ITC M.COM IV SEM GST

1. INPUT TAX CREDIT(ITC)
“HOW ITC IS
AVAILED&UTILIZED”
K M A R C H A N A Y A D A V
I D N O : 5 0 5 1 0
M . C O M I V S E M

2. INTRODUCTION
The provision relating to input tax credit are given in sections 16 , 17
and 18 of the CGST Act 2017
Section 16 talks about Eligibility and Conditions for taking input tax
credit
Section 17 talks about Apportionment of credit and blocked credits.
Section 18 talks about Credit in Special Circumstances.

3. MEANING OF INPUT TAX CRDIT
“Input Tax Credit “ means credit of ‘input tax’ – Section 2(56) of CGST Act..
Input Tax Credit is related to Input Tax ,therefore the meaning of input tax i.e., tax
paid by supplier in respect of goods purchased or services obtained from registered
person.
Input Tax Credit is available for inputs and capital goods both . When a
registered person purchased goods or inputs for resupply , he pays
tax on such goods and services obtained . In this case he is entitled
to get input tax credit against tax payable on goods or service ae
both. Tax paid by him shall be deducted against output tax and net
amount shall be deposited.

4. SOME IMPORTANT DEFINITIONS
• Input tax credit is allowed for capital goods, inputs ,and input services.
• Capital goods means goods, the value of which is capitalized in the
books of account of the person claiming the ITC and which are used
or intended to be used in the course or furtherance of business.
• Input means any goods other than capital goods used or intended to be
used by a supplier in the course or furtherance of business.
• Input service means any service used or intended to be used by a
supplier in the course in the course or furtherance of business.

5. ITC
SECTION 16
• ELIGIBILITY
• CONDITION
SECTION 17
• APPOTIONMENT
• BLOCKED CREDIT
SECTION 18
• CREDIT IN
CERTION
SPECIAL
• CUSTUMTONCES

6. SECTION16(2):ConditionToBeSatisfiedFor
TakingInputTaxCredit
There are 5 clause under this subsection.
Clause (a) , (aa) , (b) ,(c),(d)
ITC can be availed only if the condition in all these five
clauses are satisfied.

7. Section16(2)(a):POSSESSIONOFTAXPAYING
DOCUMENT
•
a) Invoice issued by the supplier of goods and /or services
b) Invoice issued by the recipient receiving goods and/or services from unregistered
supplier along with proof of payment of tax , in case of reverse charge
c) Debit note issued by the supplier
d) Bill of entry or similar document prescribed under the customer Act.
e) Revised invoice
f) Document issued by input by input service distributor

8. THE DOCUMENT ON THE BASIS OF WHICH ITC IS
BEING TAKEN SHOULD CONTAIN AT LEAST THE
FOLLOWING DETAILS:
a)
b)
c)
d)
e)
• Input tax credit shall not be available if the credit is
availed on account of any fraud ,willful misstatement or
suppression of facts.

9. Section16(2)(aa):DetailsOfSupplierAndRecipient
ShouldMatch
• As per section 16(2)(aa) , a registered person is entitled to the credit of any input
tax in respect of any supply of goods or service or both ,if the details of the invoice
or debit note referred above has been furnished by the supplier in the statement of
outward supplies and such details have been communicated to the recipient of such
invoice or debit note in the manner specified under section 37.
• Input tax credit can be availed by a registered person of invoices or debit notes the
details of which are required to be furnished under section 37(1) only if:
a) The details of such invoices or debit notes have been furnished by the supplier in
the statement of outward supplies in FROM GSTR-1 or using the invoice
furnishing facility and
b) The details of such invoices or debit notes have been communicated
to the registered person in FROM GSTR-2B under Rule 60(7).

10. NOTES:-
• GSTR-1 is a monthly/quarterly statement containing details of outward supplies
made by a registered supplier.
• Such details of outward supplies furnished by the supplier are communicated and
made available electronically (auto populated )to the respective recipient(s) in
GSTR-2A.
• GSTR-2B is an auto-drafted ITC statement generated for every registered person
based on GSTR-1 filled by supplier.
• Invoice Furnishing Facility(IFF) is a facility provided to quarterly taxpayers who
are in QRMP scheme , to file their details of outward supplies in first two months
of the quarter , to pass on the credit to their recipients,

11. Section16(2)(b):ReceiptOnGoods/Services
• Aspersection16(2)(b),aregisteredpersonisentitledtothecreditofanyinputtaxinrespectofanysupplyof
goodsorservicesorbothifhehasreceivedthegoodsand/orservices.
• BilltoShiptoModel:
a) Underthismodel,thegoodsaredeliveredtoathirdparty-Conthedirectionofthecustomer(registered
person)–Bwhopurchasesthegoodsfromthevendor(supplier)–A
b) Inotherwords,abillstoBbutshipsthegoodstocondirectionofB.
c) Ineffect,twosuppliestakenplaceinthisscenarioviz.,fromAtoBandfromBtoc.
d) Thus,underthismodel,thecustomer(registeredperson)whopurchasessuchgoodsdoesnotreceivethe
saidgoods.
e) Insuchcase,itshallbedeemedthatgoodshavebeenreceivedbyB,andBwouldgetthecredit.
f) So,ITCwillbeavailabletotheregisteredperson,onwhosedirectiontheservicesareprovidedtoathird
person,

12. Q1. X is a trader who places an order on Y for a consignment of
chemicals. X receives a buying order from Z for the same quantity of
chemicals . X instructs Y to deliver the goods to Z , and in turn he
raises an invoice on Z. Would X be entitled to ITC?
Solution
Though the goods are not physically at the premises of X , the
condition of section 16(2)(b) is satisfied , and X is entitled to ITC on
the consignment.

13. Q 2. The registered head office (Jaipur , Rajasthan) of JJ Pvt .Ltd .E
enters into a contract with SS pvt . Ltd .of Jaipur ,Rajasthan for repair
and maintenance of computers systems installed at its registered branch
office in Bengaluru , Karnataka ,DEF pvt .Ltd issues an invoice on JJ
Pvt Ltd . Jaipur for the services provided by it. Would JJ pvt Ltd .be
entitled to ITC?
Solution
Though the actual services are received by the branch office and not by
the head office ,section 16(2)(b) allows ITC of such repair and
maintenance services to head office.

14. Section16(2)(c):TaxChargedIsActuallyPaidToGoverment
• As per section 16(2)(c) , a registered person is entitled to the credit of any input tax in
respect of any supply of goods or services or both if the supplier has actually paid the
tax charged on the goods and /or services ,for which ITC is being taken either in cash
or by utilizing ITC.
• Presently ,suppliers are required to file GSTR-1 (Statement of details of outward
supplies) , the details of which get auto –populated in GSTR-2A of the recipient for
viewing.
• Further , GSTR-2B ,an auto-drafted ITC statement is also generated for the taxpayer
based on GSTR-1 filled by the supplier.
• On the basis of the details available in GSTR-2A and GSTR-2B , The taxpayer takes
provisional ITC on self –assessement basis in GSTR-3B for discharging the tax
liability.

15. Section16(2)(d):FurnishingOfReturn
• As per Section 16(2)(d) , a registered person is entitled to the credit of
any input tax in respect of any supply of goods or services or both if
he has filed his return u/s 39.
• Presently , a summary return in from GSTR-3B is being filled on
monthly basis.
• Thus, a taxpayer should file GSTR-3B to avail ITC on eligible inward
supplies.

16. FIRST PROVISO TO SECTION16(2):GOODS
RECEIVED IN LOTS
• In case the goods covered under an invoice are not received in a single consignment
but are received in lots/ instalment ,ITC can be taken only upon receipt of the last lot
/instalment.
Question 3
XYZ enters into a contract with ABC for supply of 10 MT of a chemical for 1,18,000
(inclusive of GST of 18000) in the month of August. The chemical is to be delivered in
lots over a period of three months. ABC raises the invoice for the entrie amount in
August and XYZ also makes the payment in the same month but the supply is completed
in November. XYZ paid the full tax in August .When would be the ITC available ?

17. SOLUTION
• Though XYZ paid the full tax as early as August , it can
taken the ITC of the same only on receipt of last instalment
of the month of November.

18. S Ltd a registered manufacture of Jaipur entered in a contract with a supplier for
supply for supply of input x in October ,2023.As per contract it was agreed that
10,000 kgs of input ‘X’ will be supplied for 7,28,000 (inclusive of CGST and SGST
@ 6% each) in 4 lots. Invoice of 7,28,000 has been issued with supply of first lot of
input ‘X’ Following further information has been provided regarding supply of input
received in subsequent lots. Briefly explain whether S Ltd .eligible to take credit on
proportionate basis.
INPUT ‘X’(IN LOTS) QUANTITY IN KGS DATE OF RECEIPT OF SUPPLY
First Lot 2500 19-10-2023
Second Lot 3000 21-10-2023
Third Lot 1500 12-11-2023
Fourth Lot 3000 01-12-2023

19. SOLUTION
• No S Ltd is not eligible to take credit on proportionate basis. As per
first proviso to section 16(2) , where the goods against an invoice are
received in lots or installments , the registered person shall be entitled
to take credit upon receipt of the last lot or instalment . Therefore , in
the given case input “X” has been received in lots hence , the credit of
tax of 78000 i.e ., (7, 2800 x 12 ÷ 112) paid on such input shall be
taken by S Ltd . Only after receipt of fourth lot i.e 01-12-2023.

20. SECTION16(3):ITCNOTADMISSIBLEIFDEPRECIATION
CLAIMEDONTAXCOMPONENT
If the person taking the ITC on capital goods and plant and machinery has claimed
depreciation on the tax component of the cost of the said items under the income –
tax Act 1961 , the ITC on the said tax component shall be allowed.
• Thus , in respect of the tax paid on such itams , dual benefit cannot be claimed
under income tax Act ,1961 and GST laws simultaneously.
• In other words , either depreciation on the component can be claimed
under income tax ACT or ITC of such tax paid can be availed under
GST laws.

21. • From the following information determine the amount of input tax credit admissible to ABC Ltd
.in respect of various inputs purchased during the month of September,2021.
Inward Supplies GST
1. Goods purchased without invoice 25,000
2 Goods purchased from PQR Ltd. (Full Payment is made by ABC Ltd to PQR L
td. against such supply but tax has not been deposited by PQR Ltd.)
1,20,000
3. Purchases of goods not be used for business purposes 18,000
4. Purchases of goods from TT Ltd .(Invoice of TT Ltd . Is received in month of
September 2021, but goods were received on month of October 2021)
24,000
5. Goods purchased against valid invoice from FF Ltd. For such purchases in the
of October 2021
36,000

22. Section16(4):TimeLimitForTakingITC
• ITC On Invoices Pertaining To A Financial Year Or Debit Notes Issued In A Financial
Year Can Be Availed Any Time:
a) Till The Due Date Of Filling Of The Return For The Month Of September Of The
Succeeding Financial Year ;Or
b) The Date Of Filling Of The Relevant Annual Return,
Whichever Is Earlier.
• With Respect To Time-limit To Avail The Itc , It May Be Noted That The Return For
The Month Of September Is To Be Filed By 20th October And Annual Return Of A
Financial Year Is To Be Filed By 31st December Of The Succeeding Financial Year.
• So , The Upper Time Limit For Taking Itc Is 20th October Of The Next Financial Year
Or The Date Of Filing Of Annual Return , Whichever Is Earlier.
• The Time Limit U/S 16(4) Does Not Apply To Claim For Re-availing Of Credit That
Had Been Reversed Eariler..

23. SecondProvisoToSection16(2):PaymentForTheInvoiceTo
BeMadeWithin180Days
• The registered person must pay to the supplier , the value of the goods
and/or services along with the tax within 180 days from the date of issue
of invoice.
• If he fails to do so , he shall furnish the
a) Details of such supply ,
b) The amount of value not paid , and
c) The amount of input tax credit availed of proportionate to such amount
not paid to the supplier in FROM GSTR- 2 for the month immediately
following the period of 180 days from the date of the issue of the
invoice.

24. Second Proviso To Section 16(2): Payment For The
Invoice To Be Made Within 180 Days
• The corresponding credits availed by the registered person would be
added to his output tax liability, with interest.
• Interest will be paid @ 18% from the date of availing credit till the date
when the amount added to the output tax liability is paid.
• However , once the recipient makes the payment of value of goods and
or service along with tax , he will be entitled to avail the credit again
without any time limit u/s 16(4).
• In case part- payment has been made ,proportionate credit would be
allowed,

25. SecondProvisoToSection16(2):PaymentForTheInvoiceTo
BeMadeWithin180Days
• Exceptions: This condition of payment of value of supply plus tax within 180 days does not
apply in the following situations :
a) Supplies on which tax is payable under reserve charge
b) Deemed supplies without consideration
c) Addition made to the value of supplies on account of supplier’s liability , in
relation to such supplies , being incurred by the recipient of the supply
• Under situation given in point (b) & ( c) , the value of supply is deemed to have
been paid.

26. S.NO Form No. Particulars Time Limit
1. GSTR-ITC-01 Declaration for claim of input tax credit Within 30 days from the date of
becoming elgible to avail of ITC
2. GSTRITC -02 Declaration for transfer of ITC in case of sale ,
merger, demerger , amalgamation, lease or transfer
of a business.
-
3. GSTR ITC -03 Details of amount of ITC relating to inputs lying in
stock , input contained in semi-finished and finished
goods lying in stock, and capital goods lying in stock
on opting for composition scheme
Within 60 days from for
commencement of the relevant
financial year.
4. GSTR MIS-01 Final Acceptance of ITC to the recipient
5. GST MIS-02 Communication of mismatched ITC to supplier and
to recipient
On or before last date of the month in
which matching carried out.
6. GST MIS-03 Communication of acceptance of claim of reduction
in output tax liability
7. GST MIS-04 Communication of discrepancy in claim of reduction On or before last date of the month in

27. Appropriation Of Input Tax Credit
Following are the relating to Transfer of input tax credit on account of utilization of CGST
credit for payment of IGST.
On utilization of input tax credit availed under this act for payment
of tax dues under the integrated Goods and Services Tax Act as
reflected in the valid return furnished the amount collected as
central tax shall stand reduced by an amount equal to such credit
so utilized and the central Government shall transfer an amount
equal to the amount so reduced from the central tax account to the
integrated tax account in such manner and within such time as may
be prescribed.

28. TransferOfInputTaxCreditSection18OfIGSTAct
a) Use of IGST to pay CGST – Central Government to transfer such amount to Central
Tax Account on Utilisation of credit of integrated tax availed under this act for payment of
central tax the amount collected as integrated tax shall stand reduced by an amount equal to
the credit so utilised and the Central Government shall transfer an amount equal to the
amount sp reduced from the integrated tax account to the central tax account in such
manner and within such times as may be prescribed:
b) Use of IGST to pay UTGST- Central Government to transfer such amount to Union
Territory Tax Account : On utilization of credit of integrated tax availed under this Act for
payment of Union territory tax the amount collected as integrated tax shall stand reduced
by an amount equal to the credit so utilized and the Central Government shall transfer an
amount so reduced from the integrated tax account to the Union territory tax account in
such manner and within such time as may be prescribed;

29. TransferOfInputTaxCreditSection18OfIGST
Act
Use of IGST to pay SGST: On utilization of credit of integrated tax
availed under this Act for payment of State tax in accordance with the
provisions of the respective state goods and services Tax Act , the
amount collected as integrated tax shall stand reduced by an amount
equal to the credit so utilized and shall be apportioned to the appropriate
state government and the Central government shall transfer the amount
so apportioned to the account of the appropriate state government in
such manner and within such time as may be prescribed.

30. UTILISATION OF CREDIT
1) Utilisation of IGST : The amount of input tax credit on account on IGST
available in the electronic credit ledger of dealer shall first be utilised towards
payment of IGST and the amount remaining ,if any may be utilised towards the
payment of CGST and SGST , in that order.
2) Utilisation of SGST : The amount of input tax credit on account of SGST
available in the electrionic credit ledger shall first be utilized towards payment
of SGST and the amount remaining , if any ,may be utilised towards payment of
CGST and amount remaining , if any , may be utilized towards the payment of
IGST.
3) Utilistaion of CGST : The amount of input tax credit on account of CGST
available in the electrionic credit ledger shall first be utilised towards payment
of CGST and the amount remaining , if any , may be utilised towards the
payment of IGST.

31. THANK YOU