The concept of Input Tax Credit is not new under GST, it is same as defined under present taxation system. But, the provisions under GST are altogether different. Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs.

Illustration:

Suppose a manufacturer-

 Tax payable on output (on Final product) is INR 350

Tax already paid on input is INR 100

A manufacture can claim tax Input Credit of INR 100 (tax payable on output-tax already paid on input i.e. 350-100) and only INR 250 needs to be paid.

In other words, a person who was liable to pay tax on output, whether for provision of service or sale of goods, is entitled to get input tax credit (ITC) on the tax paid on its inputs.

In this write-up, provisions related to Input Tax Credit are covered.

Document required for claiming ITC

Document required for claiming ITC

Invoice

Invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31 or clause (f) of sub- section (3) of section 31 (subject to the payment of Tax);

Section 31

31. (1) A registered person supplying taxable goods shall, before or at the time of,

(a)  removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case,

issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which:

(a)     any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(b)     tax invoice may not be issued.

(3) Notwithstanding anything contained in sub-sections (1) and (2):

(a) a registered person may, within one month from the date of issuance of certificate of registration and in such manner as may be prescribed, issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him;

(b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

(c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed:

Provided that the registered person may not issue a bill of supply if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

(d) a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment;

(e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a refund voucher against such payment;

(f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;

(g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue a payment voucher at the time of making payment to the supplier.

(4) In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services:

(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

(b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

(c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

(6) In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

(7) Notwithstanding anything contained in sub-section (1), where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier

Debit Note

A debit note issued by a supplier in accordance with the provisions of section 34;

Section 34

(1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(3) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed.

(4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Bill of entry

A bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for assessment of integrated tax on imports;

Bill of entry as per Custom Act, 1962

Bill of entry is a declaration by an importer or exporter of the exact nature, precise quantity and value of goods that have landed or are being shipped out. Prepared by a qualified customs clerk or broker, it is examined by customs authorities for its accuracy and conformity with the tariff and regulations.

ISD invoice or ISD credit

An ISD invoice or ISD credit note or any document issued by an Input Service Distributor (ISD) in accordance with the provisions of sub-rule (1) of rule invoice 7.

Rule 7(1)

(1) The input tax credit in respect of inputs or input services, which attract the provisions of sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely:

(a) total input tax involved on inputs and input services in a tax period, be denoted as ‘T’;

(b) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for purposes other than business, be denoted as ‘T1’;

(c) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for effecting exempt supplies, be denoted as ‘T2’;

(d) the amount of input tax, out of ‘T’, in respect of inputs and input services on which credit is not available under sub-section (5) of section 17, be denoted as ‘T3’;

(e) the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as ‘C1’ and calculated as:

 C1 = T- (T1+T2+T3);

(f) the amount of input tax credit attributable to inputs and input services intended to be used exclusively for effecting supplies other than exempted but including zero rated supplies, be denoted as ‘T4’;

(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the invoice level in FORM GSTR-2;

(h) input tax credit left after attribution of input tax credit under clause (g) shall be called common credit, be denoted as ‘C2’ and calculated as: C2 = C1- T4;

(i) the amount of input tax credit attributable towards exempt supplies, be denoted as ‘D1’ and calculated as:

 D1= (E÷F) × C2

where, ‘E’ is the aggregate value of exempt supplies during the tax period, and

 ‘F’ is the total turnover in the State of the registered person during the tax period:

Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated.

Relevant Form

A registered person can avail Input tax credit only if all the applicable particulars & all the relevant information as prescribed in Invoice Rules are furnished in FORM GSTR- 2 by such person.

Non- availment of Input tax credit

A registered person shall not be eligible for availing Input tax credit if any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.

Author’s Comment

Input tax credit under GST is designed in a manner to have ‘a seamless flow of credit’, mitigates the cascading effect of various taxes and the non- availability of credit across different taxes. It is a replacement of Excise duty and other taxes, because under present tax structure, excise duty paid on the raw material consumed is being allowed as input credit only on manufactured goods. For other taxes and duties paid for post- manufacturing expenses, there is no mechanism for input credit.

Hope this information will help you in your Professional endeavors. For further assistance/query, feel free to write to us.

Author: C S Ekta Maheshwari is the Author of this article and is Company Secretary by profession. The Author can be reached at csektamaheshwari14@gmail.com

Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

Author Bio

More Under Goods and Services Tax

Posted Under

Category : Goods and Services Tax (3414)
Type : Articles (13274) Featured (4136)
Tags : goods and services tax (1971) GST (1555)

7 responses to “Documents Required For Availing Input Tax Credit (ITC) Under GST”

  1. arun kumar says:

    Hi mam,
    Your posts about GST are really great….

    Please let us know ….whether the billing formats are to be continued or there is some change from 1st july onwards..please let us know if Form 8 , 8B . 8C etc will continue or not??

  2. Sachin says:

    Hi,
    ITC of tax paid on reverse charge is available under which section/rule. Also, only the challan will be enough or we need any other document also for claiming ITC. Thanks in anticipation.

  3. Raj Dhuper says:

    Hello Mam,
    would like to know the impact on ITC on opening stock of a registered dealer, where migrating from vat 5% to GST 28% (goods purchased local distributor).

    • Ekta Maheshwari says:

      Hi Raj,
      Whatever the stock lying in books, show its value and the credit availed by you in the last ITR and the remaining credit will be carry forward to GST. But ITR needs to be filed

  4. Ekta Maheshwari says:

    Hi Tarun,

    It was a typing error. Its INR 100 instead INR 150.

  5. TARUN PATEL says:

    THERE IS MISTAKE IN INPUT CREDIT IN ILLUSTRATION. INPUT CREDIT TO BE 100 AND PAYABLE TAX WOULD BE 250

Leave a Reply

Your email address will not be published. Required fields are marked *

Search Posts by Date

June 2017
M T W T F S S
« May    
 1234
567891011
12131415161718
19202122232425
2627282930