Input Tax Credit under GST: Meaning, Eligibility, and Claiming
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Kit Library / Commerce / Taxation
⚡ Topic Learning KitGST ITC
English 16 leveled MCQs Free
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All 16 questions, laddered from warm-up to topper-level, each with its answer and the reasoning behind it.
Warm-up · 4 questions
Q1. What does Input Tax Credit (ITC) allow a registered person to do?
Beginner
A
Avoid paying GST on outward supplies
B
Claim a refund of all taxes paid on purchases
C
Deduct tax paid on inputs from tax collected on output
D
Claim credit for taxes paid under the composition scheme
Show the answer
C · Deduct tax paid on inputs from tax collected on output
ITC allows a registered person to subtract the tax paid on inputs from the output tax liability, paying only the net amount to the government.
Q2. Under which section of the CGST Act is the eligibility and conditions for taking ITC specified?
Beginner
A
Section 18
B
Section 16
C
Section 19
D
Section 17
Show the answer
B · Section 16
Section 16 of the CGST Act deals with eligibility and conditions for taking input tax credit.
Q3. Which of the following is a benefit of ITC?
Beginner
A
Eliminates the need for documentation
B
Allows tax evasion
C
Reduces tax liability on value addition
D
Increases cascading effect of taxes
Show the answer
C · Reduces tax liability on value addition
ITC avoids cascading effect and ensures tax is paid only on value addition, reducing overall tax liability.
Q4. Input Tax Credit can be claimed on taxes paid under the composition scheme.
Beginner
A
True
B
False
Show the answer
B · False
ITC is not available for tax paid under the composition levy, as per the definition of input tax under Section 2(62).
Building up · 12 questions
Q5. Which of the following is a condition for availing ITC under Section 16(2)?
Intermediate
A
Payment to supplier within 90 days
B
Goods must be used for personal consumption
C
Supplier must be unregistered
D
Possession of a tax invoice or debit note
Show the answer
D · Possession of a tax invoice or debit note
Section 16(2) requires possession of a tax invoice or debit note issued by a registered supplier, among other conditions.
Q6. What is the time limit for payment to the supplier to retain ITC?
Intermediate
A
One year from invoice date
B
30 days from invoice date
C
90 days from invoice date
D
180 days from invoice date
Show the answer
D · 180 days from invoice date
As per Section 16(2), payment to the supplier including GST must be made within 180 days from the invoice date to retain ITC.
Q7. Which of the following is a blocked credit under Section 17?
Intermediate
A
GST paid on food and beverages for personal consumption
B
GST paid on input services for business
C
GST paid on motor vehicles used for cargo transport
D
GST paid on raw materials
Show the answer
A · GST paid on food and beverages for personal consumption
Section 17 blocks ITC on goods or services used for personal consumption, including food and beverages, unless used for outward taxable supply as part of a composite supply.
Q8. Under Section 18(1)(a), a person applying for registration within how many days of becoming liable is eligible for ITC on stock?
Intermediate
A
60 days
B
30 days
C
90 days
D
15 days
Show the answer
B · 30 days
Section 18(1)(a) allows ITC on inputs held in stock if registration is applied within 30 days of becoming liable to register.
Q9. What is the time limit for receiving back inputs sent for job work under Section 19?
Intermediate
A
6 months
B
2 years
C
3 years
D
1 year
Show the answer
D · 1 year
As per Section 19(3), inputs sent for job work must be received back within one year, failing which they are deemed supplied.
Q10. What is the time limit for receiving back capital goods sent for job work?
Intermediate
A
5 years
B
2 years
C
3 years
D
1 year
Show the answer
C · 3 years
Section 19(5) states that capital goods sent for job work must be received back within three years, otherwise deemed supplied.
Q11. Under Section 20, the Input Service Distributor can distribute credit of central tax as:
Intermediate
A
Only integrated tax
B
State tax or union territory tax
C
Central tax or integrated tax
D
Only central tax
Show the answer
C · Central tax or integrated tax
Section 20(1) allows ISD to distribute credit of central tax as central tax or integrated tax, and integrated tax as integrated tax or central tax.
Q12. According to Rule 88A, IGST credit must first be utilized towards payment of:
Intermediate
A
IGST liability
B
Any tax liability
C
CGST liability
D
SGST liability
Show the answer
A · IGST liability
Rule 88A specifies that IGST credit shall first be utilized towards IGST liability, then remaining towards CGST and SGST.
Q13. What is the last date to avail ITC for invoices of a financial year under Section 16(4)?
Intermediate
A
31st December of the same year
B
30th November of the following year or annual return, whichever is earlier
C
30th September of the following year
D
31st March of the following year
Show the answer
B · 30th November of the following year or annual return, whichever is earlier
Section 16(4) sets the last date as the earlier of 30th November of the following financial year or the date of filing the annual return.
Q14. Which form is used by an authorized officer to communicate ITC mismatch to the taxpayer?
Intermediate
A
GST ASMT-10
B
GSTR-1
C
GSTR-3B
D
GSTR-2B
Show the answer
A · GST ASMT-10
Form GST ASMT-10 is used to communicate discrepancies in ITC claims to the taxpayer, including observations and time limit for response.
Q15. Under Rule 37, ITC must be reversed if payment to the supplier is not made within how many days?
Intermediate
A
180 days
B
30 days
C
90 days
D
60 days
Show the answer
A · 180 days
Rule 37 requires reversal of ITC along with interest if payment is not made within 180 days from the invoice date.
Q16. Under Section 16(2), the supplier must have filed returns and paid GST for the recipient to claim ITC.
Intermediate
A
True
B
False
Show the answer
A · True
Section 16(2) requires that the supplier has actually paid the tax and filed returns for the recipient to be eligible for ITC.
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