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CA Final · Indirect Tax Laws · Input Tax Credit

Kaveri Pharma Ltd. has an ISD in Bengaluru and two recipient units with the same PAN. Unit P has had turnover for years. Unit Q began operations in February of the current financial year and had no turnover in the preceding financial year. The ISD will distribute common credit in August of the current year. For the turnover ratio under Rule 39, what is the 'relevant period'?

The relevant period is the last quarter for which turnover details of all recipients are available, previous to the month of distribution. Since Unit Q had no turnover in the preceding financial year, the preceding-year basis cannot be used under the Explanation to Rule 39.

  1. AThe preceding financial year, ignoring Unit Q
  2. BThe last quarter for which turnover details of all recipients are available before AugustCorrect
  3. CThe month of July alone
  4. DThe current financial year up to the date of distribution

Explanation

The Explanation to Rule 39 provides that if some or all recipients have no turnover in their State in the preceding financial year, the relevant period is the last quarter for which turnover details of all recipients are available before the month of distribution. Using the preceding year while ignoring Unit Q is not permitted, since the preceding year applies only if recipients have turnover in it.

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