{"id":1136,"date":"2020-04-16T20:34:00","date_gmt":"2020-04-16T20:34:00","guid":{"rendered":"http:\/\/oscillationss.blogspot.com\/?p=1136"},"modified":"2020-04-16T20:34:00","modified_gmt":"2020-04-16T20:34:00","slug":"gst-issues-itc-of-prepaid-insurance-premium","status":"publish","type":"post","link":"https:\/\/oscillations.in\/?p=1136","title":{"rendered":"GST Issues: ITC of prepaid Insurance premium"},"content":{"rendered":"
\n<\/p>\n
\nDoubts have been raised on the availment of ITC on prepaid insurance
\nbecause in conditions provided for claiming ITC (section 16(2)) under GST act,
\none of the conditions for availing ITC is the receipt of goods and services. So
\nthere are apprehensions that insurance service is not received to the extent of
\nprepaid insurance hence ITC is not available. However there is nothing in GST
\nact which disallows the ITC of GST paid on full insurance premium regardless of
\nthe periodicity of the premium paid. <\/div>\n
\n1.<\/b> No financial year and Prepaid expenses concept in GST Act:<\/u><\/b>
\nFirst of all, the figure of prepaid insurance is calculated as per matching
\nconcept which is one of the accounting conventions whereby firms recognize
\nrevenues and their related expenses (relative to revenues not independently) in
\nthe same accounting period i.e. financial year. Income tax act also recognizes
\nthe financial year concept. But there is no such financial year concept in
\nGST. In GST, there is no concept of prepaid expenses and carry forward of ITC
\nin the next accounting period based on periodical benefits. <\/b>The condition
\nof receipt of goods\/services as per clause (b) of section 16(2) provides:<\/div>\n
\nb) he has received the goods or
\nservices or both.<\/span><\/u><\/i><\/div>\n
\nAs one can see, above clause does not say \u201creceipt of goods and services in
\nthe given accounting year<\/b>\u201d i.e. the receipt of goods and services is not
\nfurther associated with accounting period nor any such restriction\/condition
\nrelated to accounting period is provided in this section (section 16). The
\nclause (b) only provides for the receipt of service in substance. Hence under
\nGST, Insurance service for the entire underlying policy period is supplied and
\nreceived when insurance policy (invoice) is issued by the Insurance Company. Insurance service is duly received for the purpose of
\nsection 16(2) when invoice or policy document is issued but prepaid insurance
\nis calculated not because the service to that extent is not received but as under
\naccounting\/income tax revenue is accounted for in the books only of a
\nparticular period <\/u>(fin Year) so accordingly expenditure is also required to
\nbe accounted for that particular period only. So periodical accounting
\ndoes not define the \u201creceipt\u201d of services.<\/u><\/b> Service for the purpose of
\nGST is received instantly on receipt of invoice.<\/span><\/div>\n
\nFurther, benefits of capital assets are also enjoyed in more than one
\naccounting period but there is no such restriction in GST act to avail the ITC
\nof capital assets periodically. Full ITC is available in GST against capital
\nassets. However, in service tax regime the same was available in two yearly
\ninstallments and this restriction was duly provided in the service tax act. But
\nas we can see, no such periodical restriction is provided in the GST act.
\nSimilarly, in accounting\/income tax advance receipt is not recognized as income
\nunder matching concept but GST is payable on the same (so there is no matching
\nconcept for revenues and accordingly no matching concept for expenses) hence
\nGST act is more like a cash flow phenomenon.<\/div>\n
\n2.<\/b> Explanation to Section 13(2) of CGST Act:<\/u><\/b> Further,
\nExplanation to Section 13(2) (Time of supply of services) of CGST Act provides:<\/div>\n
\nthe supply shall be deemed to have been
\nmade to the extent it is covered by the invoice or, as the case may be, the
\npayment;<\/span><\/u><\/i><\/div>\n
\nSo as per the above if supply is deemed to be provided to the extent it
\nis covered by invoice then the same can also be deemed to have been received
\nfor the purpose of section 16(2). Further, section 16(2) starts with
\nnon-obstante clause \u201cNotwithstanding anything contained in this section<\/u><\/b>\u201d
\nso some have opined that this non-obstante clause restricts the application of
\nany other contradictory clause in any other section on the conditions specified
\nin this section for availment of ITC. But non-obstante clause in this section only
\nprotects the actions provided under this clause from any other over-lapping
\nclause provided only under this \u201csection\u201d<\/b> (section16) not under the
\nentire act. So explanation to Section 13(2) of CGST Act also covers the section
\n16(2) and service can be deemed to have been received to the extent covered by
\nthe invoice.<\/div>\n
\nHence, as per the above it can be concluded that the ITC of GST paid on
\ninsurance premium (regardless of periodicity) can be availed provided the invoice has
\nbeen issued and payment has been made. <\/div>\n
\n(Views are personal)<\/b><\/div>\n

<\/div>\n","protected":false},"excerpt":{"rendered":"

Doubts have been raised on the availment of ITC on prepaid insurance because in conditions provided for claiming ITC (section 16(2)) under GST act, one of the conditions for availing ITC is the receipt of goods and services. So there are apprehensions that insurance service is not received to the extent of prepaid insurance hence ITC is not available. However there is nothing in GST act which disallows the ITC of GST paid on full insurance premium regardless of the periodicity of the premium paid. 1. No financial year and Prepaid expenses concept in GST Act: First of all, the…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1136","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts\/1136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1136"}],"version-history":[{"count":0,"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts\/1136\/revisions"}],"wp:attachment":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}