Eligibility and conditions for taking input tax credit with Protocol and Example to avail and utilise the Input tax credit

The protocol to avail and utilise the Input tax credit of these taxes is as follows:

Note:- Credit of CGST cannot be used for payment of SGST/UTGST and credit of SGST/UTGST cannot be utilised for payment of CGST.

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Eligibility and conditions for taking input tax credit (ITC) (Section 16 of GST Act 2017).

Section 16 of GST Act 2017:- Basic Condition :-Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49 this act, be entitled to take credit of input tax charged on any supply of goods/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 on common portal [Section 16(1)] of this act.

Conditions of Taking Input Tax Credit to registered person[Section 16(1)] of this act :-

Notwithstanding anything contained in this section, 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, [Section 16(2)] of this act ––

(a.) he is in possession of a tax invoice or debit note issued by a supplier registered under GST Act, or such other tax paying documents as may be prescribed;

(b.) he has received the goods or services or both(Goods/Service).

• Explanation.—
• For the purposes of this clause(B), it shall be deemed that the GST registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such GST 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;

(c.) subject to the provisions of section 41 of GST act, the GST charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of Input Tax Credit (ITC) admissible in respect of the said supply; and

(d.) he has furnished the return under section 39 of this act:

Also Read-

What is the impact of Section 16(2) (aa) of CGST Act -20170-With amended Rule 59 of CGST Rule

Delivery by goods in lot or instalment:-

Delivery by goods in lot or instalment Provided that 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:

Reverse Input Tax Credit, the amount towards the value of supply along with tax note paid  within a period of 180  days:-Provided further that where a recipient fails to pay to the supplier of goods/services or both (Goods or Service), 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) one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the ITC availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: (Also read “Rule 37. Reversal of ITC in the case of non-payment of consideration)

-Provided also that the recipient shall be entitled to avail of the Input tax credit on payment made by him of the amount towards the value of supply of goods or services or both(Goods/Services) along with tax payable thereon.

No Input Tax Credit if depreciation is Claimed on tax component :-

Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery as per the provisions of the Income tax Act, 1961, the input tax credit on the said tax component shall not be allowed [Section 16(3)] of this act.

For Example:- Cost of Asset = Rs. 2000/- Tax = Rs. 100/- Total = Rs. 2100/- If depreciation is charged on Rs. 2000/-, then credit will be available under the GST law and if depreciation is charged on Rs. 2100/- then credit will not be available.

Time limit of claim Input Tax Credit :-

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both. after the due date of furnishing of the return under section 39 of this act for the month of September following the end of financial year (F.Y) to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier [Section 16(4)] of this act. [Also read Rule 36. Documentary requirements and conditions for claiming ITC ]

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