Section 18 of CGST Act, 2017 : Section 18: Availability Of Credit In Special Circumstances

Explanation using Example

Imagine a scenario where Mr. A has been running a bakery as a sole proprietorship. The bakery was initially exempt from GST as its annual turnover was below the threshold limit. However, due to increased sales, the bakery's turnover exceeds the threshold, and Mr. A becomes liable to register for GST. He applies for GST registration within thirty days of becoming liable and receives his GSTIN (GST Identification Number).

Under Section 18(1)(a) of the CGST Act, Mr. A is now entitled to claim input tax credit (ITC) for the GST paid on inputs like flour, sugar, and other baking supplies that are in stock. He can also claim ITC for the inputs contained in semi-finished goods like unbaked pastries and finished goods like cakes and cookies that are in stock, on the day immediately preceding the date from which he is liable to pay tax under the Act.

Mr. A must calculate the eligible ITC as per the conditions and restrictions prescribed and can use this credit to offset his GST liability on future supplies. This provision helps Mr. A reduce the cost of his taxable supplies by utilizing the taxes already paid on his stock.