In this article, we will discuss in details about Input Tax Credit on motor vehicle in depth. We shall learn in depth, whether we can avail Input Tax Credit (ITC) on the GST paid when purchasing a motor vehicle. We will explore various scenarios for understanding for eligibility and ineligibility of ITC.The CGST (Central Goods and Services Tax) Act defines that it excludes certain vehicles from being considered as "motor vehicles." These exclusions are as follows:

• Vehicles running upon fixed rails.
• Vehicles adapted for use only in a factory or enclosed premises.
• Two-wheelers or three-wheelers with an engine capacity of 25 CC or less.

If you have a vehicle which is covered by the above mentioned exclude points, then it will not be called a motor vehicle and the provisions as explained in this article will not be applicable.

General understanding of the law:

Now a days, two-wheeler or three wheelers generally have engine capacity more than 25 CC. Due to this, these vehicles are not excluded from the definition of Motor Vehicle and all the provisions of Motor Vehicle become applicable on two-wheeler or three wheelers also.

In which cases can ITC be claimed?

Generally, Section 17(5) blocks input tax credit for motor vehicles, but there are specific situations in which you can still avail of input tax credit under GST. If you fall into these cases, you can take benefit of ITC.

Transportation of goods:

If you are purchasing a motor vehicle for transporting goods, you can claim ITC. This includes vehicles like tempo, trucks, JCBs, dumpers, tippers, etc.

Example: Suppose you have a wholesale clothing business, and you purchase a tempo for transporting goods. In this case, you can claim ITC on the GST paid for the tempo.

Transportation of persons:

If you are purchasing a motor vehicle with a seating capacity of more than thirteen (13, including the driver's seat), you can claim ITC. However, if the seating capacity is thirteen or less, you will not be eligible for ITC.

Example 1: Let's say you run an employee transportation service and purchase a mini-bus with a seating capacity of more than thirteen. In this case, you can claim ITC.

Example 2: If you purchase a 12-seater traveler for employee transportation, which is less than thirteen in seating capacity, you will not be eligible for ITC.

Transportation of persons:

The GST Act provides an exemption where even if the seating capacity is thirteen or less, you can still claim ITC.

Let's see which cases allow us to claim ITC.

• If you are further supplying these motor vehicles, which means you are a motor vehicle dealer, you can claim ITC.
  Example: If you own a car dealership and purchase cars for further supply, you can claim ITC on all the cars you purchase for resale.
• If you provide driving training in these motor vehicles, as in the case of a driving school, you can claim ITC without considering the seating capacity.
• If you use these motor vehicles for transporting passengers because your business is related to passenger transportation, such as a transportation agency, you can claim ITC for all vehicles used in your passenger transportation business.
  Examples: Cabs, taxis, etc.

General understanding of the law for two-wheelers and three-wheelers:

In general, on purchase of two-wheelers or three-wheelers, we cannot claim ITC because its seating capacity is less than 13 persons. But some exemptions have been provided in the GST Act where its core purpose will be considered instead of seating capacity, so if your case falls in these exemption cases then you will also get the benefit of ITC. These exempted cases are the same as we saw in the case of motor vehicles in general.

Exempted cases are:

1. You are going to further supply these two/three wheelers, meaning you are a dealer.
2. You give driving training on these two/three wheelers, which means you have a driving school.
3. You are using these two/three wheelers for the transportation of passengers because your business is the transportation of passengers.
4. If you are using two-wheelers or three-wheelers for the transportation of goods, then in this case you can avail the benefit of ITC.
5. So, if your two/three wheeler falls in any of these three conditions then you will get the benefit of ITC in GST.

Other points

A. Whether ITC is allowed or disallowed on the services of general insurance, servicing, repair & maintenance related to motor vehicles will depend on whether ITC is allowed on that particular motor vehicle or not.

So, this rule works in such a way that if ITC is available on a motor vehicle then you can also claim ITC on the services of General insurance, servicing,
repair & maintenance related to that vehicle and if ITC is blocked on the motor vehicle then you can claim ITC on the services related to that vehicle. ITC
will also be blocked on the services of general insurance, servicing, repair & maintenance related to the vehicle.

B. In all these cases, the benefit of ITC is available only in those cases where you are eligible to avail ITC under other provisions related to ITC.

We are providing some examples for Better Understanding:

1. If the manufacturing company is purchasing a car for the official use of its employees, then ITC on purchase of the car will be blocked because the seating capacity of the car is generally not more than thirteen persons (including the driver), hence the benefit of ITC will not be available.

2. If a car dealer purchases a car to sell to his customer, then ITC on purchase of the car will be allowed. In this case, the provision of exemption will be applicable, hence the provision of seating capacity will not be applicable and the benefit of ITC will be available.

3. If a driving school purchases a car for its driving school, then ITC will be available in this case. Because the provision of exemption will apply in this case.

4. If the company purchases a truck for the transportation of its finished goods, then ITC will be available in this case. Because this case will fall in the provision of transportation of goods and the benefit of ITC will be available.

5. If the Company uses the truck for transportation of its finished goods and also incurs some repair & maintenance expenses on this truck, then in this case ITC on expenses of repair & maintenance will be available.

Frequently Asked Questions (FAQs) :

Q : Is ITC available for Insurance, servicing, repair, and maintenance of vehicles?
A: As per Section-17 (5) of CGST Act, {Block Credit}-No ITC is allowed in respect of services of general insurance, servicing, repair and maintenance of vehicle except the cases mentioned below :-

• Motor vehicles for transportation of persons having an approved seating capacity of more than thirteen persons (including the driver)
• further supply of such motor vehicles
• transportation of passengers
• Providing training in driving (Driving school)
• Received by a taxable person engaged manufacture of such motor vehicles

Q : Is GST input (ITC) available on car purchases for Company ?
A : As per Section-17 (5) of CGST Act, {Block Credit}-No Input Tax Credit (ITC) is allowed in respect of motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:-

• further supply of such motor vehicles
• transportation of passengers
• Providing training of driving (Driving school)
• Received by a taxable person engaged manufacture of such motor vehicles

Q : How to claim GST on a car purchase when used for the conveyance of a director from office to Company, Is it eligible or blocked credit under GST?
A : The seating capacity of the Car is not more than thirteen persons (including the driver) Hence, ITC (Input Tax Credit) will not be allowed.

Q : Can I get an Input Tax Credit of GST on a commercial vehicle?
A : When you are purchasing a vehicle for commercial purposes like transportation of goods then ITC (Input Tax Credit) is eligible.

Q : We have purchased a Car in our company for the marketing team to visit places of customers. Is ITC (Input Tax Credit) eligible or ineligible in this case?
A : ITC (Input Tax Credit) cannot be claimed in the case of transportation of a person except where motor vehicles have an approved seating capacity of not more than thirteen persons (including the driver). Even though you are using the car to increase the revenue of the Company, but seating capacity of the Car is normally less than thirteen persons (including the driver), Hence, ITC (Input Tax Credit) will not be allowed in this case.

Q : Is ITC (Input Tax Credit) on renting of motor vehicle available?
A : As you are using the car for the purpose of renting ITC (Input Tax Credit) will be available.

Q : Can we claim GST on bike?
A : In general, on purchase of two-wheelers or three-wheelers, we cannot claim ITC because its seating capacity is less than 13 persons. However some exemptions have been provided in the GST Act where its core purpose will be considered instead of seating capacity.
Exempted cases may be like you are a dealer, provide driving training, or use the vehicles for passenger transportation, then ITC can be claimed even on a bike.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.

Topic Covers:

1. New tax regime
   a. Features
   b. Deductions/exemptions to be forgone
   c. Deduction allowed
2. Old Vs. New tax slab
3. Opting for the applicable tax regime
4. Which Tax Regime is better?
5. How To Opt For Old Tax Regime

Individuals and HUF need to pay income tax as per the slab rates applicable to the relevant assessment year. The Government of India has introduced a new tax rate regime for individuals and Hindu Undivided Families (HUF) from 1st April 2020 (FY 2020-21). The new tax rate regime has been introduced by inserting section 115BAC in the Finance Act 2020. To provide concessional tax rates as per the new tax regime an individual taxpayer and HUF need to forgo specified tax deductions or exemptions.

Further in the union budget 2023, the amendment is proposed to make the new tax regime as the default tax regime, and the option to opt for the old tax regime is provided to the taxpayer.

1. New tax regime:

Section 115BAC was inserted to provide the benefit of a concessional tax rate to individuals and HUFs. However who wish to pay tax as per this tax slab cannot claim several exemptions and deductions such as house rent allowance, and deductions under Chapter VI-A i.e. section 80C, 80D, 80G etc.

To encourage the adoption of the new tax regime significant changes have been announced to the new tax regime. The basic exemption limit in the new tax regime has been increased from ₹ 2.5 lakhs to INR 3 lakh. A tax rebate under section 87A will be provided for income up to ₹ 7 lakh.
a.Features:

• • Lower tax rate: The new tax regime has a wider scope of taxation with seven tax rate slabs ranging from 0% to the highest 30% applicable on income above ₹ 15 lakhs. Under the new tax regime basic exemption limit of income is ₹ 3 lakhs. No tax on income up to ₹ 3 lakhs.
  • Rebate: For individuals total income for tax rebate under section 87A also increased to ₹7 lakhs which is ₹ 5 lakhs for the old tax regime. This means an individual earning income upto ₹ 7lakh can claim tax rebate as per section 87A up to tax amount ₹ 25,000.

b.Deductions/exemptions to be forgone
Here is the list of deductions/exemptions not allowed under the new tax regime:

• House rent allowance (HRA)
• Deduction for professional tax
• Leave travel allowance (LTA)
• Children education allowance
• Other special allowances [Section 10(14)]
• Interest on housing loan
• Deduction for specified investments or expenses under Chapter VI-A except Section 80CCD(2) and Section 80JJAA.

c.Deduction allowed in new tax regime
List of popular exemptions/deductions allowed under the new tax regime

• Standard deduction of ₹ 50,000 section 16(ia)
• Transport Allowances w.r.t. Person with Disabilities (PwD)
• Conveyance Allowance
• Perquisites for Official Purposes
• Exemptions for Voluntary Retirement Scheme u/ Section 10(10C)
• Gratuity Amount u/ Section 10(10)
• Leave Encashment u/ Section 10(10AA)
• Interest on Home Loan on Lent-out Property u/ Section 24
• Employer’s Contributions to Employees NPS Accounts u/ Section 80CCD(2)
• Additional Employee Costs u/ Section 80JJA
• Standard Deductions on Family Pension u/ Section 57(IIA)
• Deductions on Deposits in Agniveer Corpus Fund u/ Section 80CCH(2)

2. Old Vs New tax slab:

A taxpayer can pay the tax according to the new tax regime when he is ready to forgo the benefit of specified tax deductions and exemptions. Hence it is important to evaluate the impact of the benefit of the lower tax rates vis-à-vis deductions/exemptions being claimed.

The old and new tax regime comparison is given in the table below:

Income Tax Slab	New Tax Regime  (Applicable from 1st April 2023)	New tax Regime (until 31st March 2023)	Old Tax Regime
₹0 - ₹2,50,000	-	-	-
₹2,50,001 - ₹3,00,000	-	5%	5%
₹3,00,001 - ₹5,00,000	5%	5%	5%
₹5,00,001 - ₹6,00,000	5%	10%	20%
₹6,00,001 - ₹7,50,000	10%	10%	20%
₹7,50,001 - ₹9,00,000	10%	15%	20%
₹9,00,001 - ₹10,00,000	15%	15%	20%
₹10,00,001 - ₹12,00,000	15%	20%	30%
₹12,00,001 - ₹12,50,000	20%	20%	30%
₹12,50,001 - ₹15,00,000	20%	25%	30%
More than ₹15,00,000	30%	30%	30%

3. Opting for the applicable tax regime

Union Budget 2023, makes the new tax regime the default tax regime.
An individual or HUF taxpayer may opt for the old tax regime based on their specific situation and sources of income. Switching between the old and new to the new tax regime can be done either on a year-on-year basis or only once based on the source of income.

4. Which Tax Regime is better?

Income does not include business or professional income:

If an individual or HUF does not possess income from a business or profession, the selection can be made on a year-on-year basis. This means he has the option to choose between the old and the new tax regime every year at the time of filing of return.

The sources of income, quantum of deductions, and exemptions are different for every individual so one rule cannot be applied to all. To choose the lower tax liability calculate the tax as per the new tax regime as well as the old tax regime after considering the exemptions and deductions available under the old tax regime. Compare the tax liability under both regimes and then decide on which to opt for.

Income includes business or professional income:

If an individual or HUF has income from a business or profession, once the option to avail old tax rates for a financial year has been exercised, the old rates shall apply for subsequent years. However, the law provides such taxpayer one single option of switching back to the new tax regime should their circumstances change.

5. How To Opt For Old Tax Regime

A taxpayer with income from business or profession had the option to opt for the new tax regime only once. This means once the option is exercised the availed tax rate will be applicable to all the subsequent assessment years. To opt for this option taxpayer is required to file Form 10IE. This form was introduced in October 2020.

After the amendments proposed by the Union Budget 2023 in the new tax regime, from FY 2023-24 onwards taxpayers will be required to opt for the old tax regime, and the new tax regime will be the default option.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.

In this article, you will learn :

• Introduction of HSN Code
• HSN on a Global Scale
• India's HSN classification system
• HSN Classification Structure
• HSN Code requirement in Invoice (HSN code turnover limit)
• Why is HSN code significant within the GST System
• Services Accounting Code (SAC) in GST
• 𝐂𝐨𝐧𝐬𝐞𝐪𝐮𝐞𝐧𝐜𝐞𝐬 𝐨𝐟 𝐍𝐨𝐧 𝐦𝐞𝐧𝐭𝐢𝐨𝐧𝐢𝐧𝐠 𝐨𝐟 𝐇𝐒𝐍 / 𝐒𝐀𝐂 𝐜𝐨𝐝𝐞 𝐨𝐫 𝐦𝐞𝐧𝐭𝐢𝐨𝐧𝐢𝐧𝐠 𝐢𝐧𝐜𝐨𝐫𝐫𝐞𝐜𝐭 𝐇SN /𝐒𝐀𝐂 𝐜𝐨𝐝𝐞
• Significance of HSN Code in GST
• Frequently asked questions (FAQs)

Introduction

The implementation of the Goods and Services Tax (GST) system in India marked a substantial transformation in the country's taxation framework, notably through the incorporation of the Harmonized System of Nomenclature (HSN) code. The HSN code stands as an internationally acknowledged classification system for goods, promoting standardized and consistent tax categorization. The HSN code was established by the World Customs Organization (WCO) and became operative in 1988. In this article, we will explore the details of the HSN code used in the GST system and understand how it makes it easier to classify and follow tax rules.

HSN on a Global Scale

The HSN system finds application in over 200 nations and economies for various purposes, which include:

• Uniform classification
• Base for their Customs tariffs
• Collection of international trade statistics

India's HSN classification system

India became a member of the World Customs Organization (WCO) in 1971. Initially, it utilized 6-digit HSN codes to categorize goods for Customs and Central Excise purposes.

Afterward, Customs and Central Excise included two extra digits to make the codes more exact, which made it an 8-digit system for sorting and labelling products.

HSN Classification Structure

The HSN structure is composed of 21 sections, featuring 99 chapters, around 1,244 headings, and 5,224 subheadings.

Sections are further divided into chapters which in turn are divided into headings. Each heading is then further segmented into subheadings.

The titles of sections and chapters represent general groups of products, whereas headings and subheadings provide detailed descriptions of specific items.

Where in HSN:-

• First 2 letters represents Chapters
• Next 2 letters represents Headings
• Second last 2 letter represents Sub Headings
• Last 2 letters represents Tariff

HSN Code requirement in Invoice (HSN code turnover limit)

From 1st April 2021, HSN code to be declared was as follows:-

Annual Aggregate Turnover in PY	Type of Invoice	No of digits of HSN to be declared
Up to 5 crores	Mandatory for B2B tax invoices	4
	Optional for B2C tax invoices	4
More than 5 Crores	Mandatory for all invoices	6

Up to 31st March 2021, HSN code to be declared was as follows:-

Annual Aggregate Turnover in PY	No of digits of HSN to be declared
Upto 1.5 crores	0
1.5 crores to 5 crores	2
More than 5 crores	4

Why is HSN code significant within the GST System?

The purpose of HSN codes is to make GST systematic and globally accepted.

1. Uniform Classification: It is an internationally recognized system for categorizing goods. This ensures consistency in the classification of products for the purposes of tax calculation.
2. Customs and Central Excise: HSN codes were also used for Customs and Central Excise purposes. Now, this is continued under GST which helps in the understanding of the tax structure.
3. Precise Taxation: With the help of HSN codes, due to their unique structure, it helps in determining the exact rate of GST applicable to a specific product.
4. International Trade: HSN codes are used internationally for categorizing goods. It helps in international trade (import and export).
5. Reduced Errors: HSN provides a standard method for the calculation of tax, which helps in reducing errors by both taxpayers and tax authorities.
6. Ease of Compliance: By using HSN codes taxpayers can easily comply with the taxation rules. It helps taxpayers to identify and to apply correct GST rates to their products. It reduces the chances of disputes.
7. Data Analysis: From the economic point of view, HSN can be used for data analysis like consumption patterns, industry trends etc. It helps in better policy planning and decision-making.

Services Accounting Code (SAC) in GST

The Services Accounting Code (SAC) is a classification system used in India's Goods and Services Tax (GST) regime to categorize various services for taxation purposes. Similar to the Harmonized System of Nomenclature (HSN) codes used for goods, the SAC system classifies services to determine the appropriate GST rate and facilitate uniformity in service tax compliance.

Example: 998213 is the SAC code for Legal Documentation and Certification Services Concerning Patents, Copyrights, and Other Intellectual Property Rights.

• The first two digits are the same for all services i.e. 99
• The next two digits (82) represent the heading of the major nature of service, in this case, legal services
• The last two digits (13) represent the service code of the detailed nature of the service, i.e., legal documentation for patents, Copyrights, and Other Intellectual Property Rights.

𝐂𝐨𝐧𝐬𝐞𝐪𝐮𝐞𝐧𝐜𝐞𝐬 𝐨𝐟 𝐍𝐨𝐧 𝐦𝐞𝐧𝐭𝐢𝐨𝐧𝐢𝐧𝐠 𝐨𝐟 𝐇𝐒𝐍 / 𝐒𝐀𝐂 𝐜𝐨𝐝𝐞 𝐨𝐫 𝐦𝐞𝐧𝐭𝐢𝐨𝐧𝐢𝐧𝐠 𝐢𝐧𝐜𝐨𝐫𝐫𝐞𝐜𝐭 𝐇𝐒N /𝐒𝐀𝐂 𝐜𝐨𝐝𝐞

The repercussions of not specifying the HSN/SAC code or providing an incorrect HSN/SAC code are as follows:

• The invoice will be treated as an Invalid Invoice.
• Buyer will not be able to claim ITC
• As per Section-125 Penalty of Rs. 25000/- under CGST and a Penalty of Rs. 25000/- under SGST will be charged.

Significance of HSN Code in GST:

1. Streamlining Tax Classification:

The incorporation of HSN codes into the GST system streamlines tax classification by offering a standardized and organized structure. It provides uniform taxation practices all over the industries. HSN provides simplification of tax classification, improves effectiveness, and reduces uncertainty.

2. Assessing Tax Rates:

HSN codes have a very important role in determining tax rates. It makes it easier for taxpayers to calculate accurate tax rates applicable to their products and eliminates confusion.

3. Promoting Global Commerce:

This is the help of HSN codes, it makes it easier to do international trade. These codes are used internationally. This simplifies customs processes and makes global business smoother.

4. Reporting and Documentation:

HSN codes are very important for record-keeping, documentation, and reports in the GST system. This helps taxpayers to check and make sure that goods are classified correctly.

Frequently Asked Questions (FAQs)

Q: What is the full form of HSN?
A: The full form of HSN code is “Harmonized System of Nomenclature”. This is a system used for the classification of goods which is accepted world-wide.

Q: What is HSN code?
A: This system has been introduced for the systematic classification of goods all over the world. HSN code is a 6-digit uniform code that classifies 5000+ products and is accepted worldwide.

Q: How does HSN code work?
A: It has about 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure. These groups are governed by clear and well-defined regulations designed to ensure consistent and standardized classification.

Q : Why is HSN important under GST?
A : By employing HSN codes, GST becomes a more methodical and internationally recognized taxation system. These codes eliminate the necessity to provide comprehensive descriptions of goods when filing tax returns, resulting in time savings and simplifying the filing process through automation.

Q : What is the difference between an HSN code and a SAC code?
A : HSN Stands for Harmonized System Nomenclature and SAC stands for Service Accounting Code. HSN codes are used for the classification of goods, whereas SAC codes are used for services.

Q : What is ‘Aggregate turnover’ under GST?
A : As per Section-2(6) of CGST-"aggregate turnover" means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Q : How many digits are there in the HSN code used in India?
A : In India, the HSN (Harmonized System of Nomenclature) code consists of 8 digits. These codes are used for the systematic classification of goods for taxation and trade purposes. The first 6 digits of the HSN code are consistent with the international HSN system, while the additional 2 digits are used to provide more specific details for local classification.

Q : How to add HSN code in the GST portal?
A : Follow these steps to add an HSN code in the GST portal:

1. First visit on www.gst.gov.in
2. Then by using login credentials, Log in to the GST portal.
3. On the dashboard, navigate to 'Services' > 'Registration' > 'Amendment of Registration Non-core fields'.
4. Then, click on the 'Goods and Services' tab.
5. Choose the 'Goods' tab.
6. Search for the relevant HSN by entering the HSN code or the name of the item.
7. Click on 'Save and continue'.
8. Complete the verification by submitting using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken.

Topic Covers:

1. How to surrender PAN card
2. More than one PAN card is allotted
3. Surrender On death of Individual
4. Surrender PAN Card of a Firm/Partnership/Company
5. Consequences of holding more than one PAN
6. Things should be keep in mind

The PAN Card is one of the crucial identification proofs in India. Every taxpayer has a Permanent Account Number (PAN). A person can have only one PAN. In other words, a person cannot hold more than one PAN. But in some instances, it is possible to hold two PANs due to any reason.

If the person is in possession of two PAN cards, then one PAN must be surrendered to avoid the penalties and other repercussions.

1. How to Surrender a PAN Card?

There could be any reason for surrendering the PAN like the Death of an individual, the disposal of a partnership firm or a company. Every person is allowed to hold only one PAN and if for any reason more than one PAN is allotted to a person then extra PAN should be cancelled by filing an application to NSDL or UTI or income tax officer.

a. More than one PAN card is allotted

There are two methods for surrendering a duplicate PAN card :

1. Through an application to the jurisdictional officer
2. Through Form 49A for Change or Correction in PAN

1. Through an application to the jurisdictional officer

To surrender the PAN card the person needs to make an application to the jurisdictional officer.

• Write an application to the Assessing officer from your area of jurisdiction stating the reason for surrendering the PAN card.
• Submit the application along with the relevant documents to the Income Tax Officer.
• keep the acknowledgment slip for further reference

Details need to be mentioned
The following details need to be mentioned in the application:

1. Full Name,
2. PAN card details (PAN no., DoB)
3. Address and
4. Other contact details.

If you have multiple PAN cards, then you can mention details of the PAN card you wish to surrender and the PAN card that you want to retain.

Through form 49A Form 49A for Change or Correction in PAN

If more than one PAN is allotted to a person, he can cancel an extra PAN number through the PAN Change Request Form.

Here, he will have to fill the form 49A for the request to change or correct the PAN number which he wants to keep active.
In this form, in Point No. 11 [Mention other Permanent Account Numbers (PANs) inadvertently allotted to you], you will have to mention all the PAN numbers that you want to surrender/cancel and also attach a copy of the PAN that you want to surrender.

Submit this form to the Pan Correction office of NSDL / UTI.

This form can also be submitted online on NSDL or UTI website or offline at NSDL / UTI centre for PAN application.

b. Surrender PAN Card due to the Death of PAN Holder

In case of death of the PAN card holder, the PAN card also needs to the surrendered to the Income Tax Authority. In this case, the legal representative of the PAN card holder can make an application to the jurisdiction Income Tax Officer.

The death certificate of the PAN card holder is also required to be submitted with the application. It's essential to ensure that the PAN card and personal details like name, address, date of birth, and date of death are mentioned in the application.

This is the only method to surrender the PAN in this case.

c. Surrender the PAN Card of a Firm/Partnership/Company

In case of dissolution of a Firm/Company/Partnership authorised person can write an application to the jurisdictional Income Tax Officer for surrendering the PAN of the firm/company.

The reason for surrendering PAN must be mentioned in the application.

Details and documents required:

1. PAN card details that you want to surrender
2. Copy of documents that state the firm/company is dissolved.
   (Eg. Partnership deed)

Submit the application along with the relevant documents to the Income Tax Officer and keep the acknowledgement slip for further reference since the acknowledgement slip is a proof that the PAN card has been cancelled.

3. Things should be kept in mind

• Once the PAN card is cancelled or surrendered you cannot take a refund of TDS deducted from that PAN card.
• Link/ update active PAN details wherever required like Adhaar card, Saving Bank accounts etc.
• Check whether the PAN for which cancellation/surrender application has been made is not linked with any bank account or not provided for TDS deduction. If provided then take the necessary steps.

Letter format for surrender of PAN card (Download)
Pan card surrender affidavit format (Download) 
Form 49A (Download)  
Affidavit format for company (Download) 

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.

In this article, you will learn :

• Brief description of Health care services
• Meaning of Health Care Service
• Meaning of Clinical Establishment
• Meaning of Authorized Medical Practitioner
• Meaning of Para-medics
• Brief description of Health care services which are exempt under GST Act
• CBIC Circulars clarifying issues related to health care services

The Government of India is making every effort to make healthcare services more accessible and affordable. The Healthcare Federation of India (NATHEALTH), a leading organization for healthcare services, is also actively supporting the government's efforts. To determine the applicability of GST (Goods and Services Tax) on healthcare services provided by hospitals we need to individually assess each service. Also it's important to understand what is meant by "health care services" and "clinical establishment"

Meaning of Health Care Service

In India, services provided by recognized institutions for the diagnosis, treatment, or care of illnesses, injuries, deformities, abnormalities, or services related to pregnancy, including the transportation of patients by ambulance, are exempt from GST (Goods and Services Tax). However, services such as hair transplants and beauty treatments like cosmetic or plastic surgery are subject to GST.

But, if a person has a congenital serious illness or has been affected by an accident, and beauty treatment is being provided to them due to these conditions, then GST will not be levied on such services.

Under the category of health care services, only those services provided by recognized institutions in India are exempt, such as

• Allopathy
• Ayurveda
• Yoga
• Naturopathy
• Homeopathy
• Siddha
• Unani
• Healthcare services are being provided by recognized institutions through the Central Government's authorization.

Meaning of Clinical Establishment

A hospital, nursing home, clinic, sanatorium or any similar place, regardless of what it's called, provides services or facilities for diagnosing, treating or caring for illnesses, injuries, deformities, abnormalities or pregnancies in any recognized system of medicine in India. It can also refer to a place that is set up separately or as a part of an existing establishment specifically for conducting diagnostic or investigative services related to diseases.

Meaning of Authorized Medical Practitioner

A medical practitioner is a person who is officially registered with one of the councils of recognized medical systems in India. This includes any medical professional who has the necessary qualifications to practice in any recognized medical system in India as required by current laws.

Meaning of Para-medics

A healthcare professional which can include nurses, physiotherapists, technicians, lab assistants and others is responsible for providing emergency care to a sick or injured person during transportation to a hospital. This care may involve tasks such as giving injections, administering IV fluids, reading electrocardiograms (ECGs), and performing advanced life-saving procedures as directed by a doctor.

Health care services which are exempt under GST Act

1. Service provided by Doctor / Consultants / Technician :-

The services offered by doctors, consultants, or technicians working in hospitals, whether they are employees or not, are considered healthcare services. These services are exempt from taxes.

2. Services provided by hospital :-

Healthcare services provided to patients by a hospital are also exempt from GST. In cases where the hospital charges patients, and retains a portion of the amount while paying the remaining balance to the doctor, even in such cases, GST will not be applicable, and the entire amount will be exempt from GST.

Example: If a total of Rs. 10,000 is charged to patients, out of which Rs. 6,000 is paid to the doctor or senior consultant and the remaining Rs. 4,000 is retained by the hospital for providing ancillary services such as nursing care, infrastructure services, emergency services and blood pressure monitoring in this case, it will be considered a part of healthcare services. Therefore, it qualifies as an exempt service and GST will not be applicable.

3. Food Service :-

When a hospital provides canteen services and serves food to admitted patients based on a doctor's prescription this food service is considered a composite supply and GST will not be charged on this service.

However, when the hospital provides food service to outsiders who are not admitted patients or are attendants or visitors GST will be applicable.

4. GST on Hospital Room rent :-

When a hospital charges for room rent, and the room charges are not more than Rs. 5000 per day, GST will not be applied. If the room charges exceed Rs. 5000, then GST will be applicable.

GST Rate :

GST rate of 5% will be levied when hospital room rent exceeds Rs.5,000 per day.

However, if a patient is admitted to the ICU/CCU/ICCU/NICU, and room charges are being levied in connection with their stay, then in this case, GST will not be applied, regardless of whether the room charges are more than Rs. 5000.

5. Medicines & Allied Items :-

When a hospital provides medicines and allied items to patients admitted to the hospital, GST will not be applicable. This is considered a composite supply.

6. Laboratory services :-

The services of medical tests provided by hospitals are exempt from GST.

7. Veterinary Clinic Services :-

Services provided by a veterinary clinic for the healthcare of animals or birds is also an exempt service.

8. Cord Blood Banks Services :-

Services offered by cord blood banks for the preservation of stem cells or any other related preservation services.

9. Hair transplants and cosmetic/plastic surgery :-

Healthcare services typically do not cover the costs of hair transplants or cosmetic/plastic surgery unless these procedures are deemed medically necessary for the restoration or reconstruction of bodily structures or functions that have been impaired due to congenital defects, injuries, trauma, or developmental abnormalities.

10. Hospital Leasing and Renting :-

If the hospital leases or rents out any area within the hospital premises in such cases GST liability arises.

11. GST on ambulance service :-

The services provided by Government and private service providers by way of transportation of patients in an ambulance is specifically exempt under notification No. 12/2017- Central Tax (Rate) (S.No.26) dated 28.06.2017 vide Sl. No. 74.

12. GST on diagnostic services :

Healthcare services include diagnosis service & therefore, it is exempt.

13. GST on collection of samples for diagnostic, collection center does not have any laboratory :

Hon’ble Supreme Court of India in one of the landmark cases of Commissioner of Customs (Import) Mumbai v. M/s Dilip Kumar and Company and Ors [2018-TIOL-302-SC-CUS-CBJ -

Exemption notification should be interpreted strictly. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assesse and it must be interpreted in favour of the Revenue.

In view of the aforementioned judgment and the reasoning set out above, the activity of collection of samples by the collection agent for the laboratory so that the laboratory can conduct the diagnostic tests on the same cannot be construed as a health care service (diagnosis), but a business support service provided to the laboratory and thus, will be liable to GST.

However, if the service contract is entered into between the patient and the collection center and the test report is issued by the collection agent in its name, the service provided by it would amount to health care service (diagnosis) and thus, will be exempt from GST.

The collection center would fall within the definition of clinical establishment as it is an institution offering services (by collection of samples) or facilities requiring diagnosis. An individual sample collection agent, known as phlebotomist, can also be construed as an authorized medical practitioner if it holds the license/certificate issued by the Competent Authority.

Therefore, the activity of sample collection by a collection agent can be construed as a health care service provided by a clinical establishment or an authorised medical practitioner and can thus, be argued to be exempt from GST.

14. GST on health insurance premium :-

Health insurance is not covered in the exemption list. The GST rate for health insurance in India is generally 18%. Health insurance falls under the service category, and it has its specific HSN code 997133.

CBIC Circulars clarifying issues related to health care services :

Question : Hospitals hire senior doctors/ consultants/ technicians independently, without any contract of such persons with the patient; and pay them consultancy charges, without there being any employer-employee relationship. Will such consultancy charges be exempt from GST? Will revenue take a stand that they are providing services to hospitals and not to patients and hence must pay GST?

Answer: Health care services provided by a clinical establishment, an authorized medical practitioner or para-medics are exempt. [Sl. No. 74 of notification No. 12/2017- CT(Rate) dated 28.06.2017 as amended refers]. Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services that are exempt.

CBIC circular No. 32/06/2018-GST dated 12-02-2018

Question: Hospitals charge the patients, say, Rs.10000/- and pay to the consultants/ technicians only Rs. 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. Will GST be applicable on such money retained by the hospitals?

Answer: Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India[para 2(zg) of notification No. 12/2017- CT(Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc., is towards the healthcare services provided by the hospitals to the patients and is exempt.

CBIC circular No. 32/06/2018-GST dated 12-02- 2018

Question: Food supplied to the patients: Health care services provided by the clinical establishments will include food supplied to the patients, but such food may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers. When outsourced, there should be no ambiguity that the suppliers shall charge tax as applicable and the hospital will get no ITC. If hospitals have their own canteens and prepare their own food; then no ITC will be available on inputs including capital goods and in turn if they supply food to the doctors and their staff; such supplies, even when not charged, may be subjected to GST

Answer: Food supplied to the in-patients as advised by the doctor/nutritionists is a part of the composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website.

Topic Covers:

1. Meaning of Aggregate Turnover
2. Other Important Definition
3. Aggregate turnover includes and excludes
4. How to Calculate?
5. Turnover in State
6. Reference of aggregate turnover in GST Act
7. Other Important Points

1. Meaning of Aggregate Turnover

‘Aggregate turnover’ is a crucial parameter for deciding the applicability of various matters under the GST law like; registration, E-invoicing, Annual return, audit etc. The aggregate turnover is the most important factor in determining the applicability of the provision of the specific category of taxable persons.

The term "aggregate turnover" is defined under section 2(6) of the CGST Act, 2017.  As per the section "aggregate turnover" means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on a reverse charge basis), exempt supplies, exports of goods or services, or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

The aggregate turnover, computed for supplies done in the entire financial year starting from April to ending in March, is called annual aggregate turnover.

2. Other Important Definition

Some important definitions to understand the meaning of aggregate turnover, under the CGST Act are as follows:

The expression “taxable supply” is defined under section 2(108) of the SCGT Act:

"taxable supply" means a supply of goods or services or both which is leviable to tax under this Act.

The “exempted supply” as defined in section 2(47) of the CGST Act:

"exempt supply" means the supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

Section 2(78) of the CGST Act defines the “non-taxable supply” as

"non-taxable supply" means a supply of goods or services or both that is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;

3. Aggregate turnover includes and excludes

Based on the above provisions and definitions here are specific inclusions and exclusions:

1. Aggregate Turnover includes:

• All Taxable supplies including outward supplies which are taxable under RCM.
• Zero-rated supply (Exports and Supplies to SEZ)
• Exempt Supply
• Inter-State supply
• Supply by agent on behalf of his principal
• Taxes other than prescribed under the CGST Act

1. Aggregate Turnover excludes:

The aggregate turnover does not include the following:

• Inward supplies on which GST is payable under the RCM
• CGST, SGST, UTST, IGST or Compensation Cess
• Goods sent on Job Work to a Job worker, unless not considered to be deemed supplies.
• Goods returned to the Principal by the job worker.
• Schedule III activities (8 activities)

4. How to Calculate Aggregate Turnover in GST?

The calculation of Aggregate turnover is done on all India bases having the same PAN. It Means person supplying goods or services all over India with the same PAN, will be aggregated.

Let's take an example:

XYZ Pvt Ltd is a company registered in Delhi. During the financial year 2022-23, it made the following supplies:

Value of taxable supplies - ₹ 80,00,000 (₹ 40,00,000 in Delhi, ₹ 20,00,000 in M.P. and ₹ 20,00,000 in Maharashtra)

Value of exempt supplies - ₹ 20,00,000

Value of exports - ₹ 30,00,000

Taxes levied under GST Act - ₹ 4,00,000

Value of inward supplies - ₹ 8,00,000

Calculation of the aggregate turnover of XYZ Pvt Ltd.:

Aggregate Turnover = Value of all taxable supplies + Value of all exempt supplies + Value of all exports

Aggregate Turnover = 80,00,000 + 20,00,000 + 30,00,000

Aggregate Turnover = ₹ 1,30,00,000

Therefore, the aggregate turnover of ABC Private Limited for the financial year 2022-23 is ₹1,30,00,000.

5. Turnover in State

The definition of the term ‘turnover in State’ (or UT) is a replica of the term ‘aggregate turnover’, but for the fact that ‘turnover in State’ is restricted to the turnover of a taxable person within a state, as opposed to aggregate turnover with is PAN-based (i.e., all taxable persons having the same PAN, across States). In other words, “turnover in state” refers to the aggregate turnover of an entity within a particular state.

The expression “Turnover in state” or “Turnover in union territory” is used in different provisions of the act. The following references are made of the term in the Act:

• Composition scheme: Under the composition scheme tax payable by the taxable person is calculated on the value of ‘turnover in State’ within the state at the applicable tax rate. This tax should be paid by the taxable person in the State in which the registration is obtained.
• Distribution of input tax credit by an ISD: In case of the distribution of credit that is attributable to two or more units of the person, the credit shall be distributed amongst such units on a pro-rata basis (i.e., the ratio of their respective ‘turnover in State’ to the aggregate of the ‘turnover in State’ of all such units).
• Turnover in the State includes ‘all’ taxable supplies which includes exempt supplies. When tax is being paid under section 10 of the CGTS Act on ‘turnover in State’, the composition rate will need to be applied not on the value of supplies in respect of which composition is allowed but on other supplies also. The word used in the definition is ‘all taxable supplies’ in the State of each distinct person.

6. Reference of aggregate turnover in GST Act

Relevance of Aggregate Turnover is given under the GST law in different sections.

• GST registration: Every person supplying any goods or services that are chargeable to tax under GST is required to pay GST and resultantly required to obtain GST registration. However, there is a threshold limit for GST registration as per the law. If the aggregate turnover exceeds the specified threshold limit, registration is required to be obtained under GST.

The GST turnover limit for registration is as follows :

Category	Turnover Limit
Composition scheme	1.50 Cr ( or ₹ 75 Lakhs for special category states) in the previous financial year
Normal GST Registration
Special category States	10 Lakhs in Financial year
Other States	20 Lakhs in Financial year
A Person exclusively engaged in intra-supply of goods	40 Lakhs in Financial year

Special category States as per section 22 of the act are Manipur, Mizoram, Nagaland, and Tripura.

• Calculation of Late Fee: In case of late filing of annual return for calculation of late fee it is required to calculate the aggregate turnover.
• Applicability of e-Invoicing: E-Invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices and a few other documents are authenticated electronically by GSTN for further use on the common GST portal. This system of e-Invoicing is implemented on specific categories of persons, mostly large enterprises. The Aggregate turnover in any preceding financial years from FY 2017-18 is considered to check the applicability of the section.
• QRMP Scheme: To opt quarterly return monthly payment scheme in which GST liability is paid on a monthly basis and return is filed on a quarterly basis. The aggregate turnover in the previous financial year is calculated.
• Annual Return: To ascertain the requirement for filing of GST Annual Return in FORM GSTR - 9 & Reconciliation Statement in Form GSTR - 9C.
• HSN/SAC Code: HSN/SAC code is mandatory to mention in tax invoices. Relaxation has given to mention a four-digit HSN code on the turnover basis, to ascertain the requirement to mention HSN codes on the Invoice it is required to calculate aggregate turnover.

7. Other Important Points:

Here are other important points about the aggregate turnover:

• Schedule III activities are neither supply of goods nor services hence should not be included in Aggregate Turnover.
• Exempt Supplies: Section 2(47) of the CGST Act
  • ‘NIL’ rate supplies;
  • supplies that are wholly exempted from GST u/s 11 of CGST Act or u/s 6 of IGST Act; and
  • Non-taxable supplies – Section 2(78) of the CGST Act

• Nil Rated Supply: - The word “Nil Rated supply” is nowhere explained in GST Law. The main basic difference between Nil Rated and Exempted Supply is that, for Nil Rated Supply the tax rate is nil and therefore no tax is payable, whereas for the exempted supply the tax rate is greater than 0% but exemption is given on these supplies as per Exemption Notification of the act.
• The amount collected by the seller as an agent of the government Tax like in case TCS(tax collected at source) from the customers u/s 206C (1H) of Income Tax Act, 1961 will not be included in aggregate turnover.

Disclaimer:-The information available on this website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/Application

Topic Covers:

1. Meaning of Block credit/ITC
2. Provisions of Section 17(5) of CGST Act
3. Clause-wise Explanation of Ineligible ITC
4. List of Ineligible ITC under GST
5. Repercussion on non-compliance
6. Disclosing in GST Return

Meaning of Block Credit/Blocked ITC :

The main objective of the introduction of the Goods and Service Tax in India was the seamless flow of the input tax credit. Tax paid on purchase should be available to claim as a tax credit to pay the liability of output tax.

The law prescribed some conditions and eligibility provisions to claim the input tax credit under Section 16 of the CGST Act. Section 17(5) of the CGST Act, 2017 provides the list of ineligible input tax credit. In other words, the input tax credit on this list of items is blocked. A registered person cannot claim input tax credit on these transactions.                                                           

Provisions of Section 17(5) of the CGST Act:

The provision of the GST section 17(5) applies to all taxpayers. Section 17(5) starts with “notwithstanding” clause which means the provision of this section will prevail over the provision of Section 16(1) and Section 18(1) of the act.

The sections covers blocked credit transactions which include input tax credit on motor vehicle, insurance services, works contracts, membership of a club, and goods or services used for personal consumption etc.

Clause-wise Explanation of Ineligible ITC under section 17(5) of CGST Act:

1. Clause (a) of Section 17(5)

As per this clause input tax credit cannot be claimed on the purchase of motor vehicles with a seating capacity of not more than thirteen persons.

Exceptions to this clause are as follows

• Purchase of vehicles for retail at automobile retail houses and manufacturing establishments.
• A vehicle purchased for transportation of passengers, as in the case of cabs, bus rentals, or lease services.
• A vehicle purchased for providing training on driving such motor vehicles, as in the case of driving schools.

It means in the above cases input tax credit can be claimed.

Example: (a) GST paid on a vehicle purchased for personal use is blocked ITC / ineligible ITC

(b) GST paid on vehicle purchased by driving school to provide training – ITC available as per above exception

(c) GST paid on vehicle purchased by car dealer for sale – ITC available as per above exception

2. Clause (aa) of Section 17(5) :

ITC also cannot be claimed on the purchase of vessels and aircraft except when they are used for the following purposes:

1. For transportation of passengers;
2. For transportation of goods;
3. For further supply of such vessels and aircraft;
4. For providing training on navigating such vessels or flying such aircraft.
   
   3. Clause (ab) of Section 17(5) :

GST paid on services relating to general insurance/ servicing/ repair and maintenance of motor vehicles, vessels or aircraft is ineligible for input tax credit.

However, the input tax credit will be available when such services are received by the taxable person engaged in –

1. Manufacture of such motor vehicles/ vessels/ aircraft;
2. Supply of general insurance services in regards to such motor vehicles/ vessels/ aircraft.
3. The input tax credit on such services will also be available when motor vehicles/ vessels/ aircraft are used for purposes mentioned above in the relevant clause.

Example: (a) Tax paid on General insurance of motor vehicle, purchased for personal use – is ineligible input tax credit.

(b) Repairs and maintenance of vehicle used for driving school – ITC available as per the above exceptions.

4. Clause (b) of Section 17(5) :

For the following supply of goods or services or both, the Input tax credit is blocked:

• Food and beverages;
• Outdoor catering; Beauty treatment;
• Health services;
• Cosmetic and plastic surgery;
• Life insurance and health insurance;
• Membership of club, health and fitness centre;
• Travel benefits are provided to employees on vacation like leave or home travel concession.

However, the Input tax credit will be available where an inward supply of such goods or services is used for making a taxable outward supply of the same category of goods or services or as an element of a taxable composite or mixed supply.

Some examples for better understanding:

(a) R Ltd. allows its employees to book flight tickets for personal under the company’s name – GST paid on flight ticked is a blocked input tax credit as per provision.

(b) GST on flight tickets for sales personnel travel (business) – ITC available as per the above exception

(c) Membership of health centre paid by Mr. S, a registered person – Ineligible ITC / blocked

5. Clause (c) of Section 17(5) :

In the instance of works contract service received for construction of an immovable property (other than plant and machinery).

The exception is available in this clause that Input Tax Credit can be availed if such works contract service is used as input service for further supply of works contract service.

Example:

(a) PQR Contractors constructing a building (immovable property) by availing work contract service – ITC not available/blocked input tax credit.

(b) PQR Contractors hires RSM Contractors for works contract (an input service) – ITC available as per above exception.

6. Clause (d) of Section 17(5) :

The registered person cannot avail ITC on goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his account including when such goods or services or both are used in the course or furtherance of business.

It is to be noted that the expression "construction" includes re-construction, renovation, additions or alterations, or repairs, to the extent of capitalization, to the said immovable property. The same applies to clause (b) above in the case of works contract services.

Example:

(a) Raj Ltd hires RSM Contractors for construction of a building (immovable property) – ITC not available/blocked credit.

(b) XYZ Ltd. hires RSM Contractors for construction of plant and machinery – ITC available as per exception

7. Clause (e) of Section 17(5) :

ITC on purchase of goods or services or both on which tax has been paid under section 10 of the CGST Act, 2017 is not allowed to be claimed. Section 10 of the CGST deals with taxpayers who opted for a composition scheme under GST.

8. Clause (f) of Section 17(5) :

In case, goods or services or both received by a non-resident taxable person except on goods imported by him.

9. Clause (g) of Section 17(5) :

If goods or services or both are purchased for personal consumption a registered person cannot claim the ITC on it.

• Clause (h) of Section 17(5) :

In the instance of goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples, ITC is not allowed to be claimed.

Example:

Raj Ltd distributed goods as free samples for sales promotion – ITC is not available on such goods.

• Clause (i) of Section 17(5) :

Any tax paid in accordance with the provisions of sections 74, 129, and 130 of the act is not available to claim as ITC.

Section 74 deals with Tax not paid or short paid, because of fraud or wilful misstatement or suppression of facts, section 129 is about Detention, seizure, and release of goods/ conveyance; and section 130 is regarding Confiscation of goods/ conveyance.

Summary list of blocked credit under GST:

Here is a list of goods and services on which ITC is not available, in other words, blocked Credit under Section 17 (5) of the CGST Act 2017-

1. ITC on purchase of Motor vehicles and conveyances (for personal use, a motor vehicle with seating capacity upto 13 persons, purchase of aircraft and vessels.
2. General insurance, servicing, repairs, and maintenance of vehicles and vessels
3. Vessels and Aircraft, however, there are a few exceptions where ITC is allowed for the same.
4. Food, beverages, club memberships, beauty treatment, surgery, etc. not used for further supply of the same.
5. Membership of a club, Gym, Beauty club, health, and fitness centre.
6. Life and Health insurance
7. Travel for personal or business purposes, vacations, holidays, etc. where LTA is provided to the employees (unless obligated)
8. Leasing, Renting, and Hiring Vehicles for other than specified purposes.
9. Working Contract (for construction of properties)
10. Construction of immovable property (other than plant and machinery)
11. Purchase from Composition Scheme
12. Goods and Services received by a Non-resident
13. Goods and Services for Personal Consumption
14. Free Samples, gifts, lost stolen, and destroyed goods
15. Tax paid under section 74 of the CGST Act 2017.
16. Goods and Services purchased for exempted supplies.
17. No ITC on account of detention, seizure, and release of goods and conveyances in transit. (Under Section 129)
18. No ITC allowed on payment of late fees, penalties, interests, etc.
19. No ITC on tax paid on account of confiscation of goods or conveyances and levy of penalty (Under Section -130)

Repercussion on non-compliance:

If the registered person claimed ineligible ITC or Blocked credit as per Section 17 (5) of CGST Act the registered person must reverse such ITC which is claimed wrongfully. Further, interest at the rate of 18% is also required to be paid from the date of such claim until the date of reversal.

Disclosing in GST Return:

It is the responsibility of a registered person to report the ineligible ITC claimed earlier and liable to be reversed as per Section 17(5) of the CGST Act. The reporting of ineligible ITC or Blocked Input Tax Credit shall be done at the time of filing GSTR-3B for the month or quarter, as the case may be. The ineligible ITC needs to be reversed in Table 4(B) of the GSTR-3B.

Disclaimer:-The information available on this website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/Application

The Central Board of Direct Taxes (CBDT) vide Notification Number 7/2023 (dated 21 February 2023) has notified new audit reports in Form 10B and Form 10BB, for charitable trusts, religious trusts and other institutions. To ensure compliance with newly amended regulations, understanding the applicability of the forms is the basic requirement.

When Form 10B is applicable?

Form 10B is required to be filed if any one or more of the following circumstances exist:

• Total Income is more than five crore rupees without effect of sections 11, 12 and sub-clauses (iv), (v), (vi) and (via) of section 10(23C) of Trust/Institution Registered under 12AB / 10 (23C)
• The organization has received any foreign contribution during the previous year (even if the income is less than five crore rupees)
• The income of the trust or institution is applied outside India during the previous year (even if the income is less than ₹ 5 crore and the organization has not received any foreign contributions).

When Form 10BB is applicable?

A registered trust or institution under Section 12AB or under Section 10(23C) which does not fall under any of the above criteria must file an audit report in Form 10BB.

Form 10BB is applicable if the following criteria are met:

• Total Income of Trust/Institution Registered under 12AB / 10 (23C) without effect of sections 11, 12 and sub-clause ​​(iv), (v), (vi), (via) of section 10(23 c) up to five crore rupees.
• The trust or institution has not received any foreign contributions during the previous year;
• The trust or institution has not invested any of its income outside India during the last year.

Due Date:

Form 10BB or Form 10B is required to be filed on or before the specified date referred to in section 44AB of the income tax act i.e. one month before the due date for filing of return u/s 139(1).

In other words, the applicable form shall be filed on or before the 30^th day of September of the assessment year. For Financial year 2022-23 the due date is 30-09-2023.

Vide CBDT Circular No. 16/2023 in 225/177/2023/ITA-II dated 18.09.2023 issued. The due date of furnishing Audit reports in Form 10B/Form 10BB for the Financial Year 2022-23 has now been extended to 31-10-2023. Hence, Form 10B or 10BB can be submitted up to 31-10-2023.

 

Format of Form 10B 

 

Format of Form 10BB

Disclaimer:-The information available on this website/Application is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/Application, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/Application

Topic covers:

1. Introduction
2. Provision of Section 16(4)
3. Notification No. 18/2022-Central Tax dated 28.09.2022
4. Matters emphasis in the provision
5. Points need to be remembered
6. Reporting in GST return

Introduction:

Tax Credit means claiming the tax already paid by the person at the time of purchase of the goods or services. In GST law it is called Input Tax Credit or ITC.

In GST law person who is registered under the GST Act can use ITC of the goods or services used in the business or willing to use for the business. The tax GST liability will be reduced by the amount of Input tax credit, at the time of payment.

Example 1: A person registered under the GST Act purchases raw materials to produce tube lights. It cost him ₹ 10,000 on which he paid GST @ 18%. Hence, he paid a total of ₹ 11,800 upon purchasing raw materials.

Later, the company produced tube lights which sold for ₹ 12,000 tax rate applicable is @ 18% which he collected from the consumer. Hence, the company generated total revenue of ₹ 14,160 including tax collected from GST.

While paying taxes, the taxpayer is entitled to deduct the tax amount (₹ 1,800) he has already paid at the time of buying the raw materials. Hence, instead of paying ₹ 2160, the person is only liable to pay ₹ 360 (₹2160-₹1800).

But in GST law it’s not so easy to avail the Input tax credit of tax paid at the time of purchase. Some conditions need to be fulfilled to avail the benefit of the Input Tax Credit.

Section 16 of the CGST Act, deals with the eligibility and conditions to avail the input tax credit. Some conditions and eligibility stipulated under section 16 of the CGST Act are as follows:

• The registered person can claim the ITC
• The goods or services must be used in the course or furtherance of business. A person cannot avail the benefit of GST paid on goods or services of personal use.
• The registered person must have the tax invoice or a debit note, containing essential details as per the law.
• The goods or services must be received by the registered person.
• The GST collected must be paid to the government.
• The return is furnished.

However, there are certain provision and rules which restricts to claim the input tax credit even after complying with all the conditions mentioned in section 16(2) of the act. Tax paid on purchase of goods or services used to make exempted or non-taxable supply, Where section 16(2) of the act deals with conditions to claim the ITC. Section 16(4) deals with the time limit to claim it.

Provision of Section 16(4) of the CGST Act:

Section 16(4) of the act provides: “A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the thirtieth day of November following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.”

The provision of section 16(4) provides that even though the eligibility and conditions are fulfilled registered person is not entitled to take input tax credit if the time to avail of the input tax credit has expired. The registered person can avail ITC against the invoice or the debit note earlier on the following two dates:

30^th day of November of the next financial year

Or

Date of filing of annual return relating to that financial year.

Example 2: X & Co, a buyer has a purchase invoice dated 10th September 2022 (FY 2022-23), and wants to claim input tax credit of GST paid on that purchase. And annual return filed as on 15^th December 2023. As per the criteria laid down to find out the time limit, the two dates are as follows:

• 30th November 2023. Or
• The date of filing the GST annual return for FY 2022-23 i.e. 15^th December 2023.

The earlier of the two is the date to claim ITC of FY 2022-23. Therefore, the last date to claim ITC is 30th November 2023.

Notification No. 18/2022-Central Tax dated 28.09.2022

Finance Act 2022 proposed an amendment with regards to the time limit, to claim the ITC, provided under section 16(4) of the act. In this regard, CBIC issued a Notification No. 18/2022-Central Tax dated 28.09.2022 to implement the amendment from 01-10-2022.

A registered taxpayer can claim the ITC only through GSTR-3B and there is no other alternative way available in the GST Law to avail of Input Tax Credits. We all know that the due date of filing GSTR-3B for the month of October is 20^th/22^nd /24^th November (as the case may be) and thereafter it can be filed subject to payment of Late fees as per the CGST Act.

As per the amended provision, ITC of the relevant financial year can be claimed up to “thirtieth day of November following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.” So doubts have been raised, about whether the timelines for the said compliances stand extended to the date of filing/ furnishing of the return/ statement for the month of November 2022 or the said compliances can be carried out in a return or the statement filed/ furnished up to 30^th November 2022.

In this regard, it is clarified that the said compliances in respect of a financial year can be carried out in the relevant return or the statement filed/ furnished up to 30th November of the next financial year, or the date of furnishing annual return for the said financial year, whichever is earlier. It is also clarified that no extension of the due date of filing monthly returns/statements for the month of October (due in November) or the due date of filing quarterly returns/statements for the quarter ending September has been made vide the amendments in CGST Act, 2017 notified through Notification No. 18/2022-Central Tax dated 28.09.2022

Example 3: A Ltd. made purchases as on 10^th Oct 2022 of ₹10,00,000 and paid  GST of ₹1,80,000 @18%. A Ltd. not GST return of Oct 2022 on the due date. The GST return for the month of Oct 2022 is filed as on 1^st Dec 2023.

In the above instance, the relevant financial year is FY 2022-23. As per the amended provision, the time limit to claim the ITC is 30^th November of the next financial year, in this case, 30^th November 2023.  The return relevant is filed after 30^th November 2023. Hence A Ltd is not entitled to claim the ITC.

Matters emphasis in provision

The section emphasises on following matters:

• Section 16 (4) ensures that ITC should be claimed only for the business purposes. This provision ensures that businesses are accountable for their ITC claims and timely compliance with the law.
• Businesses must maintain accurate and complete records of all their purchases and expenses. Any discrepancy or incorrect information in the documentation can lead to the rejection of the ITC claim.
• Non-compliance of section 16(4) can result in tax burden on the registered person. A registered person cannot claim ITC beyond the time prescribed in the section.

Points need to be remembered

Here are some points which could help to comply with the provisions of the law:

1. Maintain Proper Documentation: Maintain accurate and up-to-date records of invoices, debit notes, and relevant documents that are essential to claim the ITC.
2. Separate Personal and Business Expenses: Businesses should maintain separate accounts for business and personal expenses. The registered person should not provide GSTN at the time of personal purchases as ITC cannot be claimed on such purchases.
3. Regular Internal checks: Regular checks help to ensure compliance with Section 16 (4) and other CGST Act provisions.
4. Stay updated: To comply with the latest requirements and regulations, the registered person must be aware about the changes in the law.
5. Reconcile the ITC Claims: Regular monitoring and reconciling of ITC claims helps to identify errors and discrepancies for timely corrections.

Reporting in GST return

At the time of filing of GSTR-3B the taxpayers will need to bifurcate the input tax credit into eligible and ineligible input tax credit. It allows the ineligible ITC to be deducted from the auto-populated total ITC figure.

The registered person is required to provide details of ITC under table 4(D)(2) of GSTR-3B, which is not eligible to claim as per section 16(4) of the CGST Act.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website.

Topic covers:

1. What are Debit Notes and Credit Notes?

2. Debit Note and Credit Note in GST

• Definition
• Reason to issue Debit Note and Credit Note
• Time limit to issue

3. Reflection in GST return

4. Format of Debit note and credit note

5. Difference between debit note and credit note

6.FAQs

After issuance of the original invoice, there could be changes like change in value, change in tax amount or rate, or any other similar change. It happens in the normal course of business, in this instance “Debit/Credit Note” is issued to give the effect of changes in the account.

What are Debit Notes and Credit Notes?

A Debit or credit note is a document to give the effect of any increase or decrease in the amount of the original invoice.

In the case where the invoice amount needs to be increased in comparison to the original invoice amount then the supplier issues a debit note. It gives a debit effect to the account to whom the debit note is issued.

Example 1:  Mr. A sold goods worth ₹ 1,100 to Mr. Y But by mistake, the invoice was issued only for ₹ 1000 and it came to notice after 2 days. In this case, Mr A issues a debit note for ₹ 100 to Mr Y.

On the other hand where the invoice amount needs to be decreased in comparison to the original invoice amount then the supplier issues a credit note. It gives a credit effect to the account to whom the credit note is issued.

Example 2:  Mr. A  sold goods worth ₹ 900 to Mr. Y But by mistake, the invoice was issued for ₹ 1000. In this case, Mr A issued a credit note for ₹ 100 to Mr. Y to give the credit effect of the difference amount.

Debit and Credit Note in GST Act

A Debit and credit note has the same importance that the tax invoice has under the GST Act.

Debit Note-

The definition of “Debit note” is given under section 2(38) of the CGST Act, 2017- “Means a document issued by the registered person under section 34(3) of the act.”

According to the provisions of section 34(3) of the act – A debit note should be issued when the taxable value or the tax amount charged in the original invoice is less as compared to the actual taxable value or tax amount in respect of the supply made.

The issuance of a debit note by the supplier increases the tax liability. It is an essential document to claim the input tax credit. Supplementary invoice is also treated as debit notes as per the explanation provided under the section.

Example 3: Suppose, Mr  Abhi (supplier) has issued a tax invoice to Mr Bhide (recipient). Mr  Abhi erroneously declared the taxable value as ₹ 3,00,000 instead of the actual taxable value ₹ 5,00,000. In this case, Mr Abhi will issue a debit note for ₹ 2,00,000 charging appropriate tax thereon. The tax liability will also increase on an increased value of ₹ 2,00,000 at the applicable tax rate.

Reason to issue Debit note

Some illustrative situations where tax invoice value increases and to give effect of such increase, a debit note is required to be issued by the supplier are as follows:

• When the actual value of goods or services is higher and the supplier wrongly issued a tax invoice at a lesser taxable value.
• When the actual tax rate of goods or services is higher and the supplier has wrongly issued a tax invoice mentioning a lower tax rate.
• The quantity received by the recipient is higher than the actual quantity declared by the supplier in the tax invoice
• Any other similar reason.

Time Limit:

The time limit to issue a debit note is provided under section 34(4) of the act. However, this time limit is for the declaration of tax liability due to changes. In other words, there is no time limit for issue a debit note to the supply for which a debit note is required to be issued. The time limit provided in the section is for furnishing the details of the debit note in the GST return. The supplier must declare the details of the debit note in the return of the respective month.

Reflection in GST return: Debit Note

A Debit note is an important document to avail the Input tax credit therefore its reflection in the GST return is important. Furnishing of the details of the debit note by the supplier and reflection in the recipient account is mentioned as under:

o   Supplier furnishes the details of debit notes at the time of filing of GSTR-1.

o   Supplier pays the differential tax liability in GSTR-3B of the relevant month.

o   According to the details furnished by the supplier, details of tax paid are reflected in the GSTR-2B of the recipient as input tax credit.

o   The recipient can claim this input tax credit at the time of filing of GSTR-3B.

 Credit note:

The definition of “Credit note” is given under section 2(37) of the CGST Act, 2017- “Means a document issued by the registered person under section 34(1) of the act.”

As per section 34(3) of the act – A credit note should be issued when the taxable value or the tax amount charged in the original invoice is more than the actual taxable value or tax amount in respect of the supply made.

The issuance of a credit note decreases the tax liability. But it should be noted here if the credit note is not accepted by the recipient and denied to reverse the input tax credit. The tax liabilities do not result in a reduction.

Example 4: Suppose, Mr.  S (supplier) has issued a tax invoice to Mr. R (recipient) for the taxable value of ₹ 1,00,000. Out of which the value of ₹10,000 goods found faulty and returned by Mr. R to Mr. S. Now, in such a case Mr. S issues a credit note for ₹ 10,000 to Mr R.

Reason to issue a Credit note

Some illustrative situations where tax invoice value decreases and to give the effect of such decrease, a credit note is required to be issued by the supplier are as follows:

• The supplier has erroneously declared a value that is more than the actual value of the goods or services provided.
• The supplier has erroneously declared a higher tax rate than what is applicable for the kind of goods or services or both supplied.
• The quantity received by the recipient is less than what has been declared in the tax invoice.
• The quality of goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.
• On account of sales return
• Post-sale discount as per the agreement at the time of supply
• Any other similar reasons.

Time Limit:

Like a debit note, the time limit to issue a credit note is also not prescribed. The time limit to furnish the details of a credit note in the GST return is prescribed under section 34(2) of the act. The registered person who is required to issue the credit note must furnish the details of the credit note earlier on the following dates

• 30th November following the end of the respective Financial Year in which the supply is made;
  • or
• The date of furnishing the relevant annual return.

Based on the above provision, it can be concluded that a credit note should be issued and the details need to be furnished within the time as prescribed above.

Reflection in GST return: Credit Note

A Credit note issued by the supplier results in a reduction of the tax liability. The registered person issuing the credit note must furnish the details of the credit note within the time as prescribed. If details are not furnished within such time the tax liability cannot be reduced.

o   Supplier furnishes the details of credit note in form GSTR-1

o According to the details furnished by the supplier, details of tax reduction are reflected in the GSTR-2B of the recipient as input tax credit.

o   This Input tax credit will be auto-populated in table 4B(2) of GSTR-3B which is for reversal of the Input tax credit.

Debit note and credit note Format:

Under the GST act particular format is not prescribed but particulars that a debit note or credit note should contain are provided under the CGST rule 53(1A). As per this rule, a debit note or credit note must contain the following particulars:

1. a) Name, address, and Goods and Services Tax Identification Number of the supplier;
2. b) Nature of the document;
3. c) A consecutive serial number of the document
4. d) Date of issue;
5. e) Name, address, and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
6. f) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered;
7. g) Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
8. h) Value of taxable supply of goods or services, rate of tax, and the amount of the tax credited to the recipient; and
9. i) Signature or digital signature of the supplier or his authorized representative.

Difference between Debit Note and Credit Note:

Particulars	Debit Note	Credit Note
Section defining	The Definition of a Debit Note is given under section 2(38) of the CGST Act	The Definition of a  Credit Note is given under section 2(37) of the CGST Act
Reason to issue	In cases where the taxable value or tax charged in the tax invoice is less as compared to the actual taxable value or tax payable.	In cases where the taxable value or tax charged in the tax invoice is more as compared to the actual taxable value or tax payable.
Impact on tax liability	Issue of Debit Note increases tax liability of the supplier.	Issue of Credit Note decreases tax liability of the supplier.
Impact on Input Tax Credit (ITC) for the recipient	The recipient can claim ITC	The recipient is required to reverse the ITC as per the Credit note

 

FAQs

Q. Can a registered person issue more than one credit/debit note for a tax invoice?

A. Yes, for one invoice one or more credit or debit notes can be issued

Q. Can a registered person issue one credit/debit note for more than one tax invoice?

A. Yes, for multiple tax invoices one credit /debit note can be issued.

Q. Can a recipient of goods or services or both issue a credit/debit note?

A. In the common commercial practice recipient can issue the debit/credit note. But in GST it breaks the flow of tax liability and reversal of ITC, therefore this document must be issued by the supplier and also he is required to furnish the details in the return of the relevant month.

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.