What is Input Tax Credit? Explain the eligibility and conditions for taking input tax credit.
What is Input Tax Credit? Explain the eligibility and conditions for taking input tax credit.
Ans.
Input Tax Credit
Input Tax Credit means the credit of input tax on supplies of goods or services or both received by a registered person. Tax paid on capital goods also permitted to be availed in one instalment, which are used in the course of business, subject to certain conditions and restrictions.
It is interesting to note that so far as eligibility of ITC, the CGST Act has not made any distinction amongst inputs, capital goods and input services. The claim of input tax credit is available in one go. In GST, taxability of sale/service will also determine the eligibility of input tax credit.
Eligibility and Conditions for Taking Input Tax Credit
[CGST Act, Sec. 16]
(1) Every registered person shall be entitled to take credit of input tax charged on any supply of goods or service or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic ledger of such person.
(2) No registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless:
(a) He is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents;
(b) He has received the goods or services or both including “Bill to Ship to Model under which goods are delivered to third party on the direction of registered person;
(c) The tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit;
(d) Where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment.
(3) The recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon within 180 days from the date of issue of invoice.
(4) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery, the input tax credit on the said tax component shall not be allowed.
(5) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the due date of furnishing of the return for the month of September following the end of financial year to which such invoice/debit note pertains or the date of filing of Annual Return whichever is earlier.
