This is Ravi Verma, In this Tutorial, I will let you know about the correct way for claiming ITC.
What is ITC in the GST?
When a person’s business turnover is more than the threshold limit of Indian rule, then this time he needs to get registered his business under the GST act 2017.
After getting the registration under the GST act, he needs to file his GSTR-1 and GSTR-3B every month according to the GSTR rule & regimen.
And now he would issue a tax invoice to his vendors and clients, after issuing the tax invoice he needs to file GSTR-1 and GSTR-3B on given that due to this his vendors and client would get their ITC.
For example:- There are two businessmen "Ram" and "Shyam", "Ram" is a seller and "Shyam" is a purchaser, when Ram sold his goods to Shyam then this time he would give a tax invoice to Shyam, and now Ram will file his GSTR-1 on the given due date after that Shyam would receive own ITC which was already paid to Ram at the time of purchasing goods.
What is rule 38, 42, and 43 of the CGST rule and section 17(5)?
According to rule 38 of the CGST Act –Its full name is a Claim of credit by a banking company or a financial Institution. When the details of outward supply are furnished by the registered person under sub-section(1) of section 37, the details of ITC will show in their vendor’s GST portal under the GSTR-2B column. But vendors will not able to get their full ITC due to some reason the GST act.
- You can not avail of your ITC because your suppliers have taken a new registration in the GST Act that’s why.
- By any registered person, who has defaulted in the payment of tax, he did not pay his tax to the GST department due to this reason you may not avail of your ITC.
- By any registered person, who has filed his GSTR-1 and the total value of out-word supply is Rs 100000 but he has not paid the full taxable amount to the GST department, due to this shortfall you can not avail your ITC.
- By any registered person, who claimed excess ITC during the time of Tax payment, due to this error you can not avail of your ITC.
- By any registered person, who has paid his taxes with the help of its credit ledger he did not pay their 1% tax in the cash form due to this you can not avail of your ITC.
What said section 49(12) – According to this section you have to pay 1% tax in the cash form at the time of GSTR-3B filling, you can not be filed your tax amount only with your credit ledger.
According to rule 43 of the CGST Act – When we are buying capital goods for business purposes and the value of the goods is Rs 100000 and we get ITC of Rs 18000 from these goods. And if we have used these capital goods for our personal use then this time it is our duty to reverse their ITC on account of personal use of capital goods.
Example – If we have Purchased capital goods for business purposes is RS 10000 and we get ITC is Rs 1800 then if we used these goods for manufacturing exempt goods or taxable goods both then this time it is going to do the reversal case, so whatever we will manufacture our exempt goods it is our duty to reverse ITC to the GST department with the ratio of between the value of exempt goods and ITC.
Note - The government has implemented a rule that if you are buying capital goods for business purposes and you have used these goods for 5 years and after that, you have sold these goods to any other person after deducting the depreciation amount of these goods after that, you do not need to do any ITC reversal to the GST Department.
Rule 42 of the CGST Act – This rule is not covered to rule 43 of the CGST Act. according to this rule, we would get our ITC according to the GSTR-2B, we will not claim any extra ITC under rule 42 of the CGST act.
Example - If we have purchased goods from Mr. A and Mr. A has not paid the tax amount for these goods to the GST department and we have claimed ITC in our GSTR-3B return, the government will issue a notice to Mr.A due to non-payment of tax liability, after payment of this amount we will get our ITC otherwise we have to reverse the ITC amount which was claimed by me.
Due to this finding, we cannot claim such ITC which did not fulfill the conditions of CGST Rule 38, 42, and 43 of section 17(5).