(62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy;
From the opening of the definition, it can be understood that input tax can arise only in respect of registered persons, and the tax is only available on supplies made to him. Therefore, no
tax paid on outward supplies can ever qualify as input tax to the person making the supply (who may or may not be registered), and shall only be treated as ‘input tax’ by the person receiving the supplies.
The law also makes it amply clear that input tax is to a registration, and cannot be loosely associated with various GST registrations of the single legal person.
Further, for ‘input tax’, the law makes no distinction between Central tax, State tax, Union territory tax and integrated tax.
The law specifically provides certain inclusions and an exclusion to clarify the scope of the term:
The specific inclusions are of two types, i.e., the integrated tax applicable on import of goods (in lieu of the previously applicable CVD and SAD), and the taxes payable on reverse charge basis on account of supplies being those supplies that are notified in this regard, or on account of being inward supplies from unregistered persons. From the language used, it must be understood that these inclusions are not limited to those that have been discharged, on the premise that the law used the words “charged” or “taxable” and not “paid”.
While it is clear that composition suppliers will not be entitled to collect taxes, from this definition, it can be inferred that the amounts paid by composition in lieu of tax, cannot, in turn, be treated as input tax either for the composition supplier or for the recipient of the supplies.
Further, the GST Compensation law reserves right to levy cess on certain supplies. However, this cannot be treated as input tax for the purposes of GST. Although the GST Compensation law provides that the provisions of input tax would apply mutatis mutandis to cess, it categorically specifies that the input credit of cess can only be utilised for discharging the liability on such cess.