Looking for a business loan
Thank you for your interest, our team will get back to you shortly
Thank you for your response
Thank you for your response
Our representative will get in touch with you shortly.
Save upto 7% in taxes
Claim 100% ITC and save ~4% GST
3x faster experience
Save 2 man days every GSTIN month
Easy to connect
Connect with 100s of ERP's, import data error-free
‘Input Tax Credit’ or ‘ITC’ means the Goods and Services Tax (GST) paid by a taxable person on any purchase of goods and/or services that are used or will be used for business.
ITC value can be reduced from the GST payable on the sales by the taxable person only after fulfilling some conditions. These conditions given under the GST law are more or less in line with the pre-GST regime, except for a few additional ones such as GSTR-2B. These rules are direct and maybe stringent in nature.
Latest Updates on ITC
17th December 2022
The following are recommendations from the 48th GST Council meeting-
(1) CGST Rule 37(1) is going to be amended retrospectively from 1st October 2022 for reversing ITC as per the second proviso to Section 16 of CGST Act, only to the extent of the invoice value not paid to the supplier versus the value of the supply, along with tax payable.
(2) GST Council will insert Rule 37A in CGST Rules that will define steps to reverse ITC claimed on taxes not deposited by the supplier within a specified date. Further, the process of re-availing such ITC where the supplier pays it subsequently will be provided in compliance with Section 16(2)(c) of the CGST Act.
(3) Procedure will be given to verify ITC differences between GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19. It would reduce the need for litigations and give much-needed clarity to taxpayers and officers.
(4) ITC will be available for the scenario stated in Section 12(8) of the IGST Act – the place of supply is a foreign country, but the GST-registered recipient is in India, in cases of goods transportation/courier/mail services.
Check out the latest condition added to GST provisions to fulfil and claim ITC, by watching the video-
Section 16 of the CGST Act lays down the conditions to be fulfilled by GST registered buyers to claim ITC. The conditions are summarised as follows-
The time limit to claim ITC against an invoice or debit note is earlier of two dates, given below:
For instance, XY Corp, a buyer with a purchase invoice dated 8th December 2021 (FY 2021-22), wants to claim GST paid on that purchase. As per the criteria laid down to find out the time limit, the two dates are as follows:
The earlier of the two is the date up till when the XY Corp can claim ITC of FY 2021-22. Therefore, the last date is 20th October 2022 and XY Corp can claim this ITC in any of the tax periods between April 2021 to September 2022.
Note: For debit notes, the above condition must be considered with respect to the debit note itself and not the original invoice that it is linked to.
**The last date is changed to 30th November of the year following the financial year, vide Budget 2022, but yet to be notified by the CBIC. Until then, the due date of September return shall be the last date.
The input tax credit is not available for claims in the following cases-
For further explanation of ineligible ITC claims, read our article on ‘Ineligible ITC under GST’.
Where one rents a hotel room for business purposes or pays freight forward charges, the place of supply differs from the recipient’s state of GST registration. So, the Input Tax Credit (ITC) is not made available in such cases.
No particular provisions restrict this claim, but from a state revenue point of view, ITC is not available to the recipient of one state since another state accrues the revenue. Further, Form GSTR-2B classifies this as an ineligible ITC for the recipients.
The CGST Circular 184/16/2022, issued on 27th December 2022, has clarified the below in another similar case.
The Circular clarifies the availability of ITC claims for GST-registered persons in India who buy services of transportation of goods/mail/courier if the destination of such transportation/mail/courier is outside India.
With effect from 1st February 2019, the place of supply, in the above case, has been the place outside India or a foreign country.
Further, the transaction will be regarded as an interstate supply since the location of the supplier is in India and the place of supply is outside India. Accordingly, IGST is levied in such a transaction.
The Circular further clarifies that the person buying such a service can claim ITC on the transportation/courier bills.
Accordingly, the transporter/courier company can report the state code as ‘96-Foreign Country’ in GSTR-1 while reporting the place of supply for the service.
Many conditions are there to claim ITC before the last date passes. An Indian enterprise must verify the ITC details before claiming it in Form GSTR-3B for a tax period. It involves regular reconciliation of GSTR-2B with books of accounts. Further, it requires frequent follow-ups with suppliers who have not reported tax invoices or debit notes.
All these require a robust and smart solution that requires the least manual effort!
Clear GST ensures that your GSTR-2B data is fetched without manual intervention. Our advanced reconciliation engine matches data between books and GSTR-2B to identify gaps, with the option to define custom matching logic and claim 100% ITC in GSTR-3B.
Clear GST also allows users to annually reconcile ITC across financial years for accurate preparation of GSTR-9 and GSTR-9C.
Clear Max ITC is India’s first end-to-end enterprise solution for maximising the claims of the input tax credit. Clear Max ITC platform has exclusive features to improve your input tax credit claims with value additions such as the following-
1. It hosts the fastest AI-based reconciliations to match invoices without any errors and help you identify 100% ITC.
2. Automated data reconciliations take place by direct data pulls from the GSTN and the ERP at regular intervals.
3. Automated vendor communication helps you to keep follow-up efforts at a bare minimum.
4. Smart payment decisions are synced to a business’s ERP based on automated vendor categorisation through an intelligent vendor scoring mechanism.
5. Advanced user access management helps you define access rights for each team and keeps data absolutely secure.
The platform firstly sets up a two-way connection between it and your ERP/accounting system. It schedules automatic reconciliations of the GST details at regular time intervals and also syncs vendor payment decisions.
Your team can fix the vendor payment terms to automatically hold the GST value or the entire invoice due if your vendor has not filed GST returns. It further syncs this decision with the ERP for all future payments. If any invoice is missing and identified so, communication is auto-sent to the concerned vendor via email, WhatsApp, etc.
With passing time, you will notice that the Clear Max ITC solution has helped you reduce the number of defaulting vendors, optimise input tax credit, and unblock your working capital. We’ve seen that the solution has helped many of our clients reduce their GST cash outflows and Increase profits by up to 7% just by way of ITC maximisation.
Explore the Clear Max ITC solution by requesting a demo: https://cleartax.in/s/max-itc
For further understanding, read more articles on ITC-
Basics of input tax credit explained
Removal of provisional ITC and restricting it to GSTR-2B from 1st Jan 202
All about adjustment of Input Tax Credit under GST
Document and forms for claiming ITC under GST
Optimising credits in the amended Rules for Input Tax Credit utilisation