Skip to content

CA Final · Indirect Tax Laws · Input Tax Credit

Kaveri Textiles Pvt Ltd, an ISD located in Chennai (Tamil Nadu), has CGST of Rs 60,000 and SGST of Rs 60,000 available for distribution on an input service attributable to all its recipients. The recipients under the same PAN are: Unit A in Chennai (turnover Rs 40 lakh in the relevant period) and Unit B in Bengaluru, Karnataka (turnover Rs 60 lakh). Both are operational. Which distribution is correct under rule 39?

Unit A receives CGST Rs 24,000 and SGST Rs 24,000, and Unit B receives IGST Rs 72,000. Distribution is pro rata to turnover in the ratio 40:60, and credit going to a recipient in another State is distributed as integrated tax, being the sum of its CGST and SGST shares.

  1. AUnit A: CGST Rs 24,000 and SGST Rs 24,000; Unit B: IGST Rs 72,000Correct
  2. BUnit A: CGST Rs 48,000 and SGST Rs 48,000; Unit B: IGST Rs 24,000
  3. CUnit A: CGST Rs 24,000 and SGST Rs 24,000; Unit B: CGST Rs 36,000 and SGST Rs 36,000
  4. DUnit A: IGST Rs 48,000; Unit B: IGST Rs 72,000

Explanation

Ratio of turnover is 40:100 for A and 60:100 for B. Total credit is Rs 1,20,000. Unit A's share is 40% of CGST (Rs 24,000) and 40% of SGST (Rs 24,000), distributed as CGST and SGST because it is in the same State as the ISD. Unit B's share is 60% of 60,000 plus 60% of 60,000, i.e. Rs 36,000 plus Rs 36,000 equals Rs 72,000, which is distributed as IGST because B is in another State. Check: 48,000 plus 72,000 equals 1,20,000.

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