Input Tax Credit (ITC) means the amount of tax you paid on your purchase of input goods, service, capital goods, and tax paid under reverse charge. Then at the time of paying tax on your output, you can reduce the tax you have already paid on your input and pay the balance amount.
Section 16:
Section 16 of Central goods and service tax act (CGST) 2017 tells about the eligibility criteria and conditions for taking Input Tax Credit (ITC).
Eligibility Criteria
Every registered person shall subject to such conditions and restrictions as prescribed and specified in section 49, be entitled to take Input Tax Credit (ITC) on any supply of goods or services 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 credit ledger of such person.
Condition to claim Input Tax Credit (ITC)
No registered person shall be entitled to the claim Input Tax Credit (ITC) in respect of any supply of goods or services or both to him unless,-
- He has received the documents issued by the supplier such as tax invoice or debit note or such other tax paying documents as may be prescribed.
“And the details of the invoice or debit note has been furnished by the supplier in Return of his outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37” Inserted (w.e.f. 1st Jan. 2022 vide Notification No. 39/2021-C.T., dt. 21st Dec. 2021)
- Recipients must have received goods or services or both.
Explanation to receive goods or service or both: it shall be deemed that the registered person has received the goods or, as the case may be, services-
(i) 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 goods movement , either by way of transfer of documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person. (w.e.f. 1st February, 2019)
(iii) The details of Input Tax Credit (ITC) in respect of the said supply communicated to such registered persons under section 38 has not been restricted. Inserted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 – CT dated 28.09.2022.)
- With the exception of the provision of section 41, the tax amount charged in respect of supplies has already been paid to the government either in cash or through utilization of Input Tax Credit (ITC) admissible in respect of the said supply; and
- The supplier has filed the Return u/s 39.
Proviso’s
“Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment”
“Provided that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply 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 (ITC) availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be Prescribed”
“Provided also that 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.”
Depreciation on Tax Component- No ITC
Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961, the Input Tax Credit (ITC)on the said tax component shall not be allowed.
Time Limit
A registered person shall not be entitled to take Input Tax Credit (ITC) in respect of any invoice or debit note for supply of goods or services or both after the 30th November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
FAQ's
Section 16 of Central goods and service tax act (CGST) 2017 tells about the eligibility criteria and conditions for taking input tax credit (ITC).
Input tax credit means the amount of tax you paid on your purchase of input goods, service, capital goods, and tax paid under reverse charge. Then at the timing of paying tax on your output, you can reduce the tax you have already paid on your input and pay the balance amount.
- He has received the documents issued by the supplier such as tax invoice or debit note or such other tax paying documents as may be prescribed.
- Recipients must have received goods or services or both.
- With the exception of the provision of section 41, the tax amount charged in respect of supplies has already been paid to the government either in cash or through utilization of Input Tax Credit (ITC) admissible in respect of the said supply
- The supplier has filed the Return u/s 39.
Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961, the Input Tax Credit (ITC) on the said tax component shall not be allowed.
Yes, all conditions given u/s 16 of CGST act 2017 needs to be fulfilled to claim ITC.
