How to calculate Eligible Input Tax Credit?

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Sakshi Shah

GST
ITC

Eligible Input Tax Credit is that portion of Common Input Tax Credit which can be utilised for payment of output tax liability.
The ITC on inputs used for personal consumption or the ITC on inputs used for the sale of exempt goods or services is called Ineligible ITC.
Therefore it cannot be used for paying taxes under GST. In order to calculate ITC availbale, it is important to calculate Eligible Input Tax Credit from the Common ITC.

What is Common Credit (ITC) or Proportionate Credit (ITC) under GST?
Input Tax Credit Rules for Common Credit or Proportionate Credit under GST
Read More
What is Common Credit (ITC) or Proportionate Credit (ITC) under GST?
Input Tax Credit Rules for Common Credit or Proportionate Credit under GST
Read More

Example

Following are the details of Input Tax Credit of business of Mr. X for January 2019:

ITC on Input Goods used for business purpose Rs. 50,000
ITC on Input Goods used for personal purpose Rs. 10,000
ITC on Input Goods used for sale of taxable goods Rs. 30,000
ITC on Input Goods used for sale of exempt goods Rs. 40,000
ITC on Input Services used for business and personal purpose* Rs.1,00,000
ITC on Input Services used for sale of taxable and exempt goods Rs. 60,000
Ineligible ITC Rs. 10,000
Turnover of exempt goods Rs.2,40,000
Turnover of taxable goods Rs.4,80,000

*It is assumed that 10% of the input services are used for personal purpose

Solution

  1. Calculation of ITC on services used for personal purpose
    ITC used for business + personal purpose * % used for personal purpose
    Rs.1,00,000 * 10% = Rs.10,000
  2. Calculation of ITC on services used for the sale of exempt goods
    ITC used for exempt + taxable sales * Exempt Goods Turnover / Total Turnover
    Rs.60,000 * Rs.2,40,000/Rs.7,20,000 = Rs.20,000
  3. Calculation of Eligible ITC
ITC on Input Goods used for business purpose Rs. 50,000
ITC on Input Goods used for sale of taxable goods Rs. 30,000
Proportionate ITC on Input Goods used for business purpose
(Rs.1,00,000 – Rs.10,000)
Rs. 90,000
Proportionate ITC on Input Goods used for the sale of taxable goods
(Rs.60,000 – Rs.20,000)
Rs. 40,000
Total Eligible ITC Rs. 2,10,000    
t_round GST Input Tax Credit Calculator
Calculate your input tax credit under GST
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t_round GST Input Tax Credit Calculator
Calculate your input tax credit under GST
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FAQs

What is the eligibility for availing Input Tax Credit?

The following conditions have to be met to be entitled to Input Tax Credit under the GST scheme:
1. One must be a registered taxable person on GST Portal.
2. One can claim Input Tax Credit only if the goods and services received is used for business purposes.

Can we claim ITC on electricity bills?

No, ITC cannot be claimed for tax paid on Electricity bills as Electricity is out of GST coverage & thus no GST is levied on electicity bills.

If goods are destroyed or lost due to various reasons, can a person take ITC to the extent of such goods?

No, a person cannot take ITC with respect to goods lost, stolen, destroyed or written off. In addition, ITC with respect of goods given as gifts or free samples are also not allowed.

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