GST ITC : Furtherance of Business (A Detailed Analysis)
According to Section 16 (1) of CGST Act, 2017: Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which is used or intended to be used in the course or furtherance of his business and the said amounts shall be credited to the electronic credit ledger of such person. Let us see the first, definition of Business under GST ; As per Sec 2(17) of CGST Act,2017 “Business”include, check out more details for “GST ITC : Furtherance of Business” from below…..
GST ITC : Furtherance of Business
- a. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similaractivity, whether or not it is for a pecuniary benefit;
- b. any activity or transaction in connection with or incidental or ancillary to (a) above;
- c. any activity or transaction in the nature of (a) above, whether or not there is volume, frequency,continuity or regularity of such transaction;
- d. supply or acquisition of goods including capital assets and services in connection with commencementor closure of business;
- e. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members, members, as the case may be;
- f. admission, for a consideration, of persons to any premises; and
- g. services supplied by a person as the holder of an office which has been accepted by him in the courseor furtherance of his trade, profession or vocation;
- h. services provided by a race club by way of totalizator or a licence to book maker in such club
- i. any activity or transaction undertaken by the CentralGovernment, a State Government or any localauthority in which they are engaged as public authorities
In other words,Business means any trade, commerce, manufacture,profession, vocation, adventure, wager or any other similar activity whether or not it is for monetary benefits. Any activity directly or indirectly related to these activities are also covered under Business. Further, any activity falling in above categories would be treated as business irrespective of volume, frequency, and continuity.
Input tax credit is entitled to only on the basis of goods and services or both to be use din the course or Furtherance of Business. Meaning of ”Furtherance” as per dictionary, furthering or being furthered; promotion; advancement or progress of a scheme. Further an ceo business means act of furthering business, advancement/ promotion of business.
In the course or furtherance of business is very much important phrase in the input tax definition but the fact is, term ”Business” has defined in the law but the phrase ” furtherance of business ”has not defined in the law or not dealt with any manner in the law. However, we can determine whether a supply has been made in the course of furtherance of business :- activity carrying on the basis of business principles, continuity and mainly concerned with the making taxable supply for consideration. Following is the some examples related to business and furtherance of business
- i) An Individual buys Bike for personal use and same the after 2 years to a Dealer this is not a sale under GST and no furtherance of business as well.
- ii) Services provided by a society / Club of its members shall be treated as Supply and applicable rates under GST to be charged.
- iii) GST paid on purchases of Printing and stationery which is used in the office is eligible for input credit since it is used in the course and furtherance of business.
Supply is either used exclusively in the course/ furtherance of business can claim input tax credit without any resections. According to Sec 17(5) of CGST Act, 2017, there is restriction on availment of input tax credit on the some of services& supply.
The phrase “furtherance of business” is not defined in the GST Act. It has a wide meaning. Expenses are incurred in relation to furtherance of business depend on nature of business as well as nature of the expenditure. If the purchases are for use for office, plant& Braches etc. and tax paid on the same will get input tax credit, while usage for personal purpose by office bearers then it is cannot be called as that for furtherance of business.
Input Tax in relation to a taxable person, means the tax charged on any supply of goods and/or services to him whois used in the course or furtherance of his business, but does not include the tax paid under the Composition but includes the tax payable under the reverse charge. It includes taxes paid on input goods, input services and capital goods. Further, Credit of tax paid on capital goods is permitted to be availed in one instalment and if I-T depreciation claimed on tax portion then ITC not applicable.
Conclusion : Phrase “in the course of” and “furtherance of business’ ‘having wide scope of meaning and it is really challenge before us to prove that Input Tax credit on all supplies of goods and/or services in the course of and also for furtherance of business.