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

In March 2027, an ISD distributes credit for the first time to recipients P and Q. P had turnover in its State in the preceding financial year, but Q began operations in January 2027 and had no turnover in the preceding financial year. What is the 'relevant period' for the turnover ratio?

Because recipient Q had no turnover in the preceding financial year, the relevant period becomes the last quarter before the month of distribution for which turnover details of all recipients are available. The preceding financial year applies only when all recipients had turnover then.

  1. AThe preceding financial year for both recipients
  2. BThe last quarter, before the month of distribution, for which turnover details of all the recipients are availableCorrect
  3. CThe month of distribution alone
  4. DThe current financial year up to the end of February 2027

Explanation

Under the Explanation to Rule 39, if some or all recipients have no turnover in their States in the preceding financial year, the relevant period is the last quarter, previous to the distribution month, for which turnover details of all recipients are available. Since Q had no turnover in the preceding year, the preceding-year basis cannot be used for the set.

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