Skip to content

CMA Final · Indirect Tax Laws and Practice · Input Tax Credit

An ISD has Rs 1,00,000 of eligible credit on an input service attributable to recipients P, Q and R only. The relevant-period turnovers are P Rs 4 crore, Q Rs 4 crore and R Rs 2 crore. A fourth recipient S (turnover Rs 10 crore, same PAN) does not benefit from this service. Which is the correct distribution to Q?

Q receives Rs 40,000. Where the service is attributable to only some recipients, the pro rata turnover is measured against the aggregate turnover of those recipients only, which is Rs 10 crore. Q's Rs 4 crore share gives 40 per cent of Rs 1,00,000. Recipient S is excluded.

  1. ARs 40,000Correct
  2. BRs 20,000
  3. CRs 50,000
  4. DRs 33,333

Explanation

The service is attributable to more than one but not all recipients, so only the recipients to whom it is attributable form the denominator: T = 4+4+2 = 10 crore. Q gets 4/10 x 1,00,000 = 40,000. Including S gives 4/20 x 1,00,000 = 20,000, which is wrong. Check: 40,000+40,000+20,000 = 1,00,000.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax CreditFree diagnostic mock

More Input Tax Credit questions