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3/28/24, 12:21 PM Input Tax Credit (ITC) under GST - TaxAdda
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Input Tax Credit (ITC) under GST
 Author - Rohit Pithisaria  Last Updated - October 7, 2020
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I am a Indian Tax Expert based in
Jaipur (Rajasthan). Started TaxAdda in
2011 as a tax blog and now providing all
types services related to GST and
Income Tax to the client all over India.
What Is Input Tax Credit (ITC) You can connect with us 82396-85690.
Input Tax Credit refers to the tax already paid by a person at time of purhase of goods ro
services and which is available as deduction from tax payable .
Table of Contents 
For eg- A trader purchases good worth rs 100 and pay tax of 10% on it. And now this trader sold
such goods at Rs. 150 and collect tax of Rs. 15 from buyer. Now the trader has to pay Rs. 15 to
1. What is Input Tax Credit (ITC)
government but he had already paid Rs. 10, so this Rs. 10 is ITC of the trader and will be allowed
as deduction from tax payable and he has to pay net Rs. 5 as tax. Although availment of ITC is SGST, UTGST, CGST and IGST
2.
– How ITC allowed
subject to certain conditions as covered in this article.
Persons who are allowed to
3.
take Input Tax Credit
SGST, UTGST, CGST And IGST – How ITC Allowed 4.

Persons NOT allowed to take
Input Tax Credit
Amount of Input Tax Credit on account of IGST shall first be utilized for the payment of IGST then 5. Time limit for taking ITC
for payment of CGST and then for payment of SGST or UTGST. 6. Conditions for taking ITC
Input Tax Credit shall not be

Amount of Input Tax Credit on account of CGST shall first be utilized for the payment of CGST 7.
available for
then for payment of IGST. Such amount can not be used for payment of SGST or UTGST.
8. Reversal of Input tax credit
Amount of Input Tax Credit on account of SGST or UTGST shall first be utilized for the payment of ITC for GST paid on reverse
9.
charge
SGST or UTGST then for payment of IGST. Such amount can not be used for payment of CGST.
ITC on Capital Goods and
10.
SGST/UTGST payable or Input tax credit of SGST/UTGST will be calculated state wise i.e ITC of Reversal on its sale
SGST in one state can not be utilized for payment of SGST of another state. ITC in respect of inputs sent
11.
for job work
Input tax credit can not be used for payment of interest, penalty, fees or any amount payable Manner of distribution of
under the act other than the GST in manner mentioned above. 12. credit by Input Service
Distributor
Example 13. ITC in special cases
IGST CGST SGST
Tax Payable 10,000 8,000 5,000 Subscribe

We will send updates relating to GST
Input Tax Credit 12,000 7,500 1,200 only
(No spam, you can unsubscribe anytime)
IGST CGST SGST Name
Tax Payable 10,000 8,000 5,000

Email
Less: Input Tax Credit of IGST from IGST 10,000 7,500 1,200
 Get Updates
CGST from CGST and SGST from SGST
(up to maximum of tax payable)
Gross Tax Payable NIL 500 3,800
Less: Input Tax Credit of Remaining IGST of Rs. 2,000 – 500 1.500
from CGST first and then SGST
Net Tax Payable – – 2,300
Persons Who Are Allowed To Take Input Tax Credit

All registered person are allowed to take input tax credit other than person who are
paying tax under composition scheme (https://taxadda.com/gst-composition-
Privacy - Terms
https://taxadda.com/gst-input-tax-credit/ 1/6
scheme/).
A person who has applied for registration within 30 days from the date on which he is
liable for registration is allowed to take input tax credit in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock on the day
 immediately preceding the date from which he becomes liable to pay tax.
A person who hast taken voluntarily registration is allowed to take input tax credit in

respect 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.
A person who has ceased to pay tax under composition scheme is entitled to take credit

of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished
goods held in stock and on capital goods on the day immediately preceding the date
from which he ceases to pay tax under composition scheme.
Under the points 2, 3 and 4 above, the input tax credit is allowed only for the stock which is
purchased in last one year from the aforementioned date. Such person needs to file Form GST
ITC-01 within 30 days of his becoming eligible for availing input tax credit. Details furnished in
the form is to be certified by a practicing chartered accountant or cost accountant if the input
tax credit claimed is more than Rs. 2 lakhs.
Persons NOT Allowed To Take Input Tax Credit

Persons who are not registered in GST
(https://taxadda.com/gst-
Persons who are registered under composition scheme return-service)
Time Limit For Taking ITC

ITC is not allowed after any of the following happens
due date of return for month of September of next financial year
annual return filed for relevant year (Filing date, not due date)
Conditions For Taking ITC

Input Tax Credit is allowed to a person only if following conditions are satisfied
he is in possession of a tax invoice or debit note (https://taxadda.com/meaning-of-

debit-note-and-credit-note/) issued by a supplier registered under GST
he has received the goods and/or services
the tax charged in respect of such supply has been actually paid to the account of the
appropriate Government
he has furnished the return under section 39
ITC is not allowed after any of the following
due date of return for month of September of next financial year
annual return filed for relevant year (Filing date, not due date)
The person who obtains voluntary registration is entitled to take the input tax credit of
input tax on inputs in stock, inputs in semi finished goods and finished goods in stock,
held on the day immediately preceding the date of registration.
Input tax credit is allowed only on purchases made for selling taxable or zero rated goods
or services. ITC is not allowed for purchases made for exempted supplies.
The input tax credit of goods and / or service attributable to only taxable supplies can
be taken by registered taxable person. The amount of eligible credit would be
calculated in a manner to be prescribed in terms of section 16(7) of the MGL read with
GST ITC Rules (yet to be issued). It is important to note that credit on capital goods also
would now be permitted on proportionate basis.
Where the goods against an invoice are received in lots or instalments, the registered
taxable person shall be entitled to take credit upon receipt of the last lot or instalment.
Input tax credit of GST component of capital goods is not allowed if the person has
claimed depreciation in income tax act for GST component. In other words ,a person can
either take input tax credit of GST on capital goods or claim depreciation on tax
component.
Input Tax Credit Shall Not Be Available For


Input tax credit shall not be available in respect of the following:

(a) motor vehicles and other conveyances except when they are used

(i) for making the following taxable supplies, namely


(A) further supply of such vehicles or conveyances ; or

(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods.
(b) supply of goods and services, namely,
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery except where such inward supply of goods or services of a particular category
is used by a registered taxable person for making an outward taxable supply of the same
category of goods or services;
(ii) membership of a club, health and fitness centre,
(iii) rent-a-cab, life insurance, health insurance except where the Government notifies the
services which are obligatory for an employer to provide to its employees under any law for the
time being in force or such inward supply of goods or services or both of a particular category
is used by a registered person for making an outward taxable supply of the same category of
goods or services or both or as part of a taxable composite or mixed supply
(iv) travel benefits extended to employees on vacation such as leave or home travel
concession.
(c) works contract services when supplied for construction of immovable property, other than
plant and machinery, except where it is an input service for further supply of works contract
service;
(d) goods or services received by a taxable person for construction of an immovable property
on his own account, other than plant and machinery, even when used in course or furtherance
of business;
Explanation 1.- For the purpose of this clause, the word “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent of capitalization, to the said
immovable property.
Explanation 2.- ‘Plant and Machinery’ means apparatus, equipment, machinery, pipelines,
telecommunication tower fixed to earth by foundation or structural support that are used for
making outward supply and includes such foundation and structural supports but excludes
land, building or any other civil structures.
(e) goods and/or services on which tax has been paid under composition scheme
(https://taxadda.com/gst-composition-scheme/);
(f) goods and/or services used for personal consumption;
(g) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(h) any tax paid in terms of sections 74, 129 or 130.
Reversal Of Input Tax Credit

If a person who is paying tax in normal scheme and wants to shift to Composition scheme or
where goods or services supplied by him become wholly exempt, he has to pay credit of input
tax 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 such percentage points as may be prescribed,
on the day immediately preceding the date of exercising of such option or, as the case may be,
the date of such exemption. After payment of such amount, the balance of input tax credit, if
any, lying in his electronic credit ledger shall lapse.
Where a recipient fails to pay to the supplier of goods or services, the amount towards the

value of supply of goods/services along with tax payable thereon within a period of 180 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.
 This rule doesn’t apply where the recipient is liable to pay tax on reverse charge basis. Such
person has to furnish such details in From GSTR-2 for the month in which such period of 180

days lapse.
ITC For GST Paid On Reverse Charge

GST paid on reverse charge is also allowed as Input Tax Credit subject to the condition that it is
allowed according to all other provisions. But note that reverse charge has to paid through
cash only.
ITC On Capital Goods And Reversal On Its Sale

Credit of tax paid on capital goods is also permitted to be availed in one instalment.
Input tax credit of tax component of capital goods is not allowed if the person has claimed
depreciation in income tax act (https://taxadda.com/depreciation-section-32-income-tax/)
for GST component. In other words ,a person can either take input tax credit of GST on capital
goods or claim depreciation on tax component.
If the taxable person sells such capital goods on which ITC had been taken then such person is
liable to pay GST of higher amount from the following
ITC taken on such capital goods less 5 percentage points per quarter of a year or part
thereof from the date of invoice
Sale price of capital goods multiplied by GST rate

Where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable
person may pay tax on the transaction value of such goods determined.
ITC In Respect Of Inputs Sent For Job Work

Principal is allowed to take ITC of the goods or capital goods sent to a job worker for job work.
Input is allowed even if the inputs are directly sent to a job worker for job-work without their
being first brought to his place of business.
If such goods are not received back by principal or supplied from place of job worker within one
year from the date of sending goods to job worker, then it shall be deemed that such inputs
had been supplied by the principal to the job-worker on the day when the said inputs were
sent out. This limit of one year is increased to three years in case of capital goods.
Where the inputs are sent directly to a job worker, the period of one year or three year shall be
counted from the date of receipt of inputs by the job worker.
This rule of deemed supply shall not apply to moulds and dies, jigs and fixtures, or tools sent
out to a job-worker for job-work.
Manner Of Distribution Of Credit By Input Service

Distributor
(1) The Input Service Distributor shall distribute the credit of central tax as central tax or
integrated tax and integrated tax as integrated tax or central tax, by way of issue of a
document containing the amount of input tax credit being distributed in such manner as may
be prescribed.
(2) The Input Service Distributor may distribute the credit subject to the following conditions,
namely:––
(a) the credit can be distributed to the recipients of credit against a document containing such
details as may be prescribed;
(b) the amount of the credit distributed shall not exceed the amount of credit available for
distribution;
(c) the credit of tax paid on input services attributable to a recipient of credit shall be

distributed only to that recipient;
 (d) the credit of tax paid on input services attributable to more than one recipient of credit
shall be distributed amongst such recipients to whom the input service is attributable and such

distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union
 territory of such recipient, during the relevant period, to the aggregate of the turnover of all
such recipients to whom such input service is attributable and which are operational in the
current year, during the said relevant period;
(e) the credit of tax paid on input services attributable to all recipients of credit shall be
distributed amongst such recipients and such distribution shall be pro rata on the basis of the
turnover in a State or turnover in a Union territory of such recipient, during the relevant period,
to the aggregate of the turnover of all recipients and which are operational in the current year,
during the said relevant period.
Explanation.––For the purposes of this section,––
(a) the “relevant period” shall be––
(i) if the recipients of credit have turnover in their States or Union territories in the financial year
preceding the year during which credit is to be distributed, the said financial year; or
(ii) if some or all recipients of the credit do not have any turnover in their States or Union
territories in the financial year preceding the year during which the credit is to be distributed,
the last quarter for which details of such turnover of all the recipients are available, previous to
the month during which credit is to be distributed;
(b) the expression “recipient of credit” means the supplier of goods or services or both having
the same Permanent Account Number as that of the Input Service Distributor;
(c) the term ‘turnover’, in relation to any registered person engaged in the supply of taxable
goods as well as goods not taxable under this Act, means the value of turnover, reduced by the
amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the
Constitution and entry 51 and 54 of List II of the said Schedule.
ITC In Special Cases

Banks and Financial Institutions
Banks, financial institutions and non banking financial companies (NBFC) engaged in business
of deposits, extending loans or advances have an option to avail an amount equal to fifty per
cent of the eligible input tax credit on inputs, capital goods and input services in that month or
to take Input tax credit only on purchases made for selling taxable or zero rated goods or
services and leave out the tax paid on purchases made for exempted supplies.
Option once exercised can not be changes during the financial year. Also restriction of 50%
doesn’t apply where the tax is paid on supply from one registered person to another registered
person having the same Permanent Account Number.
Pipelines and Telecommunication Tower
PROVIDED that credit of input tax in respect of pipelines and telecommunication tower fixed to
earth by foundation or structural support including foundation and structural support thereto
shall not exceed—
(a) one-third of the total input tax in the financial year in which the said goods are received,
(b) two-third of the total input tax, including the credit availed in the first financial year, in the
financial year immediately succeeding the year referred to in clause (a) in which the said
goods are received, and
(c) the balance of the amount of credit in any subsequent financial year.
Still has a question? Write a comment below and I will try my best to answer quickly.
Confused about complicated laws? Take our GST consultation services to get your
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 Read More Articles

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Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023
Refund of Unutilised Input Tax Credit GST on Import

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(https://taxadda.com/refund-of- import/)
unutilised-input-tax-credit-for-
zero-rated-supplies/) Article 269A of constitution mandates that import of
goods or services in India is considered as Inter-
What is Input Tax Credit under GST? Input Tax Credit state trade. Therefore, import of goods or services is
(ITC) means claiming the credit of the GST paid on considered as interstate supply and is liable for
the purchase of goods and services which are used payment of IGST. IGST on the import
for the furtherance of the business. ITC is a
mechanism to
READ ARTICLE » (HTTPS://TAXADDA.COM/REFUND-OF-
UNUTILISED-INPUT-TAX-CREDIT-FOR-ZERO-RATED- READ ARTICLE » (HTTPS://TAXADDA.COM/GST-ON-
SUPPLIES/) IMPORT/)
Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023
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3/28/24, 12:21 PM Input Tax Credit (ITC) under GST - TaxAdda

(https://taxadda.com/) Services  Calculator  Blog Login  Search on TaxAdda 

SGST, UTGST, CGST And IGST – How ITC Allowed 4.

Input Tax Credit shall not be

IGST CGST SGST

Tax Payable 10,000 8,000 5,000 Subscribe

(No spam, you can unsubscribe anytime)

IGST CGST SGST Name

Tax Payable 10,000 8,000 5,000

Gross Tax Payable NIL 500 3,800

Net Tax Payable – – 2,300

Persons Who Are Allowed To Take Input Tax Credit

Persons NOT Allowed To Take Input Tax Credit

Time Limit For Taking ITC

due date of return for month of September of next financial year

Conditions For Taking ITC

he is in possession of a tax invoice or debit note (https://taxadda.com/meaning-of-

he has received the goods and/or services

he has furnished the return under section 39

ITC is not allowed after any of the following

due date of return for month of September of next financial year

Input Tax Credit Shall Not Be Available For

(i) for making the following taxable supplies, namely

(A) further supply of such vehicles or conveyances ; or

(ii) for transportation of goods.

(b) supply of goods and services, namely,

(f) goods and/or services used for personal consumption;

(h) any tax paid in terms of sections 74, 129 or 130.

Reversal Of Input Tax Credit

ITC For GST Paid On Reverse Charge

ITC On Capital Goods And Reversal On Its Sale

Sale price of capital goods multiplied by GST rate

ITC In Respect Of Inputs Sent For Job Work

Manner Of Distribution Of Credit By Input Service

Explanation.––For the purposes of this section,––

(a) the “relevant period” shall be––

ITC In Special Cases

Pipelines and Telecommunication Tower

 Read More Articles

READ ARTICLE » (HTTPS://TAXADDA.COM/PRESUMPTIVE- READ ARTICLE » (HTTPS://TAXADDA.COM/GST-

Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023

Refund of Unutilised Input Tax Credit GST on Import

READ ARTICLE » (HTTPS://TAXADDA.COM/REFUND-OF-

UNUTILISED-INPUT-TAX-CREDIT-FOR-ZERO-RATED- READ ARTICLE » (HTTPS://TAXADDA.COM/GST-ON-

Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023

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