UNIT = 2

Input Tax Credit

SONU PANDYA
Capital goods (Sec. 2(19) of the CGST Act, 2017) means goods, the value of which is capitalized in the books of
account of the person claiming the ITC and which are used or intended to be used in the course or furtherance of business.

Input (Sec. 2(59) of the CGST Act, 2017) means any goods other than capital goods used or intended to be used by a
supplier in the course or furtherance of business.

Input service (Sec 2(60) of the CGST Act, 2017) means any service used or intended to be used by a supplier in the
course or furtherance of business.

Input Tax (Sec. 2(62) of the CGST Act, 2017): In relation to a registered person, it 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: -

the integrated goods and services tax charged on import of goods;

the tax payable under the provisions of Sec 9(3) and Sec. 9(4) of the CGST Act, 2017;

the tax payable under Sec 5(3) and Sec. 5(4) of the IGST Act, 2017;

the tax payable under SGST Act (i.e. person liable to pay GST under RCM);

The tax payable under UTGST Act (i.e. person liable to pay GST under RCM),

But does not include the tax paid under the composition levy.
Input Tax Credit (Sec 2(63) of the CGST Act, 2017): It means the credit of input tax.

Exempted supply (Sec. 2(47) of the CGST Act, 2017): It means supply of any goods or services or both which
attracts

nil rate of tax or

which may be wholly exempt from tax under section 11, or

under section 6 of the Integrated Goods and Services Tax Act, and

includes non-taxable supply;

Invoice or tax invoice (Sec 2(66) of the CGST Act, 2017): It means the tax invoice referred to in section 31;

Output tax (Sec 2(82) of the CGST Act, 2017): “Output tax” in relation to a taxable person, means the tax
chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but
excludes tax payable by him on reverse charge basis;

Outward supply (Sec 2(83) of the CGST Act, 2017): “Outward supply” in relation to a taxable person, means
supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal
or any other mode, made or agreed to be made by such person in the course or furtherance of business;
 • Section 16: Eligibility and condition for taking Input Tax Credit

Eligibility for taking ITC

Registration under GST Goods/services to be used for business
purposes

Conditions for taking ITC

Possession of tax paying document Receipt of the goods and / or services

Tax leviable on supply actually paid to Filing of return
Government
Goods received in lots: ITC available only on receipt of last lot.
“Bill to Ship to Model” (Services added by CGST Amendment Act, 2018
w.e.f. 1.2.2019)
It shall be deemed that the registered person has received the goods or
services
a) where the goods are delivered by the supplier to a recipient or any other
person on the direction of such registered person, whether acting as an agent
or otherwise, before or during movement of goods, either by way of transfer
of documents of title to goods or otherwise
b) where the services are provided by the supplier to any person on the
direction of and on account of such registered person.
If the said document does not contain all the specified particulars but contains the
following details, then input tax credit may be availed by such registered person
a) amount of tax charged,
b) description of goods or services,
c) total value of supply of goods or services or both,
d) GSTIN of the supplier and recipient and
e) place of supply in case of inter-State supply
Payment for the invoice to be made within 180 days
The registered person must pay the supplier, the value of the goods and/or services
along with the tax within 180 days from the date of issue of invoice.
Exceptions
This condition of payment of value of supply plus tax within
180 days does not apply in the following situations:
a) Supplies on which tax is payable under reverse charge
b) Deemed supplies without consideration
c) any amount that the supplier is liable to pay in relation to
such supply but which has been incurred by the recipient of the
supply and not included in the price actually paid or payable
for the goods or services or both .
Rule 37 of CGST Rules
● A registered person, who has availed of input tax credit but fails to pay to the supplier
there of, the value of such supply along with the tax payable thereon, within 180 days
from date of issue of invoice, shall furnish the details of such supply, the amount of value
not paid and the amount of input tax credit availed of proportionate to such amount not
paid to the supplier in FORM GSTR-2 for the month immediately following the period of
180 days from the date of the issue of the invoice.
● The amount of input tax credit shall be added to the output tax liability of the registered
person for the month in which the details are furnished.
● The registered person shall be liable to pay interest at 18% p.a. for the period starting from
the date of availing credit on such supplies till the date when the amount added to the
output tax liability.
• If depreciation claimed on tax component, ITC not allowed
 • Time limit for availing ITC

• So, the upper time limit for taking ITC is 20th October of the next financial year or the date of filing of annual
return, whichever is earlier

• Exception: The time limit u/s 16(4) does not apply to claim for re-availing of credit that had been reversed earlier.

• Mechanism of utilization of Input tax credit

IGST CGST UTGST SGST

IGST IGST IGST IGST
CGST CGST UTGST SGST
S/UTGST
Amendment in Rule 36 – Input Tax Credit (w.e.f. 9.10.2019)
• Input tax credit to be availed by a registered person in respect of invoices or debit
notes, the details of which have not been uploaded by the suppliers under section
37(1) i.e. in Form GSTR-1 shall not exceed 20% of the eligible credit available in
respect of invoices or debit notes the details of which have been uploaded by the
suppliers under section 37(1). (This is reduced to 10% later).
 Section 17: Apportionment of credit and blocked credits

Part 1: Blocked Credits

• Input tax credit shall not be available in respect of the following namely:

1. Motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including
the driver), except when they are used for making the following taxable supplies:
A. further supply of such motor vehicles or
B. transportation of passengers or
C. imparting training on driving such motor vehicles
2. Vessels and aircraft except when they are used
i. for making the following taxable supplies:
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
3. Services of general insurance, servicing, repair and maintenance in
so far as they relate to motor vehicles, vessels or aircraft referred
above
The input tax credit in respect of such services shall be available
i. where the motor vehicles, vessels or aircraft referred above are
used for the purposes specified therein
ii. where received by a taxable person engaged
● in the manufacture of such motor vehicles, vessels or aircraft or
● in the supply of general insurance services in respect of such motor
vehicles, vessels or aircraft insured by him
4. Following supply of goods or services or both
● food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred
above except when used for the purposes specified therein, life insurance and health
insurance
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
● membership of a club, health and fitness centre
● travel benefits extended to employees on vacation such as leave or home travel concession
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 to its employees under any law for the time
being in force.
5. Works contract services for construction of an immovable property Except When
● It is input service for further supply of works contract service
● Immovable property is plant and machinery

6. Goods or services or both received by a taxable person for construction of an immovable property (other
than plant and machinery) on his own account even when such supplies are used in the course or
furtherance of business

7. Goods or services or both on which tax has been paid under the composition scheme

8. Tax paid under sections 74, 129 and 130. (These sections prescribe the provisions relating to tax paid as a
result of evasion of taxes, or upon detention of goods or conveyances in transit, or towards redemption of
confiscated goods/conveyances.)

9. Goods or services or both received by a non-resident taxable person except goods imported by him

10. Goods that are lost, stolen, destroyed, written off or disposed of by way of gift or free samples

11. Goods and / or services used for personal consumption

Note

● Construction includes reconstruction, renovation, additions or alterations or repairs, to the extent of

capitalization, to the said immovable property.

● Plant and machinery mean apparatus, equipment, and machinery fixed to earth by foundation or structural
supports but excludes

a) land, building or other civil structures

b) telecommunication towers

c) pipelines laid outside the factory premises

 Apportionment of Credit

•
when the goods and / or services are used
Only proportionate
partly for business purpose and partly for
ITC is allowed
other purposes

when the goods and / or services are used ITC attributable to

by the registered person partly for making taxable supplies and
taxable supplies including zero-rated zero-rated supplies can
supplies and partly for making exempt be taken
supplies