Distrubution of ISD credit

[Jasbir Uppal]

Dear Professionals,

Query No 1

The procedure for disturbution of input tax credit by ISD , the assessee is partnership firm having more than two GSTN in different states but on same PAN number.

Can the excess ITC be adjusted with the liability of tax payable in another state under section 20 of CGST Act,2017 ?

Query No 2

As per 23rd GST Council meeting in Guwahati most of items have been shifted from 28% to 18%

On the date of effecting notification the stock of material lying on effecting date the rate of tax paid @28% but post effect the rate will be 18% on outward supply.

Now our query is eligible ITC is on 28% or 18% because in VAT period most of assessing officer had revered the ITC as in those cases also the same condition prevailed.

Thanks & Regards

J S Uppal

Tax Consultant

[KASTURI SETHI]

In my view both replies are as under: 1. Yes 2. Yes. 28 % for the stock because inputs have suffered higher rate of tax as per law. What has happened regarding VAT in the past is not relevant in the eyes of Central Tax. In pre-GST era there was a difference treating credit of VAT and CE and ST.

[CSSANJAY MALHOTRA]

Addendum to views shared by Sh. Kasturi ji.

In first case, ISD can distribute Common ITC in proportion to the Turnover of separate GSTIN No.

In Second case, ITC eligibility is 28% which can be set off against 18% from Nov 15 (Effective date of Notification as recommended in 23rd GST Council meeting). This is a case of inverted Duty Structure and you can claim Refund of same as per GST Act.

[DR.MARIAPPAN GOVINDARAJAN]

I viewed the views of both experts. Sanjay Malhotraji you have not been in the forum for many a day. Please give your active participation.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, Thanks for enrichment of my knowledge by way of addition and support.

[Nash Industries I Pvt Ltd]

In sync with the views of all the experts.

Regards

S.Ramaswamy

[Ganeshan Kalyani]

Answer to query 1 is yes.

Answer to query 2 - you are eligible to take credit of the tax paid while purchasing.

AI Summary

ISD input tax credit distribution: excess credit can be adjusted across GSTINs and pre-rate change ITC preserved.
An Input Service Distributor may allocate common input tax credit among separate GSTINs on the same PAN, including using proportionate turnover-based distribution, allowing excess credit to be adjusted against liabilities of other GSTINs. When tax rates on outward supplies are reduced, eligible input tax credit for stock purchased before the effective date remains at the tax rate actually paid at purchase, potentially giving rise to an inverted duty situation with refund avenues for the unutilised differential.