Skip to content

CS Executive · Tax Laws and Practice · Input Tax Credit and Computation of GST Liability

Sunrise Pharma Ltd uses a common input service for both taxable supplies and exempt supplies. The input tax on the service is ₹1,80,000. Under the apportionment rule, credit for such common input is:

Credit is restricted to the input tax attributable to taxable supplies including zero-rated supplies. The part used for exempt supplies is not eligible, so neither full credit nor a complete block applies to a common input used for both kinds of supply.

  1. AFully allowed as the service is used in business
  2. BRestricted to the portion attributable to taxable supplies including zero-rated suppliesCorrect
  3. CFully blocked because some supplies are exempt
  4. DAllowed at 50% in all cases

Explanation

Where goods or services are used partly for taxable supplies including zero-rated supplies and partly for exempt supplies, credit is restricted to the input tax attributable to the taxable and zero-rated supplies. Full credit ignores the exempt use, and a full block is excessive because the taxable part is still eligible.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit and Computation of GST Liability shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax Credit and Computation of GST LiabilityFree diagnostic mock

More Input Tax Credit and Computation of GST Liability questions