Block credit under GST is an area that has been causing confusion for many businesses. In this article, we will be answering some frequently asked questions to help small and medium business owners and startup founders understand this topic better.
Block credit refers to the input tax credit (ITC) that is not available to a business for a specific period. The government has identified certain scenarios where ITC cannot be claimed. This is what is referred to as block credit under GST.
There are several scenarios where ITC cannot be claimed, which include:
1. Goods or services used for personal purposes
2. Used for making exempt supplies
3. Making non-taxable supplies
4. Used for making supplies outside India
5. Used for a business that is not registered for GST
6. For a business that is not required to be registered for GST
A business can claim ITC for a period of up to one year from the date of the invoice or the date of filing the annual return, whichever is earlier.
The ITC that is blocked cannot be claimed as a credit against the output tax liability. The business will have to bear the cost of such ITC.
Yes, a business can claim ITC on goods or services used for making both taxable and exempt supplies. However, the ITC that can be claimed will be restricted to the extent of the taxable supplies made by the business.
No, a business cannot claim ITC on goods or services used for making non-taxable supplies.
Availing blocked credit under GST is a punishable offence. The penalty for availing blocked credit is equal to the amount of credit availed.
Block credit under GST can be a complex topic for many businesses. It is important for businesses to understand the scenarios where ITC cannot be claimed and the time limit for availing ITC. Non-compliance with the GST regulations can result in heavy penalties, which can be avoided by understanding the rules and regulations.
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