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CA Final · Indirect Tax Laws · Input Tax Credit

Sundaram Textiles Ltd, Chennai (an Input Service Distributor) received an input service attributable to all its recipient units, with eligible central tax of Rs 30,000 and State tax of Rs 30,000. Under the ISD distribution rule, how must this credit be distributed to a recipient unit located in Karnataka (a different State from the ISD)?

For a recipient in a different State from the ISD, the central and State tax credit is distributed as integrated tax, equal to the combined amount of central and State tax credit qualifying for that recipient. Same-form distribution applies only to recipients located in the ISD's own State.

  1. AAs central tax of Rs 30,000 and State tax of Rs 30,000 in the same form
  2. BAs integrated tax equal to the aggregate of the central and State tax credit that qualifies for that recipientCorrect
  3. CAs State tax only, since the recipient is in another State
  4. DAs central tax only, because the ISD is registered in Tamil Nadu

Explanation

Under rule 39(1)(j)(ii), credit of central and State tax for a recipient located in a State other than the ISD's State is distributed as integrated tax equal to the aggregate of the central and State tax credit qualifying for that recipient. Keeping the original form is allowed only for a recipient in the ISD's own State, so the first option is wrong.

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