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CA Final · Indirect Tax Laws · Input Tax Credit

Nirmal Textiles Ltd is an ISD located in Maharashtra. In the current month it has CGST of Rs 90,000 and SGST of Rs 90,000 on a common input service attributable to all its recipients. The recipients are Unit A in Maharashtra (turnover in the relevant period Rs 40 lakh) and Unit B in Karnataka (turnover in the relevant period Rs 60 lakh). Both units have the same PAN as the ISD. What credit will Unit B receive?

Unit B receives IGST of Rs 1,08,000. Its turnover share is 60 per cent, giving Rs 54,000 each of CGST and SGST. Since Unit B is in a different State from the ISD, the two amounts are added and distributed as integrated tax.

  1. AIGST of Rs 1,08,000Correct
  2. BIGST of Rs 54,000
  3. CCGST of Rs 54,000 and SGST of Rs 54,000
  4. DIGST of Rs 90,000

Explanation

Unit B's share is 60/100. CGST share is 0.6 x 90,000 = 54,000 and SGST share is 0.6 x 90,000 = 54,000. Because Unit B is located in a State other than the ISD's, rule 39(1)(j)(ii) requires the aggregate of 54,000 + 54,000 = Rs 1,08,000 to be distributed as integrated tax. Taking only one component (54,000) is the key error.

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