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Input Tax” in relation to a taxable person, means the Goods and Services Tax charged on any supply of goods and/or services to him which are used or are intended to be used, during furtherance of his business. Fulfillment of Input Tax Credit under GST – Conditions To Claim is one of the most critical activity for every business to settle its tax liability.

ITC being the backbone of GST and a major matter of concern for the registered persons, conditions for eligibility to ITC and eligible ITC have been prescribed which in majority in line with pre- GST regime. These rules are also quite particular and stringent in its approach.

Input Tax Credit under GST – Conditions To Claim

A registered person will be eligible to claim Input Tax Credit (ITC) on fulfillment of the following conditions:

  1. Possession of a tax invoice or debit note or document evidencing payment
  2. Receipt of goods and/or services
  3. goods delivered by supplier to other person on the direction of registered person against a document of transfer of title of goods
  4. Furnishing of a return
  5. Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received.
  6. Failure to the supplier towards supply of goods and/or services within 180 days from the date of invoice, ITC already claimed will be added to output tax liability and interest to paid on such tax involved. On payment to supplier, ITC will be again allowed to be claimed
  7. No ITC will be allowed if depreciation have been claimed on tax component of a capital good
  8. If invoice or debit note is received after:
  • the due date of filing return for September of next financial year

or

  • filing annual return

whichever is later

No ITC will be allowed

9. Common credit of ITC used commonly for

  • Effecting exempt and taxable supplies
  • Business and non-business activity

Credit will be allowed according to the RULES

Here is a video that will help you understand the conditions for claiming ITC:

Items on which credit is not allowed

  1. Motor vehicles and conveyances except the below cases
  2. Such motor vehicles and conveyances are further supplied i.e. sold
  3. Transport of passengers
  4. used for imparting training on driving, flying, navigating such vehicle or conveyances
  5. Transportation of goods
  6. 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, credit will be available

Example: Mr. Dev purchases cosmetic creams to supply it to a customer, then credit of ITC paid on purchases will be allowed.

7. Sale of membership in a club, health, fitness centre.

8. rent-a-cab, health insurance and life insurance except the following:

  1. Government makes it obligatory for employers to provide it to its employees
  2. goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available

Example: Mr. Dev takes the service of rent-a-cab to supply to Mr. Manoj, a customer, then credit of ITC paid on purchases will be allowed.

9.travel benefits extended to employees on vacation such as leave or home travel concession.

10. Works contract service for construction of an immovable property (except plant & machinery or for providing further supply of works contract service)

11. Goods and/or services for construction of an immovable property whether to be used for personal or business use

12. Goods and/or services where tax have been paid under composition scheme

13. Goods and/or services used for personal use

14. Goods or services or both received by a non-resident taxable person except for any of the goods imported by him.

15. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples

16. 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.

To read understand the basics of Input Tax Credit, Click Here.

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