.
- The credit of capital goods shall, however, stand reduced by 5 percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods.
- However, tax paid on capital goods used for both, taxable and exempt supply will not be eligible as input tax credit.
Un-utilized input tax credit in case of sale, merger, amalgamation of business
- when there is a change in constitution of a registered person on account of sale, merger, or amalgamation of business with specific provision of transfer of liabilities, the registered taxable person shall be allowed to transfer the input tax credit which remains unutilized
- Provide registered person furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee.
- Therefore, if the recipient is registered under the Act, he should be eligible to claim such unutilized credits. In a situation, where the recipient is not registered under the Act, he may have to make a fresh application for registration and claim such unutilized credits after making an intimation to the department.
- In case there is a change in the constitution of registered taxable person without specific provision of transfer of liabilities unutilized input tax credit cannot be transferred.
Switchover from taxable to exempt transactions or from Regular to composition.
In case registered person Switchover from taxable to exempt transactions or from Regular to composition, in such a case he shall pay an amount equal to the credit of tax paid on stock held (inputs, semi-finished goods or finished goods) and capital goods (reduced by percentage points) on the day preceding the date of opting for composition/ effecting exempt supplies will have to be paid. The same can be paid by utilization of credit/ cash payments.
Supply of capital goods on which ITC has been taken
In case of supply of capital goods or plant and machinery on which input tax credit has been taken, the registered person will have to pay an amount equal to:
• Input tax credit taken on the said capital goods/ plant and machinery reduced by the percentage points specified; or
• the tax on the transaction value of such goods
whichever is higher.