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CA Final · Indirect Tax Laws · Input Tax Credit

Sahyadri Foods Ltd, an Input Service Distributor (ISD) located in Pune, received an input service invoice with eligible credit of Rs 60,000 (CGST Rs 30,000 + SGST Rs 30,000) that is attributable solely to its sister unit (same PAN) in Chennai. Which statement correctly describes the distribution under Rule 39?

The entire credit goes only to the Chennai unit, because it is the sole recipient to whom the service is attributable. As Chennai is outside the ISD's State, the CGST and SGST credit is distributed as integrated tax equal to their aggregate, Rs 60,000.

  1. ADistributed to all recipients of credit pro rata on turnover, as CGST and SGST
  2. BDistributed only to the Chennai unit, as integrated tax of Rs 60,000Correct
  3. CDistributed only to the Chennai unit, as CGST Rs 30,000 and SGST Rs 30,000
  4. DDistributed only to the Chennai unit, as integrated tax of Rs 30,000 because only the central portion qualifies

Explanation

Credit attributable to one recipient is distributed only to that recipient (clause c). Since the recipient is in a State other than that of the ISD, central and State tax credit is distributed as integrated tax equal to the aggregate of the two, i.e. Rs 30,000 + Rs 30,000 = Rs 60,000. Distributing it as CGST and SGST applies only to recipients in the ISD's own State.

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