In this editorial, the eligibility and conditions for taking Input Tax Credit under Central Goods and Services Tax Act, 2017 is being covered. The aim is to decipher various aspects of Input Tax Credit.

Before moving further, let’s understand what actually ‘input tax’ & ‘input tax credit’ is all about ??

As per section 2(62) of Central Goods and Services Tax, 2017 “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes—

(a) the integrated goods and services tax charged on import of goods;

(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;

(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act;

(d) the tax payable under the provisions of sub-section (3) and sub-section (4) of section 9 of the respective State Goods and Services Tax Act; or

(e) the tax payable under the provisions of sub-section (3) and sub-section (4) of section 7 of the Union Territory Goods and Services Tax Act,

As per section 2(63) of Central Goods and Services Tax, 2017 “input tax credit” means the credit of input tax;

Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 44, 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 his business and the said amount shall be credited to the electronic credit ledger* of such person.

* The input tax credit that is self-assessed in the monthly returns will be reflected here under three categories i.e IGST, CGST & SGST. The taxpayer will be able to utilize the balance shown in this account only for payment of tax  as per the credit utilization rules and no other amount such as interest, penalty etc.

Conditions for entitlement to the credit of any input tax in respect of any supply of goods or services or both-

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods and/ or services;

(c) the tax charged in respect of such supply has been actually paid to the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 34:

– Where the goods against an invoice are received in lots of installments, the registered taxable person shall be entitled to take credit upon receipt of the last lot or installment.

– where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

– Where, on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

In simple words:

Only Registered Person shall be eligible to the Input tax charged on any supply of goods or services or both which are used or intended to be used in the course of furtherance to the following conditions:

1. Possession of tax invoice or debit note issued by the supplier;

2. The person has received the goods or services or both;

3. Matching concept; and

4. Payment to vendors  within 180 days from the date of invoice

In the following cases, Input Tax Credit shall not be allowed:

– Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961)

– In respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

• Limitation of 12 months from the date of invoice to continue

• Credit to be availed within the same financial year.

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 (8120)
Type : Articles (18279)
Tags : goods and services tax (6567) GST (6168)

2 responses to “Conditions for Taking Input Tax Credit Under CGST, 2017”

  1. Amit Sharma says:

    1. What about if the recipient does not make payment within 180 days?

    2. Under condition to take credit… does the section 39 is replace by section 34.

    3. What about the credit on capital goods if the person does not claim depreciation?

    • Ekta Maheshwari says:

      Hi amit,
      With response to your query,
      1. If the recipient does not make payment within 180 days, then an amount equal to its ITC shall be added to its output tax liab with interest.
      2. Yes, sec 39 is replaced by sec 34
      3. If the person doesnot claim dep, ITC shall be allowed to him

Leave a Reply

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