INPUT TAX CREDIT - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

17. INPUT TAX CREDIT 17.1 As per the definition of Input Tax defined in Section 2(62) of CGST Act, 2017, Input Tax in relation to a registered person means the Central Tax (CGST), State Tax (SGST), Integrated Tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services or both. It also includes tax paid on reverse charge basis and integrated tax charged on import of goods. However, it does not include tax paid under composition levy. 17.2 Input Tax Credit (ITC) means the credit of input tax on the supplies of goods or services or both received by a registered person, which includes taxes paid on input goods, input services and capital goods. 17.3 In terms of Section 16(1) of the CGST Act, 2017, a registered person is entitled to take credit of input tax charged on supply of goods and/or services to him, which are used or intended to be used in the course or furtherance of business, on the basis of the Tax Invoice or Debit Note or Bill of Entry or Input Service Distributor invoice or any other prescribed document. 17.4 The following four conditions are to be satisfied by the registered taxable person for obtaining ITC: (a) He is in possession of Tax Invoice or Debit Note, Bill of Entry or Input Service Distributor invoice; (b) He has received the goods and/or services; (c) The supplier has actually paid the tax charged in respect of the supply to the government; and (d) He has furnished the return under Section 39 of the CGST Act, 2017. 17.5 The document on the basis of which input tax credit is to be taken should contain all the specified details in it. However, if the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person. 17.6 In case the goods against an invoice are received in lots or installments, the registered person shall be entitled to the credit only upon receipt of the last lot or installment. 17.7 The recipient of goods and/or services is required to pay the consideration towards such supply along with tax within 180 days from the date of issue of invoice. In case of failure to pay the consideration, the amount of ITC taken by the recipient would be added to the output tax liability of the said recipient and is required to be paid at the time of filing the Return. Such recipient would also be required to pay interest. However, he can take ITC again on payment of consideration and tax. The time-limit specified in Section 16(4) of CGST Act, 2017 shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or these rules, that had been reversed earlier. 17.8 In cases where the goods have been delivered to a person other than taxable person (third person) it would be deemed that the registered taxable person has received the goods though the goods have been delivered to a third party on the direction of such taxable person. ITC will be available to the person on whose order the goods are delivered to third person, i.e. the said taxable person. Same is the case with services. 17.9 As per Section 16(4) of the CGST Act, 2017, a registered person cannot take ITC in respect of any invoice or debit note for supply of goods or services after 30th November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant Annual Return, whichever is earlier. 17.10. (Inserted by Section 118 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024 and Notification No. 17/2024-CT dated 27th September, 2024.) [Section 16(5) of the CGST Act, 2017 entitles a registered person to take input tax credit in respect of the invoices pertaining to the supplies for the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, in any return under Section 39 filed up to the thirtieth day of November, 2021. As per Section16(6), if the taxpayer s registration was cancelled under Section 29, but restored later on under Section 30, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return filed up to thirtieth day of November following the financial year or for the period from the date of cancellation of registration till the date of order of revocation of cancellation of registration if such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is earlier.] 17.11 In cases of new registration or where a person shifts from Composition Scheme to regular tax payment or where an exempt supply become taxable, the time-limit for taking ITC is one year from the date of invoice of inward supplies. 17.12 If the registered taxable person has claimed depreciation on the tax component of the cost of Capital Goods under the provisions of the Income Tax Act, then ITC will not be allowed in such cases. 17.13 Section 17(5) of the CGST Act, 2017 prescribes certain input goods and input services on which ITC is not admissible. These input goods and input services are mainly items of personal consumption, inputs used in construction of an immovable property (except plant and machinery), telecommunication towers, pipelines laid outside the factory premises, etc. ITC is also not admissible on taxes paid as a result of detection of evasion of taxes. 17.14 ITC is also not admissible on goods lost, stolen, destroyed or written off. In addition, ITC with respect of goods given as gifts or free samples are also not allowed. 17.15 A person applying for registration can take input tax credit of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration. If the person was liable to take registration and he has applied for registration within thirty days from the date on which he became liable to registration, then input tax credit of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date on which he became liable to pay tax can be taken. This is subject to further condition that the invoices pertaining to such inward supplies should not be more than a year old. Similarly, a taxpayer under Composition Scheme, who on crossing the threshold limit has become a regular taxable person, can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods (reduced by prescribed percentage points). The manner of calculation of eligible credit is provided in Rule 40 of CGST Rules, 2017. This is subject to further condition that the invoices pertaining to such inward supplies should not be more than a year old. 17.16 As per the provisions of Section 49 of the CGST Act, 2017, the different amounts of input tax credits available in the electronic credit ledger of the registered person shall be utilized as under: (a) Integrated tax shall first be utilised towards payment of Integrated tax and the amount remaining, if any, may be utilised towards the payment of Central tax and State tax or UT tax, in that order; (b) The Central/State/UT tax shall first be utilised towards payment of Central/State/UT tax and the amount remaining, if any, may be utilised towards the payment of Integrated tax; (c) The input tax credit on account of State/UT tax shall be utilised towards payment of Integrated tax only where the balance of the input tax credit on account of Central tax is not available for payment of Integrated tax; (d) The input tax credit on account of Central tax, State tax or Union territory tax shall be utilised towards payment of Integrated tax, Central tax, State tax or Union territory tax, only after the input tax credit available on account of Integrated tax has first been utilised fully towards such payment. (e) The Central tax shall not be utilised towards payment of State tax. Similarly, State tax shall not shall not be utilized towards payment of Central tax. 17.17 If the goods or services or both received by a taxable person are used for effecting both taxable and non-taxable/exempt supplies, the input tax credit of goods or services or both attributable only to taxable supplies can be taken by registered person. The manner of calculation of eligible credit is provided in Rule 42 of the CGST Rules, 2017.