271

aIJPfA
y,ASI-1
G OF JNPUT TAX CREDIT

r,tt~credit is the tax paid by the buyer on p~rc~~se of goods or services.Such tax
Jnput t~ 'd at the purchase when reduced from hab1hty payable on outward supplies is
which 15 P~ ut tax credit.In other words, ITC is tax reduced from output tax payable on
l<Jlown as p
nt of sales.
accou
·Let inputs be A, B and C.
ExamPle · .
Tax paid on purchase of A - Rs. 2,500 ; Tax paid, on purchase ofB _ Rs. 1,800
Tax paid on purchase of C - Rs. 750 ; Tax on output- Rs. 6,800
Tax to be paid by manufacturer= Rs. 6,800 - tax paid on inputs (Rs. 2,500 + Rs.
l SO0 + Rs. 750) = Rs. I, 750
r'herefore, Input Tax Credit= 2,500 + 1,800 + 750 = Rs. 5,050

ELIGIBILITY & CONDITJONS FOR TAKING ITC [SECTION 16 OF CGST

ACT/
Eligibility /or taking ITC,/Section 16(1)J

Every registered person shalL subject to such conditions and restrictions as may be
prescribed and in the manner specified in Section- 49, be entitled to take credit of input
tax charged on any supply of goods or services or both,to him which are used or intended
to be used in the course or furtherance of business and the ·said amount shall be credited
to the electronic credit ledger of such person.[Section 49 deals with the provisions
relating to Payment of Tax, Interest, Penalty & other amounts.}

Conditions/or taking ITC [Section 16(2)J

Tbe registered person will be entitled to ITC on a supply only i,f all the following
conditions are fulfilled·• 1 I

Possession of tax paying document [Section 16(2) (a) read with Rule 36] ·
RI 36 ·
thu eln 0) st ates - The input tax credit shall be availed by a registered person, including
e put Serv·ice n·1stnbutor,
· . of any of the followmg
on the basts . documents, namely-
(a) An inv • · ·
(b) An . 01~e issued by the supplier of goods and/or services
1
~voice issued by the recipient receiving goods and/or services from
unregistered supp 1·1er along with proof of payment of payment of tax, m
· case of
reverse charge
 . AND SERVICES TAX
00 oos

·t ote issued by the supplier

(c) A De bI n . . i11

(d) A I
B.11 of Entry or any s1m1lar document• prescribed under the C
es for the assessment of IGST on Imports Ust 01ll
or Rul . . . . sAq
) An Input Service D1stnbutor mvo1ce or Input Service n· . ,\96l
(e . . tstnbuto
documents issued by an Input Service Distributor
. .
r Credit
Or

R l 36 121 states _ Input tax credit shall be availed by a registered

u e 1· :1 • • Person onJ .
t. ulars as specified in Rule 46 are contamed m the document 'R Y1f an tl
par IC . , . . • L. uIe 4 de 1e
visions relating to Tax lnvo1ce.} The documents basts which ITC . . a/s w;1n 6 1

pro . . . is be
should contain at least the fo llowmg details: 10g taken

(a) Amount of tax charged

(b) Description of goods/services
(c) Total value of supply of goods and/or services
(d) GSTIN of the supplier and recipient
(e) Place of supply in case of inter-State supply

Rule 36(3) - No input tax credit shall be availed by a registered person in respect of any
tax that has been paid in pursuance of any order where any demand has been confirmed
on account of any fraud, willful misstatement or suppression of facts.

Rule 36(4) - ITC to be availed by a registered person in respect of invoices or debit notes,
the details of which have not been furnished by the suppliers under Section 37(1) in
FORM GSTR-1 or using the invoice furnishing facility, shall ·not exceed 5% of the
eligiblf credit available in respect of invoices or debit notes, the details of which have
been furnished by the suppliers under Section 37(1) in FORM GSTR-1 or using the
invoice furnishing facility.

The details of the invoice or debit note referred to in Section 16(2)(a) has been furnished
by the supplier in the statement of outward supplies and such details have been
communicated to the recipient of such invoice or debit note in the manner specified under
Section 37.

Receipt ofgoods and/or services [Section J6(2J{b)J

J

st
T~e regi ered person taking the ITC must have received the goods and/a~ services.for
this purpose 1·t · d . . d ices or
~fu. ' ts eemed that- the registered person has received .the goo s or serv
 273

the goods are delivered by the supplier to recipient or any other person
Where . . . , .
• on t11e direction of such. registered ,person, whether acting as an agent, or
ise before or durmg movement of goods, either by way of transfer of
othefW , h . ,
- nts of title to goods or ot erwise.
docume . .
Where the services are provided by the supplier to any person on the direction of
• andon account of such registered person. ,,
Example: Mr. Sharma i:s a trader who p~aces an order on Mr. Madan for a
conSl·gnment of a product. Mr. Sharma receives
, , a purchase order from Mr. Hitesh
for the same quantity of the product. Mr. Sharma instructs Mr. Madan to deliver
the goods to~- Hitesh, and in turn he raises an invoice on Mr. Hitesh. Though
the goods are not physically received at the premises of Mr. Sharma, Section
16(2)(b) allows ITC of such goods to Mr. Sharma. . .,
l
Tax /eviable on supply actually paid to Government [Sec!ion J6(2)(c)]

Subject to the provisions of Se~tion 41, tax chargfd in respect of such supply has been
actually paid to the Government, either in cash or throug~ utilization oflTC ~dmissible in
respect of the said supply.

Section 41 allows taking ITC in electronic credit ledger on self-assessment basis. The
self-assessed ITC gets credited to the taxpayer's electronic cr edit ledger on provisional
basis as per Section 49(2). 1 ·1 ' '

Filing ofreturn [Section 16(2) (d)J . , ;

The registered ,persqn taking the ITC must have filed, his return under .Section 39.
Currently, a summary return in FORM GSTR-3B is being filed on monthly basi~.
Therefore, a taxpayer should file GSTR-3B to avail ITC on eligible inward supplies.
. l • ' . ' I I
Goons RECEIVED IN LOTS

Where the goods against an invoice are received in lot~ or instalments, the reg~tered
person shall be entitled to take ITC upon receipt of the last lot or instalment.
Dl.JRA .
p TION FOR PAYMENT FOR THE INVOICE TO BE MADE/SECOND
llOVfSJONTOSECTION 16(2) READ WITH RULE 37 OFCt;ST RULES,, 2017)
The regist . ' d
se • ered person (recipient) must pay to the supplier, the value .of the goo s or
rvices or b h . f. . b
the . ot along with the tax within 180 days from the date of issue O mvoice Y
suppher.In the event of failure to do so, the corresponding credits availed by the
 GOODSA ND SERVICES TAX

d dt · b·1· .h. '

Id be ad e o his. output tax ha 11ty, wit mterest.Jntere st W11J . b 24
recipient wou . ·1· credit till the date when the amount added e Paid I
d t of ava1 mg lo th 8~
from. .the. a eid However, once the recipient makes . the payment
. of Val Ue of e output '¾
liab1hty is pa · . h will be entitled to avaII the credit again With goOds aiiw 0
ices along with tax, e ou1 any ti.. . or
serv . . of payment of value of supply+ tax wit. h.m 180 days does not apple. .,,e lini·n.
The cond11Ion
following s1tuatmns. . e
. • • , rn ti
( ) Supplies
. on wh'ch 1 tax is payable under reverse charge

a Dee me d supp res

(b) 1 without consideration .

..
(c) Add11Ions made to the value . .of supplies on account
: . of supplier' 1abi1tt
. .
relatmn to sue y
. · h supplies, bemg mcurred by the rec1p1ent of the suppl 5 1 'i 1n

Under . . (b) and (c) ' the value Of supply is deemed to have been Paid.
. Thi
1 s1tua1Ions .
.smn
. 1s. me
provsupp - luded in the GST law ensure that ITC 1s not taken on fakem- Voices
. to purposes. . aflds
the IY1s. made for genuine business

IF . DEPRECIATION CLAIME~ ON T4,X COMPONENT,

ALLOWED [SECTION 16(3)]
nc IS Noy

Where the registered person has claimed depreciation on the tax component of the co~ of
capital goods and plant fllld machinery under the provisions of the Income-tax Act, 196!,
the input tax credit on the said tax component shall not be allowed .
.
With respect to the tax paid on such items, dual benefit cannQt be claimed under Income.
tax Act, 1961 and GST laws simultaneously. Either depreciation on the tax component
can be claimed under Income-tax Act or ITC of such tax paid can be availed under GST
laws.

i
TIME LIMIT FOR AVAILING ITC /SECTION 16(4)}

A registered person shall not be entitled to take ITC in respect of any invoice or deb!
note for supply of goods and/or services after
th
• ' f
(a) S e due •date• of furnishing• of the return under Section 39 for e month .o
th
eptember (following • the end of financial year to which
. such mvoic
· · e or mvoN:l
relating to such debit note pertains); or
(b) fu1'.1ish ing of the relevant annual return,
Whichever is earlier.
 ~Jt u ~
\ ,\.
I' • • 275
. it specified m Sectmn 16( 4) shall
. 1e hJ11 not apply t 0
<he tt11 d been reversed earlier. a claim fo r ..
11.- jt!Jlal 11a re-ava1lmg of any
aed JONMENT OF ITC [SECTION 17/
roRf
l der
asT can be obtained and used to pay t
ax on output s r
ffCun yable on the output supply, i.e. on exempt upp ies.As a result, when
. not pa . .1 . supply ITC .1
1~ 1s . to the above prmc1p e 1s 'zero rated su , ' s not available. The
~cept10 0 PP 1Y, where ITC · .
0olYe . able on output supply. is available even
IS pay
n'!l
·roo
1
t
ble person makes both taxable and exempt su r .
ataX3 . . PP tes, he 1s entitled t0 full ITC
wi,eo . puts . input services, and capital goods used exclusiv 1
.•Ajt [or Ul ' . d . e Y 1or taxable supply and
c~ . &. inputs input services, an capital goods used excl .
oo credit ior ' . us1ve 1y ior exempt supply.
inputs, input services, and capital goods are used £ b h
,111,en conun00 . . or ot taxable and
w•
1
lies only proportionate ITC attnbutable to the taxable s 1 . .
rnpt supp ' . . . · upp Y 1s available.
exe ITC is apportioned m proportion to the amount of taxabl d
The corrun° O . e an exempt
supply.
. t· ns requiring apportionment are as follows-
The sitlla 10
(a) Where the goods ~r services .or both are used by the registered person partly for
the purpose of bus mess and partly for other purposes [Section 17(1) J
~) When the goods or services or both are used by the registered person partly for
effecting taxable supplies including zero-rated supplies under this Act [CGST
Act] or under the IGST Act and partly for effecting exempt supplies under the
said Acts.

In situation (b), the amount of credit shall be restricted to so much of the input tax as is
attributable to the taxable supplies including zero-rated supplies.

Before determining ITC of inputs and input services and capital goods, the concept of
'Blocked Credits' needs to be understood.

BLOCKED CREDITS /SECTION 17(5)]

E~pt for the list of items given in Section 17(5), ITC of tax paid on almost all inputs
and mput se · · · · d
rvices used for the supply of taxable goods or services or both ts permitte
under GST As . h h
toe . · a consequence, ITC on such items is blocked/not allowed, even t oug
Yqualify as m· · d· h se or
furthe puts, mput services or capital goods and are use m t e cour
ranee of business. '