Input Credit

[Vinod Maheswari]

Respected Experts

Please answer following query for Input credit :-

1. if we applied for a tender and as a condition in tender we have to attached a BG for it. Now can i avail input credit of that BG. In case tender do not allot to us then whether we have to reverse Input credit or can utilised this credit for some other supply.

2. If in a month we don't have any outward supply so can we take credit of fixed expenses made in that month i.e security supply, maintenance work, Fixed manpower supply. whatever supply we made in a year are all taxable (whether its 1 month in year or more months, depended on market condition)

3. if i am manufacturing Taxable as well as exempted goods and purchase spares(do not capitalize it) for both and maintain separate stock register. i don't take credit of spare purchase for exempted supplied. If after 2 years i want to use spare of exempted unit in taxable unit can i take input credit and what will be the situation if transfer spare of taxable units to exempted units(have a single registration).

Please answer by giving section/rule reference.

Thanx

[Shilpi Jain]

For 1 & 2 - credit can be taken as the input supplies are used for business purpose and the restriction in the amount of credit as mentioned in section 17(2) would not apply as there are no exempt supplies.

3 - such spares are not capital goods. Hence if you have missed taking credit at the time of purchase, the time limit to avail the said credit would lapse after 2 years. If the said goods were capitalised then there was a chance to take credit relating to such goods when used for taxable supplies in terms of rule 43.

AI Summary

Input tax credit: BGs, fixed expenses and spares qualify when used for business; time limits and capital goods rules affect claims. Input tax credit is available for supplies, including bank guarantees furnished as tender security, when used for business and not for exempt supplies; restrictions under section 17(2) apply only where exempt supplies are involved. Fixed recurring expenses used in taxable activities may be credited even in months without outward supplies. Non-capital spares must be claimed when purchased or within the applicable time limit; capitalised goods are subject to capital goods adjustment rules allowing credit when used for taxable supplies and requiring adjustments on transfers.