Input Tax Credit under GST

What is Input Tax?

“Input Tax” means the GST Taxes (CGST, SGST, IGST) charged on any supply of goods or services or both made to a registered person in the course or furtherance of his business and includes such tax payable on a reverse charge basis— but excludes tax paid under composition levy.

Who is Eligible to Take Input Tax Credit?

Every registered person shall be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business based on any of the following tax-paying documents:

Conditions for Availment of Input Tax Credit:

The said goods or services or both are used or intended to be used in the course or in the furtherance of his business;
He is in possession of a tax invoice/ debit note / tax-paying document issued by a supplier registered under this Act.
He has received the said goods or services or both subject to job-work facilities and restrictions relating to input tax credit
The supplier has uploaded the relevant invoice on the GSTN (online GST portal);
The supplier has paid the said amount of tax (as charged in the invoice) to the appropriate Government in cash or by way of the utilization of input tax credit, as admissible;
The – claimant of input tax credit – has furnished GST return in FORM-GSTR 2;
In case all the above conditions are met except for the fact that the supplier has not uploaded the invoice in his GSTR-1, provisional ITC can be taken up to 5% of the credits that are eligible and uploaded by the supplier in his GSTR-1. The provisional ITC cannot exceed the amount of ITC not uploaded by the supplier in his Form GSTR-1.

Goods received in instalments: If goods are received in instalments against a single invoice, credit can be taken upon receipt of the last instalment of goods.

Failure to pay to supplier of goods or service or both, the value of supply and tax thereon:

If the recipient of goods/services has not paid the supplier within 180 days from the date of invoice, the amount equal to input tax credit availed along with the interest will be added to the output liability of the recipient. The said input tax credit can be re-availed on payment of the value of supply and tax payable thereon.

he above condition does not apply for supplies that are payable on a reverse charge basis.

Capital goods on which depreciation is claimed: If depreciation has been claimed on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, the input tax credit shall not be allowed.

Time limit to avail of the input tax credit: Input Tax Credit has to be availed before Due Date for filing the return for September of the subsequent financial year or furnishing of Annual return, whichever is earlier.

Apportionment of Credit and Blocked Credit:

ITC Based on Use of Inputs

Blocked Credit For Motor Vehicles:

Input Tax Credit for motor vehicles used for transportation of passengers having a seating capacity of up to 13 passengers is generally not available. However such ITC is available only if Motor vehicles are used for: A. Transportation of Goods. B. Further supply of such vehicles, transportation of passengers, imparting training on driving, flying, navigating such vehicles or conveyances.
Input Tax Credit on Supply of goods and/or services such as – food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery: Available only if such supply of goods or services of each category is used for making an outward taxable supply of the particular category of goods or services.
Input Tax Credit on membership of a club, health and fitness centre, travel benefits to employees on vacation i.e. leave or home travel concession: Never available
Input Tax Credit on Works contract services when supplied for construction of an immovable property, other than plant and machinery available only if it is for further supply of works contract service.
Input Tax Credit is not available on Goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even though it is used in the course or furtherance of business.
Input Tax Credit on rent-a-cab, life insurance, health insurance allowed only if it is notified by the Government as obligatory for an employer to provide to its employees 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.

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