Page 9 - Chap7 ITC

3. Ü The circular also clarifies that where the invoice for the repair of the vehicle is not in name of the
insurance company, condition of section 16(2)(a) & (aa) is not satisfied and accordingly, ITC will not be
available to the insurance company in respect of such an invoice.
Ü Thus, in the given case, if the invoice has been raised in the name of Mr. Diwas, then Suraksha Insurance
Company would not be eligible to avail the ITC.

Sec 17(5)(f): Goods/services/ both received by a NRTP except goods imported by him

Q.8
Mr. Veer of USA being technician came to India to assemble parts of machinery. He also imported
goods worth ₹ 10,00,000 and paid following customs duties:
a) Basic customs duty is ₹ 5,00,000
b) Integrated Goods and services Tax (IGST) of ₹ 3,97,080.
In India, Mr. Veer wants to register as non-resident taxable person and his estimated liability is ₹ 5,98,250.
Also, Mr Veer had purchased goods & services in India on which CGST paid ₹ 10,000 and SGST paid ₹
10,000. How much Mr Veer is liable to pay as advance tax?
Answer :
Ü As per Section 17(5)(f) of the CGST Act, ITC is blocked for non-resident taxable persons, except for tax paid
on imported goods.
Ü Since Mr. Veer (a non-resident taxable person) must pay tax in advance, he can claim ITC of ₹3,97,080, &
liable to pay advance tax of ₹ 2,01,170(i.e. ₹ 5,98,250 - ₹ 3,97,080)
Quick Revision Points : NRTP cannot claim ITC, except for imported goods.

Sec 17(5)(h): Goods lost, stolen, destroyed, written off, disposed by way of gift or free sample

Q.9
A company has entered to an agreement with a customer for the manufacture and supply of cement
pipes for their exclusive use. A company manufactured the product but before receiving the inspection
certificate, their customer rejected some quantity of goods on the grounds of quality. As per agreement, the
rejected quantity will be destroyed in front of the customer and shall not be sold.
Examine the issue in the light of statutory provisions and suggest future course of action to the assessee as to
whether any liability arises as per the provisions of GST law. (CA Final Nov 18 Exam )
Answer:
Ü As per Section 17(5)(h) of the CGST Act, ITC is not available for goods lost, stolen, destroyed, written off,
or given as gifts/free samples.
Ü Since the cement pipes were destroyed, ITC is not allowed, and if already claimed, it must be reversed.

QRP: No ITC on lost, stolen, destroyed, or gifted goods.

Q.10
Jumbo Sales Pvt. Ltd., a supplier of readymade garments, announced 'Buy One get Two free' offer on
Men's T-Shirts on Diwali to boost its sales. You are required to advise the company on the availability of ITC
in respect of inward supplies used in relation to such supply. [Study Mat]
Answer:
Ü As per Section 7(1)(a) & (c) of the CGST Act, goods/services supplied free of cost are not treated as supply,
except for activities under Schedule I.
Ü CBIC clarifies that ‘Buy One Get One Free’ is not a free supply but a case of multiple individual supplies
with a single price, where ITC is allowed on inputs, input services, and capital goods used in such offers.
Ü Since Jumbo Sales Pvt. Ltd. charges a single price for three supplies, ITC is admissible.

QRP: No Buy One Get One’ is not free; ITC is allowed on such promotional supplies

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