GOODS AND SERVICES TAX (GST) IN

INDIA

Input Tax Credit (ITC)

SUBMITTED TO :MR.DILIP JOSHI

BY: KARTIK SAMAIYA
M.COM 4TH SEMESTER
ROLL NO-4012716
Content
INTRODUCTION
RELEVANT DEFINATION
ELIGIBILITY AND CONDITION FOR TAKING INPUT
TAX CREDIT (ITC)
APPORTIONMENT OF CREDIT AND BLOCKED
CREDITS (SECTION 17)
CREDIT IN SPECIAL CIRCUMSTANCES (SECTION
18)
HOW ITC AVAILED AND UTILIZED
INTRODUCTION
WHAT IS INPUT TAX CREDIT?

Input credit means at the time of paying tax on output,

you can reduce the tax you have
already paid on inputs and pay the balance amount
When you buy a product/service from a registered dealer
you pay taxes on the purchase. On
selling, you collect the tax. You adjust the taxes paid at
the time of purchase with the amount
of output tax (tax on sales) and balance liability of tax
(tax on sales minus tax on purchase) has
to be paid to the government. This mechanism is called
utilization of input tax credit.

For example- You are a manufacturer:

Tax payable on output (FINAL PRODUCT) is Rs 450
Tax paid on input (PURCHASES) is Rs 300
You can claim INPUT CREDIT of Rs 300 and you only
need to deposit Rs 150 in taxes.
INPUT TAX CREDIT UNDER GST
Input Tax credit under GST One of the most important
pillars of an effective GST is the availability of Input Tax
Credit (ITC) to remove the cascading effect of taxes on
transactions. In the enactment these important provisions
have been mentioned in Sec 16 to 18 of the CGST Act and
the respective State Acts.

Input tax credit (ITC) is the backbone of the GST

regime.GST is nothing but a value added tax on goods and
services combined. It is these provision of input tax credit
that make Gst a value added tax i.e is collection of tax at all
points after allowing credit for the inputs.
 The procedure and restrictons laid down in these
provisions are important to make sure that there is a
seamless flow of credit in the whole scheme of
transition without any misuse. Thus, the clarity of
rules of availment and utilization will have significant
impact on making GST a taxpayer -friendly tax.
 RELEVANT DEFINATION
Sec. 2 (63) – Input Tax Credit:- ITC means the credit of
input tax.
Sec. 2(62) – Input Tax is defined: It includes
All taxes under CGST, SGST,UTGST and IGST.
IGST on import of goods and service.
Taxes paid under reverse charge under CGST,
SGST,UTGST and IGST.
Taxes paid by the recipient of supply if such supply is
made by the unregistered person to registered person
under these ACT.
It does not include tax paid under composition levy
Sec. 2 (19) – Capital Goods - means goods, the value of
which is capitalised the books of Accounts.
 ITC-ELIGIBILITY CONDITION
AND LIMITATION
Tax Invoice :- One should possesses the tax invoice, debit note or
other tax paying documents
Receipt of Good or services or both:- He has received the goods or
services or both.
If goods are received in lots/ installments then on receipt of last
installment/lot.
It includes goods received by the agent or third person under his
direction before or during movement of goods i.e. if goods are
sold in transit.
 Tax on the supply is paid by the supplier.
Furnished the return under the provision of the act
 ITC- Conditions and limitations
contd.
He has paid to the supplier the value of the supply
and tax thereon within 180 days of the date of
issuance of invoice.
–If no such payment then the entire credit taken on
such supply shall be added to output tax liability along
with interest thereon.
–He can take the credit again on making the payment
for the value of supply and tax thereon.
No credit with respect to the amount of tax (if tax
is capitalised ) on which depreciation is claimed.
Credit of input tax can be taken till the last date
of filing Annual Return or actual date of filing
annual return whichever is earlier.
APPORTIONMENT OF INPUT CREDIT

If goods or services or both are used by the registered

person partly for business and partly for other
purposes then credit is restricted to input tax
attributable to business purposes.
If partly for taxable supply(including zero rated
supply) and partly for exempted supply then credit is
restricted to attributable to the taxable
supply(including zero rated supply).
Exempt supply includes non taxable supply. It also
includes supplies taxable under reverse charge,
transaction in securities, sale of land and sale of
building.

A banking Company, Financial institution, and

NBFC have the option to take proportionate credit as
discussed above or can take upto 50% credit.

This restriction is not applicable with respect to tax

paid on supplies made within same PAN.
 ITC- BLOCKED CREDIT

ITC shall not be available in respect of the following:

Motor Vehicle and other conveyances.

–Except if used for:-
•Further Supply.
•transport of passengers, transportation of goods,
•imparting training how to drive, navigate or fly them.
Supply of following goods or services or both:
Food Beverages, beauty treatment, cosmetic surgery,
health services, outdoor catering.
Membership of club/health and fitness centre.

Travel benefit to employees.

Rent a cab, life insurance and health insurance

(unless govt. makes it mandatory to provide such
facilities to the employee).
 ITC- BLOCKED CREDIT
 Works contract services for construction of immovable
property other than plant and machinery.

Supply where tax is levied under composition scheme.

Supplies used for personal consumption.
Goods lost/ stolen/ destroyed/ written off or disposed
of by way of gift/free sample.
Any tax paid after issuance of SCN with respect to such
SCN, detention or confiscation.
AVAILABILITY OF ITC IN SPECIAL
CASES
Person who would like to take the credit of input lying in
stock or contained in finished goods or semi finished
goods at the time of registration-
–he should apply with in 30 days from the date he
becomes liable to take the registration and the credit on
such inputs held on the day immediately preceding the
date from which he becomes liable to pay tax.
–In case of voluntary registration then the credit of such
inputs held in stock immediately preceding the date of
registration.
If registered person ceases pay tax under
composition scheme or his exempt supply
becomes taxable supply-

–he can take credit tax paid on such inputs held in

stock on the day immediately preceding the date from
which he becomes liable to pay tax.

–He can take credit of tax paid on capital goods

exclusively used for such good or services
Provided that credit shall be reduced such percentage
point prescribed in rules.
AVAILIBILITY OF ITC IN SPECIAL
CASES
Input Credit can be taken within 1 year from the date
of issue of tax invoice with respect to special cases
discussed above.
Unutilised credit can be transferred in case of sale/
amalgamation/ merger /demerger/lease/transfer of
the entity where there are specific provision for
transfer of liability.
If person opt for composition scheme or supply
becomes exempt-
–Amount equal to the credit of input held in stock or
credit on capital goods reduced by the percentage
point shall be debited either in the e-cash ledger or e-
credit ledger.
–Balance credit will lapse.
 AVAILIBILITY OF ITC IN SPECIAL
CASES
If capital goods are supplied on which credit was
taken- person shall pay an amount equal to such credit
reduced by percentage points or transaction vale of
such supply whichever is higher.

Person has the option in case of supply of refractory

bricks, mould and dies, jigs and fixtures.
 UTILISATION OF INPUT TAX
CREDIT UNDER GST
Integrated tax shall first be utilised towards payment of
integrated tax and the amount remaining, if any, may be
utilised towards the payment of central tax and State
tax, or as the case may be, Union territory tax, in that
order;
The central tax shall first be utilised towards payment of
central tax and the amount remaining, if any, may be
utilised towards the payment of integrated tax;
The State tax shall first be utilised towards payment of
State tax and the amount remaining, if any, may be
utilised towards payment of integrated tax;
The Union territory tax shall first be utilised
towards payment of Union territory tax and the
amount remaining, if any, may be utilised towards
payment of integrated tax;

The central tax shall not be utilised towards

payment of State tax or Union territory tax;

The State tax or Union territory tax shall not be

utilised towards payment of central tax.
THANK YOU