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CMA Final · Indirect Tax Laws and Practice · Input Tax Credit

Under the ISD distribution rules of the CGST Rules, 2017, the credit of tax paid on an input service that is attributable to only one recipient of credit is to be distributed in which manner?

Credit on an input service attributable to a single recipient is distributed only to that recipient. Turnover-based pro rata distribution applies only when the service is attributable to several recipients or all of them, so spreading it across every unit would be wrong.

  1. APro rata to all recipients on the basis of their turnover in the relevant period
  2. BOnly to that recipient to whom the service is attributableCorrect
  3. CEqually among all recipients having the same PAN
  4. DRetained by the ISD until the end of the financial year and then distributed

Explanation

The rules provide that credit of tax paid on input services attributable to a recipient of credit is distributed only to that recipient. Pro rata distribution applies only where the service is attributable to more than one recipient or to all recipients. Equal split and year-end retention find no support in the rule.

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