Skip to content

CA Final · Indirect Tax Laws · Input Tax Credit

Bharat Foods Ltd. has an ISD in Mumbai (Maharashtra). Its recipients with the same PAN are Unit M in Maharashtra (turnover in the preceding financial year ₹2 crore), Unit G in Gujarat (₹1.5 crore) and Unit K in Karnataka (₹0.5 crore). All have turnover in the preceding year. An audit service attributable to all three units carries CGST ₹80,000 and SGST ₹80,000, and is eligible credit. What credit will the ISD distribute to Unit G?

The ISD distributes IGST of ₹60,000 to Unit G. Its turnover share is 37.5 percent, giving CGST ₹30,000 and SGST ₹30,000, and because Gujarat differs from the ISD's State, Rule 39(1)(j)(ii) requires the aggregate to be distributed as integrated tax.

  1. ACGST ₹30,000 and SGST ₹30,000
  2. BIGST ₹30,000
  3. CIGST ₹60,000Correct
  4. DIGST ₹1,20,000

Explanation

Unit G's share is 1.5/4 = 37.5%. Its share of CGST is 80,000 x 37.5% = 30,000 and of SGST is 30,000. Because Unit G is located in a State other than that of the ISD, clause (j)(ii) requires the aggregate of 30,000 + 30,000 = 60,000 to be distributed as integrated tax. Distributing CGST and SGST separately applies only to the same-State recipient, and IGST of 30,000 would ignore the SGST 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