Page 20 - Chap7 ITC

Working Notes : 1) Computation of output tax liability of Flowchem for the month of July:

Particulars Amount (₹)
List price of 10 valves (₹ 1,00,000 x 10) 10,00,000
Add: Amount paid by R Refinery to testing agency [Note 1] 15,000
Add: Special packing [Note 2] 10,000

Add: Erection and testing at site [Note 2] 15,000
Add: Freight [Note 3] 5,000
Value of taxable supply 10,45,000

IGST @ 18% [Note 4] 1,88,100
2) Computation of ITC available with Flowchem for the month of July:

Particulars CGST (₹) SGST (₹)
Opening ITC 20,000 20,000
Work contract services availed for erection foundation for fixing the machinery to the 5,000 5,000
earth in the factory [Note 5]
Laying of pipeline up to the gate of factory from water source located outside the
factory [Note 6] Nil Nil
Installation of telecommunication towers [Note 6] Nil Nil
Services of travel company to provide home travel facility to employees [Note 7] Nil Nil

Services of fitness centre to provide wellness services to employees [Note 7] Nil Nil
Total ITC 25,000 25,000

Notes:-
1) Ø As per Section 15(2)(b) of the CGST Act, any expense that the supplier is liable to pay but is incurred by the
recipient must be included in the taxable value.
Ø In this case, the inspection charges were the supplier’s liability but paid by the recipient, so they must be
included in the taxable value.
2) As per Section 15(2)(c) of the CGST Act, any amount charged for activities performed by the supplier until
delivery of goods must be included in the value of supply
3) As per Section 15(2)(b) of the CGST Act, if freight payment is the supplier's liability under a FOR contract, but
the recipient pays it instead, it must be included in the taxable value of supply.
4) Ø As per Section 10(1) of the IGST Act, when goods move between states, the place of supply is where the
movement terminates.
Ø Since the goods move from Gujarat to Rajasthan (Abu Road), the supply is inter-State, attracting IGST.
5) Ø As per Section 17(5)(c) of the CGST Act, ITC on works contract services is blocked unless used for the
further supply of works contract services.
Ø However, plant and machinery includes foundation and structural supports used to fix machinery to the
earth, so ITC is available for such expenses.
6) Ø As per Section 17(5)(c) of the CGST Act, ITC is blocked on construction-related works unless it relates to
plant and machinery.
Ø Pipelines outside factory premises and telecom towers are excluded from plant & machinery, so ITC on
them is not available.
7) As per Section 17(5)(b) of the CGST Act, ITC is blocked for employee benefits like home travel concession
and health and fitness centre unless legally mandated for the employer.

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