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CA Final · Indirect Tax Laws · Input Tax Credit

Bharat Pharma Ltd's head office in Pune is an ISD. In October 2026 it received an invoice for an audit service attributable to only two units, X and Y, out of its four recipient units. Turnover of the units in the relevant period was: X Rs 6 crore, Y Rs 4 crore, Z Rs 10 crore, W Rs 20 crore. Eligible credit is Rs 1,00,000. How much credit goes to X?

X receives Rs 60,000. Credit on a service attributable to only X and Y is shared pro rata to their turnovers alone, so X's share is 6/(6+4) of Rs 1,00,000. Including units Z and W in the denominator would be wrong.

  1. ARs 15,000
  2. BRs 60,000Correct
  3. CRs 25,000
  4. DRs 30,000

Explanation

Under clause (d), credit attributable to more than one recipient is distributed pro rata only among the recipients to whom the service is attributable. T = 6 + 4 = 10 crore. C1 = (6/10) x 1,00,000 = Rs 60,000. Using all four units (6/40) gives Rs 15,000, which wrongly applies clause (e).

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