Hello, hello champions, how are you all?
Having fun outside?
Good? Everything is going well in life?
Are you able to understand the concepts?
Sir, this is an ITC chapter, not a game.
In GST, no matter what level you are at,
ITC chapter requires a lot of understanding, requires a lot
of study, and requires a lot of knowledge of various things.
It requires common sense from you.
It has a lot of demands.
But sir, keeping these demands in mind, we are moving ahead
on this topic.
We had finished section 16 of eligibility, of conditions,
which told us about ITC, when can you take it, section 17,
which told us about blocked credits, we had read that.
In the last lecture, we had finished half of section 18.
That discussion was, earlier you had some supplies on which
no ITC was made.
But now it has become taxable.
Now you are in the normal scheme.
So now you can avail ITC.
It was a simple concept.
One day before, whatever stock you have, you can take ITC
for that.
In some cases, you can also take for capital goods.
But from capital goods, you can reduce it by 5% per quarter.
This was the point.
We are moving ahead till now.
You can reverse this whole situation.
In the last lecture, whatever I had told you, what was the
situation?
Composition guy is coming in regular.
We have exempt supplies, so it is becoming taxable.
I am taking registration, fresh registration.
Now in all these situations, you can reverse it.
What will happen now?
You can reverse it completely.
So what will happen?
A person in regular scheme, wants to go in composition.
Sir, why?
Why would he want to go?
He is a registered person, in regular scheme, in
composition scheme, why would he want to go?
Sir, try to understand.
I have taken registration, turnover of the year is 25 lakhs.
I have said turnover, not profit.
Turnover is 25 lakhs, not much margin is left.
When I am a registered person,
I have taken normal registration, so compliances are
increasing a lot.
Cost of compliances is increasing a lot.
I will also have an audit.
Then I will pay his monthly returns.
Sir, the cost of compliances will increase.
I thought,
I will incur the cost of so many compliances.
Better than this,
I will come in composition scheme, peacefully.
I don't have to collect tax from the customer, or do
anything.
I will see my turnover for the whole year, peacefully.
And I will charge tax with a specified percentage.
You leave regular scheme and come in composition scheme.
Okay.
Quite possible.
Normal circumstances, anything can happen.
Do you have any taxable supplies?
Do you have taxable supplies?
And taxable supplies are those, like government,
I was telling you, at night, sometimes they issue
notifications.
If exempt can be made taxable, then it is obvious that
taxable supplies can also be issued with notification and
can be made as exempt supplies.
My taxable supplies, now after that notification, they have
become my exempt supplies.
Is this also possible?
Did I do something like this, that my registration got
cancelled?
Is this possible at all?
Sir, now in these three situations,
try to understand what I am trying to say.
It is said, reading between the lines.
You are understanding what I am saying.
Try to understand what I am trying to say.
What am I trying to say, sir?
This is a very big art, let me tell you.
Just give me a second.
This is a very big art.
The person in front, who is trying to speak, you are
listening to his language.
You are listening to what he is trying to say.
But at the same time,
in real life, you have to run your mind that,
what will happen to this person in the next sentence?
What does he want to say to me?
And if he wants to say this, then I should already have an
answer for that.
Sir, that is when it is fun to walk in life.
That is when you grow.
When your psychology becomes so fast to understand things,
then it is fun to talk.
The people who say that you have interpersonal skills, this
and that, it is bullshit.
It is nothing.
If you learn this funda, all your interpersonal skills will
be fine.
You don't need anything else.
Increase your psychology a little.
You are listening to what this person is saying.
Start thinking in your mind what he is trying to say.
What will he say next?
What will he say?
Okay, sir?
So, what I was telling you,
I told you three situations.
Now think and tell me what I am trying to say.
Sir, what I am trying to say
is that, earlier you had such taxable supplies.
You were in a normal scheme.
You used to work peacefully.
You used to sell properly.
You used to cut invoices.
You used to collect GST from customers.
Now what happened?
Now you have moved away from there.
Taxable supply.
Now it is not taxable.
It has become exempt.
Earlier I was claiming that thing.
When I was selling taxable supplies,
I used to claim ITC.
Now I am claiming
ITC.
When my taxable supply has become exempt, will I be able to
claim
ITC now?
I won't be able to.
Absolutely right.
Your answer is absolutely right.
I was in a regular scheme.
I left the regular scheme and came in a composition scheme.
When I was in a regular scheme,
I was availing ITC.
But now I have come in a composition scheme.
So, can I avail ITC?
Answer is no.
Because I cannot collect from the customers.
My registration has been cancelled.
My registration has been cancelled by the government.
Now can I take ITC?
Answer is
no.
No.
So, what should I do in this case?
What should I do?
Somewhere I must have made my entries.
I must have shown it in books.
When I have purchased and brought it, then I must have made
entries in my accounting books and books of accounts of
ITC, GST receivable.
I must have made a purchase and made a debit in GST
receivable.
I must have made entries in GST receivable.
Try to remember.
Somewhere I must have made entries in my e-credit ledger.
When the person in front of me, when the supplier must have
shown sales, then my purchases, the purchase statement
which is GSTR 2A,
must have been auto-populated.
Somewhere the credit of that thing must be being shown.
Sir, what should I do?
What is the solution?
Credit is being shown.
But you cannot take the credit.
Sir, in that case you don't have to do anything.
In that case, the simple credit which you are showing, you
reverse that credit.
It is a simple thing.
Reverse your credit.
This is your point.
If you have any inputs which are in stock, your ITC is in
stock.
If you have ITC in finished goods,
in some cases, in capital goods also you have ITC.
Sir, you will reverse that ITC.
Sir, ITC, either I am taking the credit or
I want to take it in future.
So, I will not take it now.
Yes, I have purchased the goods.
So, somewhere the credit entry will come.
That has to be reversed.
Okay, sir.
ITC will be reversed.
ITC of capital goods will also be reversed.
But sir, tell me one thing.
In capital goods, why are you keeping quiet so soon?
In capital goods, there you were shouting that 5% per
quarter, 5% per quarter less.
Here, you don't have to do anything.
Here also, understand the situation that I have a machine.
Understand the situation.
I have a machine.
I am telling you a practical thing.
I have a machine.
For example, for 4 years, for 4 years, for 4 years,
I was using the machine for taxable supplies.
Whatever output used to come out of that machine, all that
output,
I used to sell in the market.
I had taxable supplies.
And when I had taxable supplies, when I had taxable
supplies, then I was claiming the
ITC of this machine properly.
I was claiming the ITC of this machine properly.
This has happened for 4 years.
It has happened.
At night, the government issued a notification that your
supplies will be exempt supplies.
Here you go.
Now, the exempt supplies are like this.
Can I take the credit of this machine? I can't.
I have used all the credit of this machine.
I have taken all the credit.
If you have taken all the credit, then reverse the credit.
And how do you reverse it? You have to reverse it according
to useful life.
According to useful life, means, if you had taken the
ITC of 1 lakh
GST, then let's assume that the useful life of the machine
will be 5 years.
The useful life of the machine will be 5 years.
So, out of 5 years,
I am saying that 4 years your machine has been used for
taxable supplies.
So, did you take the
ITC of that machine when it was taxable?
Did you take the
ITC then?
Answer is yes.
I had the right.
I was making the machine useful.
You can take the ITC of 4 years from the 1 lakh machine
which is not taxable supply.
It should be 1 lakh
GST and I had the right that the machine But the machine
has been used for four years.
Five years later, I get a notification that the ITC has
been reversed.
I have already booked an ITC of five years.
So what I will do is, I will reverse the ITC of one year.
This is the point.
If I have already booked an ITC of five years, if I have
already shown its entry, then I will reverse the last one
year where it was exempted.
One lakh divided by five years multiplied by one year.
I will reverse this.
I will pass its reversal entry.
This is how it has to be run according to useful life.
Look at this, sir.
The last section I read, this is its reversal point.
Is there any problem?
Shall I go ahead?
Come, let's finish its reading.
This is the second last topic of our GST.
There is nothing much left in this.
Look, section 18.4.
It says, reverse the ITC.
Reverse the ITC whenever a registered person, who has
already taken the ITC, switches to the composition scheme
or its supplies become exempt supplies.
Proportionately reverse it on the basis of invoices.
And suppose if you don't have an invoice available, then
it's okay.
Reverse it according to the market value.
You don't have an invoice.
You don't have an invoice at this time.
The purchase is two years old.
Leave two years, the purchase is six months old.
You didn't keep the invoice, it got lost.
What to do?
Everything is fine.
The market price of that thing, on the date of switchover,
reverse it according to that.
And the details, get them certified.
The market price, CSA.
In the case of capital goods, take a useful life.
Look, sir.
What is he saying?
Look at the 40th example in the green one.
What is he saying?
Capital goods, you have used it for 4 years, 6 months, 15
days.
So the useful remaining life is left.
Now reverse it for 5 months.
In the starting, you must have taken it all.
For 5 years.
You didn't know that it will be exempted in the future.
You took the credit for 5 years.
Now when it is left for the last, reverse it.
Okay?
Look, sir.
These are the points.
Look at this point.
He says,
Capital goods or plant and machinery, you sell it tomorrow.
You have some capital goods.
You have some plant and machinery.
You sell that plant and machinery tomorrow.
What to do now?
Will there be any point of ITC in that too?
Will there be any point of reversal in that too?
Sir, definitely there will be.
It is obvious.
Definitely there will be.
When I bought some plant and machinery,
I used to make taxable supplies.
For taxable supplies,
I bought plant and machinery.
What was the purpose of buying it?
Sir, my purpose of buying it was simple.
Whatever machine I am buying and bringing,
I will do production with that.
The output I will get from production,
I will sell it in the market and collect tax.
Taxable supplies.
My purpose was production of goods.
Suppose 6 months, 9 months, 12 months have passed.
I am not getting much sales.
That machine, for that purpose,
I am not able to use it.
There are many factors.
That machine was such that as soon as it came to my
factory, my business was ruined.
I was not getting any sales.
I was doing production on production but my goods were not
being sold.
My warehouse was full.
What should I do?
Sir, I thought that I will sell that machine.
Now when the machine will be sold, at that time,
I would have taken all the ITC, when I bought it.
At that time,
I would have passed the ITC entries.
Now when I am selling it, then I will have to reverse it.
And how to reverse it?
Compare two things.
How much it is selling?
Suppose it was a machine worth 10 lakhs.
At that time,
I had paid a tax of 1 lakh.
Now when I am selling it,
I am selling it for 5 lakhs and I am collecting a GST of
50,000.
So the GST of 50,000 that I am collecting, tax on the
transaction value, how will it be compared?
With that 1 lakh.
But 1 lakh is not coming.
Out of that, whatever is used, reduce it by 5% per quarter.
Reduce it by 5% per quarter.
And compare it with the tax that you are collecting on the
sale.
By comparing both, whichever is higher, that will be yours.
Reversal amount.
See what it says.
Keep the capital goods.
It is a very simple point.
Plant and machinery, on which you have taken ITC,
ITC has been taken.
The whole game is of SEAS.
Why do you want to reverse it?
You have taken ITC once.
You have availed all the ITC.
But now some situations are coming,
which makes you ineligible by taking ITC.
So fine, as much as I have taken ITC,
I will reverse it in proportionate ITC.
So I will get the same position as Nilbette Sanata.
There will be no problem.
I have availed ITC.
I did not want to avail it.
Now I have become ineligible.
So fine, I will reverse it.
That is the point.
If capital goods, on which ITC has been taken, they are
supplied outwards by the registered person.
So what should he do?
He must pay an amount.
Sir, why will he pay?
He is reversing.
He will pass the entry of reversal.
So fine, what will he collect?
See that.
Higher of the following.
ITC taken on such goods.
When I bought that machine in the starting, what will be
the ITC on that?
One lakh rupees.
Minus 5% per quarter
from the date of issue of the invoice.
Suppose I use that machine for one year.
I use the whole machine for one year.
I will show you by writing.
Otherwise, you will not understand.
Wait a minute.
One lakh,
ITC of one lakh.
I gave the tax of one lakh when I bought the machine.
Now I am selling that machine.
So first of all,
I will compare two things.
One lakh rupees.
Minus 5% per quarter.
How much I have used it.
Suppose I use that machine for one year.
So four quarters come in one year.
So 5% multiplied by 4.
Means 20%.
So 20% of one lakh is 20,000.
I will minus that.
Value of 80,000 rupees will be left, which has to be
reversed.
Okay sir.
Now with whom will I compare this?
Tax on the transaction value.
Transaction value means suppose I sold that asset of five
lakhs.
I sold machinery worth five lakhs.
10% tax is on it.
So I collected tax of 50,000 rupees.
So this is 50,000.
Compare both of them.
Whichever is higher.
Whatever is more, that only has to be reversed.
What is more is 80,000.
So you have to reverse this 80,000.
This is the point sir.
Okay.
Why do we reverse ITC?
Let's summarize what we have studied today.
Why do we reverse ITC?
Sir, first I have availed all the ITC.
Now there are some situations, some circumstances.
Either I have become ineligible to avail ITC.
My taxable supplies have become exempt.
I was regular.
I have come in composition.
I have done some such thing that registration itself got
cancelled.
So sir, the ITC which I have availed,
I will reverse it as it is.
There are stocks, finished goods, raw materials,
I will reverse them.
If there is a capital good, how will I do it?
I will see the capital goods.
If I have availed everything,
what will I do from that?
I will minus it.
As much useful life as there is, it is still there.
For 5 years,
I had brought the asset.
I have assumed 5 years.
So whatever is the value of that asset,
whatever tax was made on it,
I had claimed all of that from ITC.
I will divide it for 5 years.
Now whatever years are left,
according to that number of years,
I will reverse ITC proportionately.
And if I am selling the asset, what will I do?
That is the thing.
Sir, this is the point.
You see.
Let's see if anything is left in it.
See.
This is the point.
Reversal of ITC point.
Hopefully, friends, the lecture will be clear to you.
I am trying a lot.
There are some complicated things.
I agree.
Even I used to face problems when I used to read these
things.
But my effort is still the same.
That I will simplify things and explain to you.
So that you don't face any problem.
See, you will have to put some effort.
You will have to read these things yourself.
What is the basic thing?
I have explained to you that this is the thing.
We are doing this and that is why we are doing this.
This is the purpose.
Once you start reading, all the points will be clear to you.
There is no problem.
I am still saying that there is no difficulty.
Difficulty is only in the mind.
There are blocks of the mind which are very necessary to
break.
If you don't break them,
Sir, let me tell you one thing.
The age you are in today,
the energy you have,
the enthusiasm you have,
after 20 years,
after 20 years, you will pray to God that I wish I had gone
back 20 years ago
and I would have had the same level of energy.
When you are 40, 42, 45 years old,
at that time you will pray
that I wish I could become 20, 21, 22 years old again.
I wish I could have that energy again.
I wish I could have that enthusiasm again, Sir.
Sir, after 20 years,
I don't want you to regret that I wish I had worked hard at
that time.
I wish I had cleared my mind a little at that time and I
would have had the same level of energy.