INUPUT TAX CREDIT – DOCUMENTS & CONDITIONS FOR AVAILMENT

Section 16(1) of the CGST act provides that every registered person can take credit of input tax
charged on any supply of goods or services or both made to him and which has been used or
intended to be used in the course or furtherance of business.

To claim Input tax credit, it is necessary that the claimant must be a registered person. All
registered person under the Act (other than those availing composition scheme) are eligible to
claim ITC in respect of taxes paid (IGST, CGST, SGST OR UTGST) on all inward supplies of
goods and services made, which are used or intended to be used in the course or furtherance
of business.

Such inward supplies may be of inputs, input services or capital goods. All such supplies are
eligible for claim of ITC. Thus, whether it is raw material, packing material, trading goods,
consumables, capital goods or items of expenditure (debited to profit & loss a/c under various
heads) all such items are eligible provided the same are used or intended to be used in the
course or furtherance of business subject to following conditions and restrictions as may be
prescribed:

(a) Goods and/or services must have been received

(b) Registered dealer must have in possession of Tax Invoice in respect of inward
supply
(c) Tax charged on such inward supply must have been paid to the Government by
the supplier whether in cash or by way of utilisation of ITC
(d) A return u/s 39 of CGST Act has been furnished.
(e) The recipient should make the payment to the supplier in respect of supplies
so received with in a period of 180 days from the date of issuance of Tax
invoice, otherwise the ITC claimed has to be reversed, however it can be
reclaimed on making of due payment.

In respect of capital goods, the complete ITC wold be available in the year of purchase (no ITC
on building) of such capital goods however if the registered person has claimed depreciation
under Income Tax Act, on tax component of such assets, ITC shall not be admissible. Or to say
the tax component should never be added to the cost of such capital goods to claim the ITC.

The input tax credit shall be availed by a registered person, including the Input Service
Distributor, on the basis of any of the following document:
(a) Tax Invoice issued by the supplier of goods or services
(b) An invoice issued by the recipient on himself, in respect to purchases from un-
registered dealers, where tax is payable under reverse charge scheme.
(c) A debit not issued by a supplier in accordance with the provisions u/s 34 in respect of
rate difference etc.
(d) A bill of entry or any similar document prescribed under the Customs Act, or rules
made there under;
(e) An ISD invoice or ISD credit note or any other document issued by Input Service
Distributor
The procedure to claim ITC by a registered person is that the same can be claimed in respective
month to which the Tax invoice relates (subject to actual receipts of goods /services). The claim
of ITC would be credited to the Electronic Credit Register of such registered person. This credit
could be utilised by him against payment of output tax liability.

However, if a person has not claimed ITC in the respective month, for any reason, he may
claim the same any time within 6 months from the end of financial year or before the time
limit for submitting Annual Return for the said financial year, which ever is earlier.

It may be noted that credit of CGST, SGST or UTGST and IGST has to be maintained separately
and the same can unlisted in the manner prescribed. The credit of CGST can be utilised for
discharge of output tax liability of CGST and if balance remains it can be utilised for IGST also.
But credit of CGST cannot be utilised for output tax liability of SGST or UTGST. Similarly input
credit of SGST cannot be utilised for output tax liability of CGST. So, cross utilisation of SGST
or UTGST and CGST is not permissible. However, the input credit of IGST could be utilised
first to discharge the output tax liability of IGST, then of CGST and if balance remains for
the output tax liability of SGST or UTGST.

The law has separately provided the provision where on certain supplies the input tax credit
will not be available even though such supplies have been incurred during the course and for
furtherance business. Similarly, the provision has also been made under the Act for
proportionate reduction of ITC in certain circumstances or reversal of input credit on certain
occasions.

Input Tax credit is vital element and if not claimed properly could be quite costly to the
business. Hence the registered dealer should maintain the rightful records in any good GST
enabled accounting or bookkeeping software for claiming the ITC. And with the help of
some GST enabled software the proper & timely return for claiming ITC should also be send
by the registered person so that the input tax credit could be claimed by him against the Output
tax liability.