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Akshay Aggarwal

Akshay Aggarwal

Chapter V of Model GST Law (GST Law) details provisions pertaining to manner of availing input tax credit (ITC). Other ITC provisions are spread across GST Law. We have discussed some important provisions in the succeeding paras:

ITC has been defined as credit of (IGST/ CGST / SGST) charged on any supply of goods and/or services used or intended to be used in course or furtherance of business.

Registered taxable person shall be eligible to avail ITC credited to the electronic credit ledger subject to condition prescribed. ITC availed by taxable person shall be credited provisionally to electronic ledger. What needs to be noted here is no restriction has been imposed with relation to availment of 50% ITC on capital goods.

However, some conditions have been attached to availment of Cenvat Credit. Few such conditions are:

– Tax paying documents such invoice, debit note etc

– Goods / Service should have been received by the person

– Tax charged on invoice should have been paid to the credit of government

– Credit for goods against an invoice, which are received in lots or instalments can be availed only upon receipt of the last lot of instalment

1) In-eligible ITC

GST Law also enlists certain cases wherein ITC will not be eligible. In other words, no ITC shall be available in following cases:

– Goods / services primarily used for personal use / consumption of employee

– Goods / services acquired for execution of works contract when such contract results into immovable property (Except P&M)

– Goods used in construction of immovable property (except P&M), property in which is not transferred

– Goods / services on which tax has been paid on composition scheme

– Goods / services used for private or personal consumption

– Credit not admissible on such tax component of the cost of capital goods, for which depreciation has been claimed under the Income Tax Act, 1961

2) Timeline to avail ITC

ITC can be availed prior to filing of annual return or return for the month of September, whichever is earlier.

3) Utilization of ITC

Input tax credit of CGST cannot be utilized towards payment of SGST and similarly input tax credit of SGST cannot be utilized towards payment of CGST.

In other words, CGST can be utilized against CGST and IGST (in that order). Likewise, SGST can be utilized against SGST and IGST (in that order). Further, IGST can be utilized against IGST, CGST and SGST (in that order).

4) ITC Reversal

– Proportionate ITC shall be reversed in case goods / services are used for business and non-business purpose

– Credit shall be allowed with respect to taxable supply including zero rates supply

It appears that government has tried to map ITC provisions of state and central laws together. It remains to be seen if ITC provisions are relaxed further as smooth flow of credit is basic premise of GST.

(Any feedbacks and suggestions are welcomed at

Income Tax Calculator fy 2017-18

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One Comment

  1. Ashok Jogalekar says:

    For availing the ITC – The condition that Tax charged on invoice should have been paid to the credit of government – this condition is ridiculous. How the receiver can ensure that the tax has been paid by the supplier of the inputs or the service provider.

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May 2024