Section 18 provides for input tax credit (ITC) availability in specific situations where a person becomes eligible under special circumstances. The section outlines when ITC can be claimed and the conditions for doing so.

Sub-section (1): Eligibility to Claim ITC in Special Cases
A registered person shall be entitled to take input tax credit in the following cases:
Clause (a): New Registration
When a person becomes liable to register under GST and obtains registration, they can claim ITC on inputs held in stock, inputs contained in semi-finished or finished goods, held on the dayimmediately before the date of registration.
Clause (b): Voluntary Registration
When a person voluntarily takes registration (though not liable), they can claim ITC on:
- Inputs held in stock,
- Inputs contained in semi-finished and finished goods,as on the day immediately before the date of registration.
Clause (c): Exempt to Taxable Supply
When a registered person ceases to make exempt supplies and starts making taxable supplies, they can claim ITC on:
- Inputs held in stock,
- Inputs in semi-finished or finished goods,
- Capital goods (reduced by prescribed percentage),as on the day immediately before the date of change.
Clause (d): Composition to Regular Taxpayer
When a person switches from the composition scheme under Section 10 to the normal scheme, they can claim ITC on:
- Inputs in stock,
- Inputs in semi-finished or finished goods,
- Capital goods (reduced by the prescribed percentage), held on the day immediately before the switch.
Sub-section (2): Time Limit to Claim Credit
The input tax credit under sub-section (1) can be claimed within 30 days from the date of becoming eligible, or within a further period as extended by the Commissioner.
Note: This time frame is strict and non-compliance results in loss of entitlement to claim ITC under this section.
Sub-section (3): Conditions for Capital Goods
If a registered person has claimed ITC on capital goods under sub-section (1), and such capital goods are later supplied, the person must pay tax on such supply as per Section 18(6).
Sub-section (4): Apportionment and Blocked Credits
The provisions of:
- Section 16 (Eligibility and Conditions), and
- Section 17 (Apportionment and Blocked Credits)shall apply mutatis mutandis to the claims made under this section.
This ensures consistency in ITC treatment, even in special cases.
Sub-section (5): ITC on Transfer of Business
In case of transfer of business, including:
- Sale,
- Merger,
- Demerger,
- Amalgamation,
- Lease, or
- Transfer of ownership,
The unutilized ITC in the electronic credit ledger may be transferred to the new entity, provided:
- There is a specific provision in the scheme of arrangement, and
- The transferor has furnished all required details.
Such a transfer is subject to prescribed conditions.
Sub-section (6): Supply of Capital Goods or Plant and Machinery
When a registered person supplies capital goods or plant and machinery, on which ITC was claimed, they must pay an amount equal to:
- ITC taken on the said asset reduced by the prescribed percentage, or
- The tax on transaction value (whichever is higher),
as per Section 15 of the Act.
This ensures the government recovers ITC when such assets are sold.
Summary Table: Key Situations under Section 18
Clause |
Situation |
Eligible ITC On |
Cut-off Date |
18(1)(a) |
Liable to register and registered |
Inputs & stock |
Day before registration |
18(1)(b) |
Voluntary registration |
Inputs & stock |
Day before registration |
18(1)(c) |
Exempt to taxable |
Inputs, stock, capital goods |
Day before exemption ends |
18(1)(d) |
Composition to normal |
Inputs, stock, capital goods |
Day before switch |
Important Notes:
- ITC on capital goods is subject to reduction by a prescribed percentage (for wear and tear).
- If the above time limits or conditions are not followed, the credit is forfeited.
- The section ensures seamless credit flow during transitions in a taxpayer's status.
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