Skip to content

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

An ISD located in Maharashtra has eligible central tax credit of ₹90,000 and State tax credit of ₹90,000 on an input service attributable to all recipients. Recipient R1 is in Maharashtra and R2 is in Gujarat. The relevant-period turnovers are ₹3 crore for R1 and ₹6 crore for R2. What credit goes to R2, and in what form?

R2 gets ₹1,20,000 as integrated tax. Its turnover share is two-thirds, giving ₹60,000 of central tax and ₹60,000 of State tax. Because R2 is in a different State from the ISD, the two shares are added and distributed as integrated tax.

  1. A₹60,000 as integrated tax
  2. B₹1,20,000 as integrated taxCorrect
  3. C₹60,000 as central tax and ₹60,000 as State tax
  4. D₹1,20,000 as central tax

Explanation

R2's share is 6/(3+6) = 2/3. Central tax share is 90,000 x 2/3 = 60,000 and State tax share is 60,000. For a recipient in a different State, rule 39(1)(j)(ii) requires distribution as integrated tax equal to the aggregate of the central and State tax shares: 60,000 + 60,000 = 1,20,000. Option ₹60,000 integrated tax counts only one component.

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