Input tax credit (Sec 2(62) of CGST act)

Input Tax Credit (ITC) is the core concept of GST as GST is destination-based tax. ITC avoids cascading effect of taxes and ensures that tax is collected in the State in which goods or services or both are consumed.

“Input tax” in relation to a registered person, 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:

(a) The integrated goods and services tax charged on import of goods;

(b) The tax payable under the provisions of sub-sections (3) and (4) of section 9;

(c) The tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act;

(d) The tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or

(e) The tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy.

Input tax to Output tax set off / Utilization methodology:

Document requirements & conditions for claiming input tax:

The input tax credit shall be availed by a registered person, including the Input Service Distributor (ISD), on the basis of any of the following documents; Rule 36 of CGST and SGST Rules, 2017:

(a) An invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31 [Invoice of supplier of goods or services or both]

(b) An invoice issued in accordance with the provisions of section 31(3)(f), subject to payment of tax [tax paid on reverse charge basis]

(c) A debit note issued by a supplier in accordance with the provisions of section 34.

(d) A bill of entry or similar document prescribed under Customs Act or Rules for assessment of IGST

(e) An invoice or credit note issued by an ISD in accordance with rule 54(1) of CGST Rules, 2017. ITC only if invoice complete in all respects ITC shall be availed by a registered person only if all the applicable particulars as prescribed in Invoice Rules are contained in the said document, and the relevant information, as contained in the said document, is furnished in form GSTR-2 by such person; Rule 36(2) of CGST and SGST Rules, 2017.

Time duration to entitle input credit:

A taxable person shall not be entitled to take input tax credit in respect of any supply of goods and/or services to him after the expiry of one year from the date of issue of tax invoice relating to such supply section 18(2) of CGST Act.

Requirements for availing input Tax Credit

As per section 16(2) of CGST Act, registered taxable person shall not be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless following conditions are satisfied:

(a) He is in possession of a tax invoice or debit note issued by a supplier registered under GST Act or such other taxpaying document as may be prescribed,

(b) He has received the goods or services or both,

(c) Subject to section 41 of CGST Act, the tax charged in respect of such supply has been actually paid to the credit of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply [section 41 of CGST Act allows taking input tax credit in electronic credit ledger on self assessment basis], and

(d) He has furnished the return under section 39 [every taxable person is required to file electronic return every month as per section 39 of CGST Act].