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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Sharma Traders, a registered person, buys goods under one invoice that the supplier dispatches in three lots during June, July and August. Sharma holds the tax invoice, the supplier has reported it and all other conditions are met. From which point may Sharma take credit of the tax on this invoice?

Sharma may take credit on the whole invoice only when the last lot is received, in August. The law ties credit for goods received in instalments to receipt of the last lot, so no credit is available lot by lot or merely on the invoice date.

  1. AOn receipt of the first lot, for the proportionate tax on that lot
  2. BOn receipt of the last lot, for the full invoiceCorrect
  3. COn the date the invoice is issued, whatever the receipt
  4. DOn receipt of the second lot, for two-thirds of the tax

Explanation

The first proviso to section 16(2) says that where goods against an invoice are received in lots or instalments, credit may be taken upon receipt of the last lot or instalment. Proportionate credit lot by lot is not permitted, so the first-lot and second-lot options are wrong. Invoice date alone is not enough because receipt of goods is a condition.

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