Input Tax Credit

Input Tax are the taxes paid on purchases made in the course of the business. When a registered dealer offsets his tax liability on sales against taxes paid on purchases is known as availing Input tax Credit.

Eligibility for taking ITC

Every registered person is entitled to take credit of input tax paid any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business.

Conditions for taking ITC

    Every registered person is entitled to take credit of input tax paid any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. Below are certain conditions

  1. Possession of Tax Invoice - ITC can be claimed on the basis of any one of the following:- i. Tax Invoice issued ii. Debit Note iii. Bill of Entry iv. Invoice prepared in respect of Reverse Charge basis v. Document issued by Input Service Distributor for distribution of Credit.
  2. Receipt of the Goods or Services:- If goods are received in instalments against a single invoice, credit can be taken upon receipt of last instalment of goods.
  3. Tax on Supply actually paid to Government (Also the payment to supplier should be made within 180 days from the Date of Invoice. If not credit availed should be paid to the government including 18% interest)
  4. Claim ITC by filing GSTR-3B - To claim the input tax credit shall be claimed by filing with the govt by the 20th of the next month in GSTR 3B.

Time limit for availing ITC

The time limit to claim ITC against an invoice or debit note is earlier of two dates below:

  1. 30th November of the next financial year.
  2. The date of filing the annual returns in form GSTR-9 relating to that financial year.

Ineligible input tax credit

  1. Motor vehicles, with a seating capacity of less than or equal to 13 persons (including the driver), goods transport agencies, vessels and aircraft, except in the below cases: (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles;
  2. Services of general insurance, servicing, repair and maintenance relating to motor vehicles, vessels or aircraft mentioned above.
  3. 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 input tax credit will be available
  4. Membership in a club, health, and fitness centre.
  5. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft, life insurance and health insurance.( ITC is available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both.)
  6. Travel benefits extended to employees on vacation such as leave or home travel concession is not eligible for ITC.
  7. Works contract service for construction of an immovable property (except plant & machinery or for providing a further supply of works contract service).
  8. Goods and/or services for the construction of an immovable property whether to be used for personal or business use.
  9. Goods and/or services where tax has been paid under the composition scheme.
  10. Goods and/or services used for personal use.
  11. Goods or services or both are received by a non-resident taxable person except for any of the goods imported by him.
  12. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
  13. ITC will not be available in the case of any tax paid due to non-payment or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.
  14. The expenditure spent on Corporate Social Responsibility (CSR) initiatives by corporates.