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Eligibility and Conditions for Input Tax Credit

Eligibility and Conditions for taking Input Tax Credit

Input Tax credit

Input tax credit 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 :
• Integrated goods and service tax charged on import of goods
• Tax payable on reverse charge basis under IGST Act/SGST Act/CGST Act/UTGST Act.
• But excludes tax paid under composition levy.




Conditions

Input Tax Credit can be claimed only upon fulfillment of the following conditions:
• He is in possession of tax invoice/ debit note issued by a registered supplier or any other tax paying documents;
• He has received the goods and /or services or both, including deemed receipt of goods and services (transfer of document of title before or during the movement of goods)
• The tax charged on such supply is paid to the Government by the supplier (by way of cash or by utilizing input tax credit) ; and
• He has furnished a valid return.

Input tax credit on Inputs and Capital Goods received in installment

In the case of supply of goods in lots/ instalments, the credit would be available in full on the receipt of the last lot/ installment.




Documents on the basis of which ITC can be claimed / tax paying documents

The ITC shall be available on the basis of any of the following documents:
•  An invoice issued by supplier of goods or services or both;
• An invoice raised by the recipient in case of inward supplies from unregistered persons or reverse charge mechanism supplies, subject to payment of tax;
• A debit note issued by a supplier of goods or services or both;
• A bill of entry or any similar document prescribed under the Customs Act, 1962 or Rules made thereunder for the assessment of integrated tax on imports;
• An Input Service Distributor (ISD) Invoice or ISD Credit Note or any other document issued by an Input Service Distributor for distribution of credit.

Time limit to pay for goods or services to avail the input tax credit –

  • 180 days from the date of issue of invoice by the supplier of Goods/services.
  • The above time limit is not applicable to supplies that are liable to tax under reverse charge mechanism.
  • If the recipient fails to pay the value of supply (with tax) within 180 days, such input tax credit would be payable by the recipient along with applicable interest.
  • Rule 38 of CGST rules provides for availability of the amount of input tax credit availed of proportionate to such amount paid to the supplier in case entire payment is not made in 180 days




Depreciation

  • Depreciation on tax component under the provision of Income Tax Act, 1961 will not be allowed if input tax credit is claimed.
  • Therefore, the registered person has an option to either claim depreciation (under the Income Tax Act, 1961) or claim credit under the GST law, on the said tax component.

Time limit to claim the Input tax credit

Input Tax Credit will not be available after the earlier of following two events:
(a) Due Date of filing of the return under Section 39 of the Act for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains, i.e. 20th October;
(b) Furnishing of the annual return. In terms of Section 44, the due date of filing annual return is 31st December following the end of the financial year.
However, in cases of credit in special circumstances like new registration, voluntary registration, etc. the credit will not be available after the expiry of one year from the date of issue of tax invoice.




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