Vinayak Enterprises is a retail supplier of both taxable and exempted goods, registered under GST in the State of Rajasthan. Vinayak Enterprises has…

Division B- Descriptive Questions (1) Computation of ITC credited to Electronic Credit Ledger ITC of input tax attributable to inputs and input services intended to be used for business purposes is credited to the electronic credit ledger. Input tax attributable to inputs and input services intended to be used exclusively for non-business purposes, for effecting exclusively exempt supplies and on which credit is blocked under section 17(5) of the CGST Act, 2017 is not credited to electronic credit ledger [Sections 16 and 17]. In the light of the aforementioned provisions, the ITC credited to electronic credit ledger of Vinayak Enterprises is calculated as under: Particulars Amount (₹) CGST @9% (₹) SGST @9% (₹) GST paid on taxable goods 45,00,000 4,05,000 4,05,000 Goods not leviable to GST [Since non-taxable, no GST is paid] 4,00,000 Nil Nil GST paid on monthly rent for shop 3,50,000 31,500 31,500 GST paid on telephone expenses 50,000 4,500 4,500 GST paid on Chartered Accountant Fee 60,000 5,400 5,400 GST paid on premium of health insurance policies as per company policy [ITC on health insurance service is allowed only if it is obligatory for employers to provide such services to its employees under any law for the time being in force-Proviso to section 17(5)(b)]. 10,000 Nil Nil Taxable Goods given as free samples [ITC on goods disposed of by way of free samples is blocked under section 17(5)(h)] 5,000 Nil Nil Freight paid to GTA for outward transportation of non-taxable goods under reverse charge [Since definition of exempt supply under section 2(47) specifically includes non-taxable supply, the input service of outward transportation of non-taxable goods is being exclusively used for effecting exempt supplies.] 50,000 Nil Nil Freight paid to GTA for outward transportation of taxable goods under reverse charge 1,50,000 3,750 3,750 ITC credited to the electronic ledger 4,50,150 4,50,150 Less: ITC reversal [ITC out of common credit, attributable to exempt supplies] (Refer point no. 2 & 3 below) (6,900) (6,900) Net ITC available 4,43,250 4,43,250 (2) Computation of common credit available for apportionment Common Credit = ITC credited to Electronic Credit Ledger – ITC attributable to inputs and input services intended to be used exclusively for effecting taxable supplies [Section 17 read with rule 42 of the CGST Rules, 2017]. Particulars CGST (₹) SGST (₹) ITC credited to Electronic Credit Ledger 4,50,150 4,50,150 Less: ITC on taxable goods 4,05,000 4,05,000 Less: ITC on freight paid to GTA for outward transportation of taxable goods 3,750 3,750 Common credit 41,400 41,400 (3) Computation of ITC attributable towards exempt supplies out of common credit ITC attributable towards exempt supplies = Common credit x (Aggregate value of exempt supplies during the tax period/ Total turnover during the tax period) [Section 17 read with rule 42]. Particulars CGST (₹) SGST (₹) ITC attributable towards exempt supplies [₹ 41,400 x (₹ 10,00,000/60,00,000)] 6,900 6,900 (4) Computation of net GST liability for the month Particulars CGST (₹) SGST (₹) GST liability under forward charge Supply of taxable goods [₹ 50,00,000 x 9%] 4,50,000 4,50,000 Total output tax liability under forward charge 4,50,000 4,50,000 Less: ITC 4,43,250 4,43,250 Net GST payable [A] 6,750 6,750 GST liability under reverse charge Freight paid to GTA for outward transportation of taxable goods [₹ 1,50,000 x 2.5%] 3,750 3,750 Freight paid to GTA for outward transportation of non-taxable goods [₹ 50,000 x 2.5%] 1,250 1,250 Total tax liability under reverse charge [B] 5,000 5,000 Net GST liability [A] + [B] 11,750 11,750 Note: Amount available in the electronic credit ledger may be used for making payment towards output tax [Section 49]. However, tax payable under reverse charge is not an output tax in terms of definition of output tax provided under section 2(82). Therefore, tax payable under reverse charge cannot be set off against the input tax credit and thus, will have to be paid in cash.