Difference Between ITC Availed and ITC Claimed in GST

In the world of GST, understanding the distinction between availed ITC and claimed ITC is important. This article explains the difference between availed and claimed ITC in GST to provide clarity for businesses and finance professionals.

What is the Availed Input Tax Credit?

The availed Input Tax Credit (ITC) means the tax credits that a business receives for taxes paid on its inputs. These inputs could be goods, services, or capital goods used during business operations.  

Putting it simply:

• A company procures goods or services, incurring GST on those purchases.
• This GST paid gets recorded in the business's books of accounts as availed ITC.
• Subsequently, the business reports this in its GSTR 3B return, making the credit available in the Electronic Credit Ledger.

For example, if a manufacturer pays GST when purchasing raw materials, the GST amount becomes an availed ITC for the manufacturer.  

However, there are certain expenses for which businesses are not eligible to claim ITC, i.e, they cannot avail of the input tax credit. These non-eligible credits are clearly defined in section 17 (5) of the CGST Act.

What is the Claimed Input Tax Credit?

The claimed Input Tax Credit means using the available ITC to reduce or offset a business's GST liabilities. Once the ITC is available in the Electronic Credit Ledger, it can be 'claimed' or utilized against the GST payable on sales or outputs.

To elucidate:

• A business sells goods/services and calculates the GST liability on those sales.
• Instead of paying this entire liability in cash, the business can claim or utilize the availed ITC from its Electronic Credit Ledger to reduce its payable amount.

Continuing the earlier example, the manufacturer who availed ITC on raw materials can claim this ITC when selling the finished product to reduce the GST liability on the sale.

What is the Difference Between Availed, Utilised, and Claimed ITC in GST?

At first glance, these terms might seem interchangeable, but they have distinct meanings in the GST framework:

Availed ITC

This is the initial recognition and recording of the input tax credit in the business's books and subsequently in the Electronic Credit Ledger after the GST has been paid on inputs.

Claimed ITC

This is the actual use or application of the availed ITC to reduce the GST liability. It's leveraging the available ITC in the Electronic Credit Ledger to offset the GST dues on outputs or sales.

Utilized ITC

This term aligns closely with claimed ITC. It means the same thing: using the available ITC to pay off GST liabilities. In this context, the terms 'utilized' and 'claimed' are often used synonymously.

What Happens if Excess ITC is Claimed but Not Availed?

Claiming more ITC than what's availed or what's available in the Electronic Credit Ledger is a violation of GST law. Such discrepancies can arise from clerical errors, misunderstandings, or intentional misreporting. Consequences of such discrepancies include:

Penalties and Interest

The business may be liable to pay penalties and interest for the discrepancy between claimed and availed ITC.

Legal Repercussions

Severe or repeated discrepancies might lead to legal actions or audits by tax authorities.

Reconciliation Issues

Discrepancies between claimed and availed ITC can also lead to challenges during GST return reconciliations, complicating the tax filing process.

Businesses must, therefore, ensure that they claim ITC only up to the extent they have availed it, maintaining proper documentation and frequent reconciliations to avoid any unforeseen discrepancies and department notices.