Conditions to claim the Input Credit Tax under GST

Input Tax is the tax levied by the supplier (registered taxpayer) for the supply of goods or services or both; to the buyer for the procurement of such goods or services or both- intended or entitled for use towards fulfilling his/her business activities.  The tax constituted on the issued tax invoice could be either by the Central (CGST) and State (SGST) or Union Territory (UTGST) or could be Integrated Tax (IGST).  Claiming of credit from the said tax by the buyer (registered taxpayer) is termed as Input Tax Credit (ITC).

Listed below are conditions to claim Input Tax Credit – under GST.            

A registered tax can claim Input Tax Credit (ITC) under the mentioned conditions.

1.       Producing a tax invoice, debit note, or document as proof of payment made

2.       Receipt of goods or services. Inclusive of “Bill to ship” scenarios

3.       The supplier has paid the tax to the Govt. and has a tax invoice for the same.

4.       The supplier has furnished the returns.

5.       For goods received in lots, ITC can be availed when the last lot of goods is received.

6.       The purchaser should have paid the supplier the entire value of the goods and services, affix the tax within 180 days from the date of issue of the invoice. Failure to which would result in the amount of credit claimed added to the output tax liability, with interest [rule 2(1) & (2) of ITC Rules]. On payment of the amount described above, the purchaser can avail of the credit again.

7.       ITC is forbidden if depreciation has been claimed on capital good’s tax component

8.       ITC is to be claimed against an invoice or a debit note either by September of the following financial year OR the date of filing of annual return, whichever is earlier. The date concerned pertains to the issue of the invoice.

9.       Section 42 of the CGST Act, 2017 states that the invoice produced by the purchaser for the claimed credit should match the invoice furnished by the supplier. In other words, matching of purchase register or expense ledger with GSTR-2A is very crucial to claim ITC.

10.   Common credit of ITC used commonly for – effecting exempt and taxable supplies and business and non-business activity.

ITC is a matter of grave significance to a registered taxpayer and holds scores of importance to a business. If followed, ITC can be claimed under GST. So to say that to avail of ITC, one has to be registered under GST. However, a person registered with the composition scheme cannot reap the benefits of ITC.

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