Input Tax Credit

As a registered taxable person the input tax credit can be claimed on basis of the following documents:

step:1 An invoice that is issued by the supplier of goods or services

step:2 An invoice that is issued by the recipient of the goods and services supplied by an unregistered dealer. Such supply comes under the reverse charge mechanism. This mechanism involves the supplies made by an unregistered person to a registered person.

step:3 A debit note that is issued by the supplier of the tax charged is less than the tax payable concerning such supply.

step:4 A bill of entry or similar documents is also required to document an integrated tax on imports.

step:5 An invoice or the credit note that is issued by an input service distributor as per the rules under GST.

step:6 A supply bill by a dealer that is opting for a composition scheme or an exporter or a supplier of the exempted goods.

What are the conditions under which Input tax credit can be claimed?

The following requisites are mandatory for claiming the input tax credit under the GST:

>The Individual must be registered under the GST law.

>A tax invoice or the debit note that is issued by the registered supplier showing the tax amount.

>The goods or the service should be received.

>The supplier should file the returns and pay the tax there on to the government.

>Where the goods are received in parts or installments, the input tax credit may be claimed on the receipt of the last lot or the installment.

>The input tax credit will not be allowed if the same is not been claimed within the prescribed time.

How to claim the Input tax credit?

All the regular taxpayers have to report the amount of the in the GSTR 3B.

A taxpayer can claim the input tax credit on the provisional basis in the GSTR 3B up to 20% of the eligible ITC that is reported by the supplier in the auto-generated GSTR 2A return. The taxpayer must cross-check the GSTR 2A figures before proceeding with the GSTR 3B.

Before the 9th of October 2019, a taxpayer was able to claim any amount of the provisional input tax credit. But CBIC has notified that from October 9, 2019, a taxpayer can claim only 20% of the eligible ITC available in the GSTR 2A as the provisional input tax credit.

This means that the amount of input tax credit that is reported in the GSTR 3B will be the total of the actual ITC in the GSTR 2A and the provisional ITC which is 20% of the actual eligible ITC in the GSTR 2A. It is important to match the purchase register with the GSTR 2A becomes very important.

Reversal of Input Tax Credit

The input tax credit can be reversed certain circumstances which are mentioned below:

Input tax credit for Capital goods

ITC is not available for capital goods that are used exclusively for making exempted goods and exclusively for personal purposes.

Here, ITC will be allowed only if depreciation has been claimed on the tax component of the capital goods.

Input tax credit on the Job work

A principal manufacturer may send goods for further processing to a job worker. In such cases ITC will be allowed on the goods that are sent to the job worker in these cases:

Under GST, the input tax credit is not available in respect of the following goods or services:

1. Motor vehicles, except when they are supplied in the course of business or used for providing taxable services like:
• Transportation of passengers
• Providing training on driving, flying, navigating such vehicles
• A further supply of such vehicles or conveyance
• Transportation of goods
1. Supply of goods and services concerning food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where a registered taxable person uses such inward supply of goods or services of a particular category for making an outward taxable supply of the same category of service
2. Membership of a club, health, and fitness center
3. Rent a cab, life insurance, health insurance, except where it is statutorily obligatory for an employer to provide such services
4. Travel benefits extended to employees on vacation, such as leave or home travel concession.
5. Goods and services received by the principal in the construction of immovable property, other than plant and machinery except where it is an input service for the supply of works contract service
6. Goods and services received by a taxable person for constructing an immovable property on his account, other than plant and machinery, even when used in the furtherance of business.
7. Goods and services on which tax has been paid under composition scheme
8. Goods and services used for personal consumption
9. Goods lost, stolen, written off, or disposed of by way of gift or free samples.
10. Tax paid after detection of fraud, wilful misstatement, or suppression.
11. Tax paid for the release of detained or seized goods.
12. Tax paid for the release of confiscated goods.