ITC on goods that are received in installments

Hello. In this blog, we will be discussing about the treatment of ITC on goods that are received in lots/ installments and whether credit can be claimed on such installments.

Question:

What is the treatment of ITC on goods that are received in lots/ installments? Can the credit be claimed on each installment?

Answer:

In the event of goods that are covered under an invoice that is sent on consignment are not received in a single installment but in different lots, the ITC on those goods can only be claimed on the receipt of the last installment/lot.

Hence, the eligibility of claiming the credit proportionately does not arise.

Let us take an example to understand.

M/s Tom Ltd has made an advance payment of Rs.20,00,000/- to M/s Jerry Ltd, for the supply of 15Kg of a rare raw material, in the month of September 2017. M/s Jerry Ltd raised a bill for the entire amount in the month of September 2017 and collected a GST of Rs.3,60,000/- for the advance amount paid. The 15Kg of raw material was delivered as follows:

Month Raw Material (kg)
October 2017 5
January 2018 5
April 2018 5

M/s Tom Ltd wishes to claim the credit of Rs.3,60,000/- on a proportionate basis. Is it correct?

As per Sec 16 of the CGST Act, 2017 M/s Tom Ltd is allowed to claim ITC, only on the receipt of the last installment / lot. In the given example, the order of 15Kg of raw material has been split across three months and hence, the last installment / lot that was received was in the month of April 2018.

The entire GST amount of Rs.3,60,000/- is eligible to be claimed by M/s Tom Ltd only in the month of April 2018. Thus, the entire ITC can only be claimed in the FY 2018-19 and is not eligible for ITC in the previous year i.e FY 2017-18.

Further, it can be concluded that M/s Tom Ltd’s intention in claiming the credit proportionately based on the quantity of raw material received is not permitted.

We hope this answers your question about ITC on goods that are received in lots/installments. If you would like us to cover any other topics or answer any questions, leave them in the comments section below.

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