Page 15 - Ch_10 ITC

† Inverted duty structure.
c) Payment of total output tax liability through electronic cash ledger in excess of 1% of total output tax

liability:-
† Rule 86B shall not apply, if registered person has paid more than 1% of total output tax liability using
electronic cash ledger upto the said month in current financial year.
† This condition is seen for C.F.Y., & hence, for April of any F.Y., the exception will not apply.

† GST liability paid under reverse charge should not be considered while calculating the total output liability
paid through electronic cash ledger.
d) Specified registered Person:-
Rule 86B would not apply for following registered person:-

† Government Department or
† A public sector undertaking or
† A local authority or
† A statutory body.
However, Commissioner or an officer authorised by him in this behalf may remove the said restriction after such

verifications and such safeguards as he may deem fit.

07. Combined Questions on ITC:-

CCP 10.07.23.00
Answer the following independent questions:-
(i) A technical testing agency tests and certifies each batch of machine tools before dispatch by BMT
Ltd. Some of these tools are dispatched to a unit in a SEZ without payment of GST as these supplies

are not taxable. The finance personnel of BMT Ltd. want to know whether they need to carry out
reversal of ITC on the testing agency's services to the extent attributable to the SEZ supplies. Give
your comments. [Study Mat]
(ii) A registered person transfers its business to another person. Is such registered person allowed to

transfer the unutilized ITC lying in its electronic credit ledger to such transferred business?
Discuss. [Study Mat]
(iii) 'AB', a registered person, was paying tax under composition scheme up to 30th July. However,
w.e.f. 31st July, 'AB' becomes liable to pay tax under regular scheme. Is 'AB' eligible for any ITC?
[Study Mat]

Answer:-

(i) Ü ITC is disallowed only to the extent it pertains to supplies used for non- business purposes or
supplies other than taxable and zero-rated supplies.

Ü S u p p l i e s t o S E Z u n i t s a r e z e r o r a t e d s u p p l i e s a s p e r s e c t i o n 1 6 ( 1 ) o f
IGST Act.
Ü In the given case, full ITC is allowed on inward supplies of BMT Ltd. used for making supplies to unit in
SEZ.

(ii) Ü As per section 18(3) of CGST Act, in case of sale, merger, demerger, amalgamation, transfer or
change in ownership of business etc., the ITC that remains unutilized in electronic credit ledger of
registered person can be transferred to new entity, if there is a specific provision for transfer of

liabilities in such change of constitution.
Ü The registered person should furnish details of change in constitution on common portal & submit a

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