How to avail Input Tax Credit in GST

Arjuna (Fictional Character): Krishna, What are the provisions of ITC for taxpayer in GST?

Krishna (Fictional Character): Arjuna, There are different provisions for ITC in Excise and VAT laws. In GST the provisions of ITC are given. Some provisions of excise, service tax and VAT are merged while preparing provisions of ITC.

Arjuna: Krishna, What is input tax?

Krishna: Arjuna, Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services or both made to a registered person. It includes taxes paid on input goods, input services and capital goods. The definition of input tax includes the tax payable under the reverse charge and IGST on imported goods and services. It does not include tax paid under composition levy. The credit of tax paid on capital goods is permitted to be availed in one instalment.

Arjuna: Krishna, What are the conditions necessary for obtaining ITC?

Krishna: Arjuna, Following four conditions are to be satisfied by the registered taxable person for obtaining ITC:

1. he is in possession of tax invoice or debit note or such other tax paying documents;
2. he has received the goods or services or both;
3. the supplier has actually paid the tax charged in respect of the supply to the government; and
4. The supplier has filed GST return

Arjuna: Krishna, Sometimes goods are destroyed or lost due to various reasons? Can a person take ITC to the extent of such goods?

Krishna: Arjuna, No, a person cannot take ITC with respect to goods lost, stolen, destroyed or written off. In addition, ITC with respect of goods given as gifts or free samples are also not allowed.

Arjuna: Krishna, In GST on which goods and services ITC is not available?

Krishna: Arjuna, In the case of food & Beverages, immovable property, Passenger Vehicle, Outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership fees of club, health and fitness center, life insurance, health insurance, goods used for personal consumption, works contract etc. ITC is not available. 

Arjuna: Krishna, What will happen if the taxpayer does not give consideration to the supplier?

Krishna: Arjuna, Taxpayer is required to pay the consideration along with tax within 180 days from the date of issue of invoice then only he will get ITC. Otherwise, ITC taken will be reversed. The taxpayer will get the ITC after making its payment.

Arjuna: Krishna, what should people learn from this?

Krishna: Arjuna, Earlier the trader was not able to take ITC of Services provided and service provider was not able to take the ITC of goods sold. But now in GST trader can take ITC of services provided and service provided can take ITC of goods sold. The taxpayer should pay the tax after understanding the provisions of ITC, otherwise, he has to pay tax including fees and penalties.