Input tax credit eligibility under Revised Model GST Law

1. Input tax credit – Eligibility

2. Input Tax Definitions
Input Tax Definition
Section 2(55) under SGST
/CGST Act
Input Tax Definition
Section 2(15) of IGST ACT
Input Tax means the IGST(including
import), CGST & SGST charged on any
supply of goods or services to him
Includes tax payable U/S 8(3) - Levy of
payment under Reverse charge
Excludes tax paid U/S 9 – Composition
levy
Input Tax means the IGST(including
import), CGST & SGST charged on any
supply of goods or services to him
Includes tax payable U/S 5(2) - Levy of
payment under Reverse charge
Excludes tax paid U/S 9 – Composition
levy of CGST/SGST Act

3. Eligibility and conditions for taking input
tax credit (Sec 16)
 16(1) Every registered taxable person entitled for input
tax charged on any supply of goods or services to him
within time and manner specified in Sec 44.
Conditions
 which are used or intended to be used in the course of
furtherance of his business
 Such amount shall be credited to the electronic credit
ledger of such person
 Other conditions as may be prescribed

4. Credit of input tax for pipelines &
telecommunication tower
 (a) One third in financial year in which said goods are
received
 (b) Two-third of credit in succeeding year and
 (c) Balance amount of credit in any subsequent year

5. Section 44 – Payment of tax, interest,
penalty and other amounts
 44 (1) Every deposit made for above purposes, shall be
credited to the electronic cash ledger of such person to
be maintained in the manner as may be prescribed.

6. 16 (2) Conditions for claiming credit
 (a) Registered taxable person is in possession of invoice or
debit note issued by a supplier
 (b) Received goods and/or services
 (c) tax charged in respect of such supply has actually paid
either in cash or credit; and
 (d) supplier has furnished the return u/s 34.
 Explanation – for the purpose of clause (b), it shall be
deemed that taxable person received the goods where
goods are delivered by supplier to a recipient or any other
person on direction of such person, whether acting as
agent or otherwise, before or during movement of goods,
either by way of transfer of documents of title or otherwise.

7. 16 (2) Conditions for claiming credit
 Provided that in case goods supplied in lots, registered
taxable person claim credit upon receipt of last lot or
installment.
 Provided that where a recipient fails to pay to the
supplier of services within 3 months from the date of
issue of invoice by supplier, an amount equal to cenvat
credit availed by the recipient shall be added to his
output tax liability, along with interest thereon, in the
manner as may be prescribed.

8. Conditions for claiming credit
 16(3)In case depreciation claimed on tax component of
cost of capital goods under income tax act, the input
tax credit shall not be allowed on said component.
 16(4) A taxable person shall not be entitled to input tax
in respect of any invoice or debit note for supply of
good or services after furnishing return u/s 34 for the
month of September following the end of financial
year or furnishing of the relevant annual return,
whichever is earlier.

9. Sec 17. Apportionment of credit and blocked
credits
 17(1) Where good and/or services are used partly for
business and partly for other purposes, the amount of
credit shall be restricted to so much of input tax as
attributable to his business.
 17(2) Where goods and/or services are used partly for
taxable supplies including zero rated supplies and
partly for exempt supplies, the amount of credit shall
be restricted to input tax attributable to said taxable
supplies including zero rated supplies.

10. Sec 17. Apportionment of credit and blocked
credits
 17(3) A banking company/ financial institution including
nbfc engaged in supply of accepting deposits shall have the
option to either comply with sub-section (2) or avail of,
every month, an amount equal to 50% of the eligible input
tax credit on input, capital goods and input services in that
month.
 17(4) Input tax credit shall not be available for following:
 (a) motor vehicle or other conveyance except when they are
used for further supply of such vehicles, transportation of
passengers or imparting of training on driving & for
transportation of goods.

11. Sec 17(4) Credit not available in respect of
some items listed below:
 (ii) membership of club, health and fitness centre
 (iii) rent a cab, life insurance, health insurance except
where govt. notifies the services are obligatory for an
employer to provide to its employees under any law
 (iv) travel benefits extended to employees for vacation
under leave travel concession
 (c) Work contract services when supplied for construction
of immovable property, other than plant and machinery,
except where input service for further supply of work
contract service

12. Sec 17(4) Credit not available in respect of
some items listed below:
 (d) goods or services received by a person for
construction of an immovable property(other than
plant & machinery) on his own account even when
used in course of furtherance of business.
 (e) Good or service on which tax paid u/s 9 i.e.
composition scheme.
 (f) goods or services used for personal consumption.
 (g) goods lost, stolen, destroyed, written off or
disposed of by way of gift or free samples.
 (h) any tax paid in section 67, 89 or 90.

13. Sec 18. Availability of credit in special
circumstances
 (1) A person who applied for registration within 30
days from the date on which he becomes liable to
registration and has been granted such registration
shall, subject to such conditions and restrictions as
may be prescribed, be entitled to take credit of input
tax in respect on inputs held in stock(including semi
finished and finished stock) on the day immediately
preceding the date from which he becomes liable to
pay tax under this act.

14. Sec 18. Availability of credit in special
circumstances
 (2) A person who take voluntary registration u/s 23(3) shall
subject to conditions and restrictions as may be prescribed,
be entitled to take credit of inputs held in stock(including
semi finished and finished stock) on the day immediately
preceding the date of grant of registration.
 (3) Where registered taxable person ceases from
composition scheme (sec. 9), he shall be entitled to take
credit of input in respect of inputs held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax u/s 8.
Provided capital good credit shall be reduced by such
percentage as may be prescribed.

15. Sec 18. Availability of credit in special
circumstances
 (4) Where exempt supply of goods or services become
a taxable supply, such person shall be entitled to take
credit of input tax in respect of inputs held in
stock(including semi finished and finished stock)
relatable to such exempt supply and on capital goods
exclusively used for such exempt supply on the day
immediately preceding the date from which such
supply become taxable;
Provided that credit of capital goods shall be reduced
by such percentage as may be prescribed on this
behalf.

16. Sec 18. Availability of credit in special
circumstances
 (5) Input tax credit is not available under subsection 1
to 4 in respect of supply to him after expiry of one
years from the date of issue of tax invoice relating to
such supply.
 (6) Where change in constitution of registered taxable
person on account of sale, merger, amalgamation,
lease or transfer with the specific provision of transfer
of liabilities, said registered taxable person shall be
allowed to transfer input tax credit remain unutilized
in its book of accounts of new company in the manner
prescribed.

17. Sec 18. Availability of credit in special
circumstances
 (7) Where a taxable person who availed of input tax
credit switches over as a taxable person u/s 9
composition scheme or when goods or services
supplied by him become exempt u/s 11, he shall pay an
amount, by away of debit to electronic or cash ledger,
equivalent to credit of input tax in respect of inputs
held in stock(including semi finished and finished
stock) and on capital goods, reduced by such
percentage as may be prescribed, on the day
immediately preceding the date of such switch over or
the date of exemption.

18. Sec 18. Availability of credit in special
circumstances
 (10) In case of supply of capital goods or plant &
Machinery, on which input tax credit has been taken,
the registered taxable person shall pay an amount
equal to input tax credit taken reduced by such
percentage prescribed on this behalf or the tax on
transaction value u/s 15(1) i.e. value of taxable supply,
whichever is higher.
Provided that where refractory, bricks, moulds and
dies, jigs and fixtures are supplied as scrap, the taxable
person may pay tax on transaction value of such goods
u/s 15(1).

19. Sec 19. Recovery of input tax credit and
interest thereon
 Where credit has been taken wrongly, the same shall
be recovered from the registered taxable person in
accordance with the provisions of this act.

20. Sec 20. Taking input tax credit in respect of
inputs sent for job work
 20(1) Where the registered taxable person(Sec 55) send
goods on job work shall, subject to such conditions
and restrictions, be allowed to input tax credit on
inputs sent to job-worker for job-work.
 20(2) Notwithstanding anything contained in sec
16(2)(b), the ‘principal’ shall be entitled be take credit
of input tax on inputs even if the inputs are directly
sent to a job worker for job-work without being first
brought to his place of business.

21. Sec 20. Taking input tax credit in respect of
inputs sent for job work
 20(3) where the inputs sent for job-work are not
received back by the principal after completion of job-
work or are not supplied from the place of business of
job worker in accordance with section 55(1)(b) within a
period of one year of their being sent out, it shall be
deemed that such inputs had been supplied by
principal to the job worker on the day when the said
inputs were sent out:
Provided when input are sent directly to job worker,
the period of 1 year shall be counted on the date of
receipt of input by the job – worker.

22. Sec 20. Taking input tax credit in respect of
inputs sent for job work
 20(4) Deals with capital good sent on job work and
similar to section 20(1)
 20(5) similar to section 20(2) where capital good
directly sent to job worked and principal claim the
credit of input tax on such capital goods.
 20(6) similar to section 20(3) period of one year
substitute with 3 years in case of capital goods.
 20(7) Nothing contained in sub-section (3) or (6) shall
apply to moulds and dies, jigs & fixtures sent out to job
– worker for job – work.

23. Sec 21. Manner of distribution of credit by
Input Service Distributor
Input Distribution
Credit of CGST CGST or IGST
Credit of IGST IGST or CGST
Where the distributor and the recipient of credit located in different
states.
Amount of input tax distributed being reduced thereafter. (CGST Act)
Input Distribution
Credit of SGST SGST or IGST
Where the distributor and the recipient of credit located in different
states.
Amount of input tax distributed being reduced thereafter. (SGST Act)

24. Sec 21. Manner of distribution of credit by
Input Service Distributor
Input Distribution
Credit of CGST & IGST CGST
Where the distributor and the recipient of credit being a business vertical,
are located in the same state.
Amount of input tax distributed being reduced thereafter. (CGST Act)
Input Distribution
Credit of SGST & IGST SGST
Where the distributor and the recipient of credit being a business vertical,
are located in the same state.
Amount of input tax distributed being reduced thereafter. (CGST Act)

25. Sec 21(3). Conditions for credit distribution
(a) The credit can be distributed against a prescribed
document issued to each of the recipients of credit so
distributed, and such document shall contain details
as may be prescribed.
(b) The amount of credit distributed shall not exceed the
amount of credit available for distribution.
(c) The credit of input services attributable to a recipient
of credit shall be distributed only to that recipient.

26. Sec 21(3). Conditions for credit distribution
(d) The credit of tax paid on input services attributable
to more than one recipient of credit shall be
distributed on pro rata basis of the turnover in a
state, during the relevant period, to the aggregate
turnover of all such recipients to whom such input
service is attributable and which are operational in
current year, during the said relevant period.
Explanation 1. – Relevant period shall be –
(a) If the recipients of credit have turnover in their states
in preceding financial year during which credit so
distributed, the said financial year; or

27. Sec 21(3). Conditions for credit distribution
(b) If some or all recipients of the credit do not have
turnover in their states in preceding financial year,
the last quarter for which details of such turnover of
all the recipients are available, previous to the month
during which credit is to be distributed.
Explanation 2 – Recipient of credit means the supplier of
good or services having same PAN as that of Input
service distributor.
Explanation 3 – Turnover means aggregate value of
turnover, as defined in Sec 2(6).

28. Sec 22. Manner of recovery of credit
distributed in excess
Where input service distributor distributes the credit
in contravention of the provision of sec 21 resulting
in excess distribution of credit to one or more
recipients of credit, the excess credit so distributed
shall be recovered from such recipients along with
interest, and the provisions of sec 66 & 67, shall
apply mutatis mutandis for effecting such recovery.

29. Abhishek Kumar Chhapolika
abhishekchhaplika@gmail.com