Categories of eligible taxpayers who can avail ITC :
The scheme of taking ITC is provided under section 16 of Chapter V of the MGL.
As per the provisions contained in section 16(1) of the MGL, every registered taxable person shall be entitled to ITC which shall be credited to the electronic credit ledger of such person. The conditions and restrictions on taking ITC shall be prescribed under rules. ITC can be taken in time and manner provided in section 35 of MGL. Section 35(2) of the MGL (similar provision contained in section 7(2) of the IGST Act) provides that the ITC as self-assessed in the return would be credited to the electronic credit ledger of the recipient.
Section 16(2) of the MGL provides that a person who has applied for a new registration shall be entitled to ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock (hereinafter called ‘goods held in stock’) on the day immediately preceding the date from which he becomes liable to pay tax. However, the person has to apply for registration within thirty days from the date on which he becomes liable to registration. The amount of ITC would be calculated in accordance with the generally accepted accounting principles. It may be inferred, therefore, that a new registrant would not be eligible for ITC in respect of goods held in stock if he does not apply for registration within thirty days of the liability to obtain registration.
A person can take voluntary registration under section 19 (3) of the MGL and pay tax even when his aggregate turnover is below the exemption threshold. Section 16(2A) of the MGL allows such person to take ITC in respect of “goods held in stock” on the day immediately preceding the date of registration. The amount of ITC would be calculated in accordance with the generally accepted accounting principles.
Section 8 of the MGL provides for composition scheme which provides that the person, whose aggregate turnover is below certain threshold, can opt to pay tax on his turnover at certain specified rate. A person opting for composition levy is not eligible to take ITC. Such person can opt out of composition scheme or ceases to be a composition taxpayer after crossing the prescribed composition threshold. Such person at the time of switching over to normal scheme, in terms of section 16(3) of the MGL, shall be entitled to take ITC in respect of “goods held in stock” on the day immediately preceding the date from which he becomes liable to pay tax as normal taxpayer. The amount of ITC would be calculated in accordance with the generally accepted accounting principles.