Key Points related to Input Tax Credit (ITC) CGST Act, 2017(Section 16-21): [Act, Rules, FAQs are Covered]
1. Every registered person is eligible to take the Input tax credit of tax paid on inputs and input services which is used or intended to be use for furtherance of business.
2. There are some following conditions which must be fulfilled by the registered person to get the input tax credit on inputs, input services and capita goods:
3. There must be an possession of tax invoice or any other taxpaying document issued by the supplier
4. Registered Person has received the goods or services.
5. Tax charged by the supplier should be paid by him to the government.
6. Registered person has filed the FORM GSTR 2 as per section 39(But at present situation, GSTR 2 is not available on the common portal for filing and therefore GST Department has decided to provide the input tax credit provisionally until GSTR 2 is available on the common portal).
7. If goods are received in lots or installments then input tax credit must be entitled to take upon the receipt of last lot or installment.
8. Credit of tax paid on capital goods is permitted to be availed in one installment.
9. If payment is not made by the registered person to the supplier within 180 days from the date of issue of invoice then the registered person have to add back the input tax credit into output tax liability along with the interest in the next month after the expiry of 180 days.
10. If depreciation is claimed on tax component of the capital goods under income tax act then input tax credit is not eligible on that tax component.
11. If the invoice or any other taxpaying document is issued in the financial year, then the input tax credit on that invoice can be taken up to the due date of GSTR 2 of September month of next financial year or relevant annual return; whichever is earlier.
12. A Registered person cannot avail the input tax credit if the tax has been paid due to any demand raised by the GST Department.
1. If the inputs and input services is used partly for business purpose and partly for other purpose, then registered person is eligible to take the input tax credit of inputs / input services used for business purpose
2. If inputs or input services is used to make the zero rated supplies or exempt goods or services then the registered person is eligible to take the credit of inputs or input services used for zero rated supplies not for exempt supplies.
3. For Banking Company and Financial Institution, two options are available for them. One is the same option which are mentioned above in 1 point of section 17 and second is to take the 50% input tax credit of total eligible ITC on inputs, input services and capital goods and remaining will be lapse.
Once one of the two options is selected then it cannot be changed in the remaining relevant financial year.
If the one person made supplies to another having the same pan number then the 50% limit will not apply that means the recipient is eligible to take the 100% ITC on that inputs.
5. Motor vehicles and other conveyances except when such motor vehicles or conveyance is used in further taxable supplies like;
a. Further sale of such motor vehicle; or
b. For transportation of passengers like Uber, Ola, Radio Taxi etc.
c. For Training of driving, flying, navigating etc.
d. For transportation of goods.
6. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except when such input or input services is used to provide the outward supplies of similar category of goods or services;
7. membership of a club, health and fitness centre;
8. rent-a-cab, life insurance and health insurance except where––
the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
i. such inward supply of goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both; and
9. travel benefits provided to employees on vacation such as leave or home travel concession;
10. works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
11. goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
(NOTE: Construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization)
i. Goods & services has been received by the non-resident except when he imported the goods.
ii. Goods or services have been used for personal consumption.
iii. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
iv. Tax has been paid under composition scheme.
(NOTE: Plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.)
1. If a person who is liable to be registered under GST and apply for GST within 30 days from the date of liability to get registered, is eligible to get the credit of the stock held on the date immediately preceding from the date of liability to get registered.
Same eligibility as discussed above is also available in a case of voluntary registration (Immediately preceding the date of registration), registered person who switches from composition dealer to regular dealer, person who earlier falls under exempt goods/services category becomes taxable now.
Registered person can also claim the input tax credit on the capital goods by reducing the percentage as may be prescribed.
All the details of input tax credit should be furnish within 30 days from the date of eligibility in FORM GST ITC 01
If the aggregate value of the claim exceeds Rs. 2,00,000 then it is necessary to get the details certified from practicing Chartered Accountant or Cost Accountant
2. Registered person is not eligible to take the input tax credit after the expiry of 1 year from the date of issue of tax invoice.
3. Registered person who switches from taxable person to composition dealer or from taxable person to wholly exempt category, then that person is liable to pay the amount equal to input tax credit availed earlier by debiting the electronic credit ledger in case of input and capital goods.
1. In case of principal-job worker relationship, the principal is eligible to take the credit of the goods and capital goods if that goods / capital goods has been sent to job worker for job work
2. If the goods / capital goods have been sent directly to the job worker without bringing into the place of business, then also the principal is eligible to take input tax credit.
3. Input goods and capital goods shall be issued to job worker through challan and all the challans details should be furnish in FORM GST ITC 04.
4. If the input goods is not coming back or not supplied from the place of business of job worker within 1 year from the date of receipt of goods to job worker, then it shall be deemed that goods have been supplied to the job worker by the principal and the details of the same should be filed by the principal in FORM GSTR 1 of the following tax period.
Same situation in case of capital goods but the time limit for capital goods is 3 years to receive back or supplied.
But above time limit is not applicable on moulds, dies, jigs, fixtures, tools etc.
1. In case of Input Service Distributor(ISD), an ISD can also distribute the input tax credit to all over its branches subject to following conditions and restrictions:
2. ISD can distribute the input tax credit through document only containing details of such Input tax credit.
3. Input tax credit distributed to the branches shall not exceed the amount available of input tax credit for distribution.
4. The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient.
5. If there is an multiple branches, then ITC can be distributed according to aggregate turnover of the respective branches of the preceding financial year.
6. It is necessary that branch to which the credit is being distributed should be operational in current financial year.
7. Input Service Distributor shall file the FORM GSTR 6 and furnish all the details relating to distributed input tax credit to all its branches.
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