EXAMPLE-119

 M/s Rahul have been registered under composition scheme under GST and turnover of the firm has crossed Rs. 75 lakh on 22^nd  September, 2017. Hence the composition scheme is withdrawn and M/s Rahul became regular taxable person under section 9. Stock of the firm on 21^st September, 2017  in the books of registered person as follows:-

(i)                 Determine the eligibility of input credit on becoming a regular taxable person.

(ii)                Determine the credit available if raw material held in finished goods of value Rs 150000 is purchased on invoice on 1 Oct 2016.

Answer

(i)                 Section 18(1)(c) provides that If registered taxable person ceases to pay tax under section 10, he shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9.

Thus in view of above provision input tax credit available = 144000+54000+45000 = Rs. 243000

(ii)               Section 18(2) specifies that taxable person shall not be entitled to take credit in respect of goods or services after the expiry of one year from the date of issue of tax invoice relating to such supply.

Thus, input tax credit on one year old invoice is not allowed.

Hence ITC  is not eligible on input contained in finished goods of value of Rs 150000 as input relates from the purchase which is made before one year. Thus eligible credit is only Rs 18000 in finished goods held in stock of value of Rs. 100000 i.e. 2,50,000 - 1,50,000.

Total eligible credit =144000+54000+18000 = Rs. 216000