ITC Credit

“Input Tax” in relation to a taxable person, means the Goods and Services Tax charged on any supply of goods and/or services to him which are used or are intended to be used, during furtherance of his business. Fulfillment of Input Tax Credit under GST – Conditions To Claim is one of the most critical activity for every business to settle its tax liability.

ITC is the backbone of GST and a major matter of concern for the registered persons, conditions for eligibility to ITC and eligible ITC have been prescribed which is more or less in line with the pre- GST regime. These rules are also quite particular and stringent in its approach.

Input Tax Credit under GST – Conditions To Claim

A registered person will be eligible to claim Input Tax Credit (ITC) on the fulfillment of the following conditions:

1. Possession of a tax invoice or debit note or document evidencing payment

2. Receipt of goods and/or services

3. Goods delivered by the supplier to another person on the direction of a registered person against a document of transfer of title of goods

4. Furnishing of a return

5. Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received

6. Failure of the supplier towards the supply of goods and/or services within 180 days from the date of invoice, ITC already claimed by the recipient will be added to output tax liability and interest to pay on such tax involved. On payment to supplier, ITC will be again allowed to be claimed

7. No ITC will be allowed if depreciation has been claimed on the tax component of a capital good

8. Time limit to claim ITC against an Invoice or Debit Note is earlier of below dates:

The due date of filing GST Return for September of next Financial year
OR
Date of filing the Annual Returns relevant for that Financial year

Items on which credit is not allowed

1. Motor vehicles and conveyances except the below cases
2. Such motor vehicles and conveyances are further supplied i.e. sold
3. Transport of passengers
4. used for imparting training on driving, flying, navigating such vehicle or conveyances
5. Transportation of goods
6. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery

But if the goods and/or services are taken to deliver the same category of services or as a part of a composite supply, the credit will be available

Example: Mr. Dev purchases cosmetic creams to supply it to a customer, then the credit of ITC paid on purchases will be allowed.

7. Sale of membership in a club, health, fitness center.

8. rent-a-cab, health insurance and life insurance except the following:

1. The government makes it obligatory for employers to provide it to its employees
2. goods and/or services are taken to deliver the same category of services or as a part of a composite supply, the credit will be available