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CA Final · Indirect Tax Laws · Input Tax Credit

Godavari Engineering Ltd, an ISD, wants to distribute credit for the month of October. Its recipients are Unit X, which had turnover in its State in the preceding financial year, and Unit Y, a new unit with no turnover in the preceding financial year. Under the Explanation to rule 39, what is the 'relevant period' for the distribution?

The relevant period is the last quarter, before the month of distribution, for which turnover details of all recipients are available. Because Unit Y had no turnover in the preceding financial year, the financial-year basis cannot be used under the rule 39 Explanation.

  1. AThe last quarter, previous to the month of distribution, for which turnover details of all recipients are availableCorrect
  2. BThe preceding financial year, since at least one recipient has turnover in it
  3. CThe month of October itself
  4. DThe financial year in which the service was received

Explanation

The relevant period is the preceding financial year if the recipients have turnover in their States in that year. If some or all recipients do not have any turnover in the preceding financial year, it is the last quarter for which turnover details of all recipients are available, previous to the month of distribution. Y has no turnover, so the quarter test applies.

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