Conditions for claiming ITC under GST

Last updated: 19 February 2022

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Quick Summary

To claim Input Tax Credit (ITC) under GST, several conditions must be met as outlined in Section 16 of the CGST Act. These include that the goods or services must be used for business purposes and that the registered person possesses the correct tax-paying documents like invoices or debit notes. Furthermore, the goods or services must have been received, and the supplier must have actually paid the charged tax to the government.

Every registered person is allowed to take tax credit for input tax.

Meaning of input tax credit

"Input tax" in relation to a registered person, means the central tax, state tax, or union territory tax charged on any supply of goods or services or both made to him, it does not include the tax paid under the composition levy. "Input tax credit" means the credit given on input tax.

What are the conditions for claiming input tax credit?

Sec 16 of CGST act provides some conditions, input tax credit can only be claimed after fulfilling these conditions:

The said goods or services or both are used or intended to be used in the course or in the furtherance of business.

Claiming ITC under GST: Conditions Explained

Possession of tax-paying document

Registered person is in possession of tax-paying document such as tax invoice or debit note or a bill of entry or such other tax paying documents.

Receipt of goods or services

Registered person has received the goods/services. Goods that have been received by an agent of such person or by any other person on behalf or direction of the registered person, it will also be considered to be receipt of goods.

Tax charged actually paid to government

The tax charged in respect of such supply has been actually paid to the government by the supplier either in cash or through utilization of input tax credit.

Payment is not made within a period of 180 days from the date of invoice

If a registered person has not made the payment to the supplier, even in that case tax credit is not allowed.

Goods received in lots or installment

In this case, tax credit shall be allowed only when last installment has been received.

No ITC if depreciation is claimed on tax component of capital asset

If depreciation has been claimed on value of capital assets along with tax components, the input tax credit on said component shall not be allowed and if registered person has taken tax credit of input tax it shall not be added to cost of capital assets.

Furnishing of return

ITC cannot be availed after the due date of filing return for September month of next financial year or on furnishing the relevant annual return whichever is earlier.