Some of relevant provisions:
Sections 16, 17, 18, 39, 41 of CGST Act, 2017 and Rules of CGST Rules and corresponding provisions in allied GST Acts and Rules.
Scope of this article:
Input Tax credit is a vast subject because of various circumstances in which it can be available or available in restricted manner or not available at all or can lapse and conditions in which it can be allowed or denied,…..etc. Therefore one has to be very careful to consider all facts and circumstances and legal provisions applicable at relevant times.
Scope of this article is to provide a brief of broader conceptual aspects. The relevant provisions need to be considered and studied in any given case. Therefore, scope of this article is limited and not exhaustive.
As per Section 16 of CGST Act, 2017, a registered person shall be eligible to take input credit in respect of supply received by him if following conditions are satisfied –
- He is in possession of tax invoice or debit note issued by a registered person or such other taxpaying documents as may be prescribed.
- He has received the goods or services
- Tax charged on such supply has actually been paid to the government either in cash or through utilization of input tax credit admissible in respect of the said supply
- He has furnished return under Section 39
- A person shall be entitled to take credit within 30 days from the date on which he becomes liable for registration in respect of inputs held in stock, semi finished or finished goods. Same provisions will apply if a person takes voluntary registration or he ceases to pay tax under composition scheme or where exempted inputs becomes taxable in puts.In this situation input tax credit cannot be claimed after the expiry of one year from the date of issue of invoice.
Exceptions to eligibility of ITC
- If depreciation is charged on GST component under Income tax act
- After due date of furnishing of return for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
- If ITC is specifically blocked under Section 17
From 09.10.2019 Government has amended Rule 36 (3) vide Notification No. 49/2019 (Central Tax) dated 09.10.2019 restricting the credit upto 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37 in respect of invoices or debit notes which have not been uploaded by the corresponding suppliers. The government has further amended Rule 36 (3) vide Notification No. 75/2019 (Central Tax) dated 26.12.2019 replacing the word 20 per cent as 10 per cent
Before this notification as per Section 41 a registered person could take ITC on all supply on self assessed basis and same will be credited to his electronic credit ledger.
A person will not be eligible for ITC on the following supplies as these are specifically blocked under Section 17(5)
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Block Credit
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Exceptions
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a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver)
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A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
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(aa) vessels and aircraft
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(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods;
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(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) with effect from 01.02.2019
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(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
(ii) where received by a taxable person engaged-
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
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b) the following supply of goods or services or both-
i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance
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the input tax credit in respect of such goods or services or both shall be available where an inward supply of such 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 or as an element of a taxable composite or mixed supply;
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ii) membership of a club, health and fitness centre
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iii) travel benefits extended to employees on vacation such as leave or home travel concession
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the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same under any law for the time being in force.
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(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except
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where it is an input service for further supply of works contract service or re-construction, renovation, additions or alterations or repairs, to the said immovable property to the extent not capitalized in books
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(d) 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.
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re-construction, renovation, additions or alterations or repairs, to the said immovable property to the extent not capitalized in books
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(e) goods or services or both on which tax has been paid under section 10
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f) goods or services or both received by a non-resident taxable person except on goods imported by him;
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g) goods or services or both used for personal consumption
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(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
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any tax paid in accordance with the provisions of sections 74, 129 and 130
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(6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.
Explanation.–– For the purposes of this Chapter and Chapter VI, the expression “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.
Readers can refer to some other articles on similar subject for example:
Conditions to claim Input Tax Credit in GST An Article By: - Ganeshan Kalyani dt. July 11, 2019 https://www.taxmanagementindia.com/print/print_Article.asp?ID=8608
Availability of Input Tax Credit (ITC) in special circumstances An Article By: - Ganeshan Kalyani dt. January 2, 2020
Input Tax Credit under GST An Article By: - Surabhi Bohra December 2, 2017
And other articles about ITC in different circumstances.
Readers can search articles with ELIGIBILITY FOR INPUT TAX CREDIT or similar phrases with special requirement, as search criteria in advanced search
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