One of the fundamental features of GST is the seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country.
When you buy a product/service from a registered dealer you pay taxes on purchase, while making sales, tax is collected and periodically the same is adjusted with the tax you already paid at time of purchase and balance liability of tax (tax on sales (minus) tax on purchase) is to be paid to the government. This mechanism is called utilisation of input tax credit(tax on purchase adjustment against tax liability on output i.e. sales).
Conditions for Claiming Input Tax Credit
All of the following conditions need to be satisfied to avail GST Input credit:
- The dealer should be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act.
- The said goods/services have been received.
- Returns (GSTR-3) have been filed.
- The tax charged has been paid to the government by the supplier.
- When goods are received in installments ITC can be claimed only when the last lot is received.
- No ITC will be allowed if depreciation has been claimed on tax component of a capital good
Document required for claiming ITC under GST
- Invoice issued by the supplier for the supply of goods and services or both.
- The debit note issued by the supplier to the recipient
- Bill of entry
- An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs 200 or in situations where the reverse charge is applicable as per GST law.
- An invoice or credit note issued by the Input Service Distributor(ISD) as per the invoice rules under GST.
- A bill of supply issued by the supplier of goods and services or both.
All these documents are to furnished at the time of filing form GSTR-2.