Input tax credit Under GST

1. INPUT TAX CREDIT
UNDER
GST
Prepared By :
Jyoti Mishra

2. Points to be covered
 Meaning of Input Tax and Input Tax Credit
 Eligibility for taking ITC
 Conditions for taking ITC
 Time limit for claiming ITC
 Apportionment of credit and blocked credit
 Availability of credit in special circumstances
 Taking ITC in respect of input for Job-Work
 Manner of utilization of ITC
 Manner of distribution of credit by ISD
 Condition for distribution of credit by ISD
 Manner of recovery of credit distributed in excess

3. What is the meaning
of Input Tax and Input
Tax Credit?
"Input Tax" means the;
Central Tax (CGST)
State Tax (SGST)
Integrated Tax (IGST)
Union Territory Tax (UTGST)
Charged on supply of goods/services to a registered person. However, credit of tax paid
on capital goods is permitted to be availed in one installment. It also include the tax
payable under the reverse charge.
"Input Tax Credit" Mechanism is available to you when you are covered
under the GST Act. Which means if you are a manufacturer, supplier, agent, e-
commerce operator, aggregator or any of the persons mentioned here, registered
under GST, You are eligible to claim INPUT TAX CREDIT for tax paid by you on your
PURCHASES.

4. what is the eligibility
for taking ITC ?
As per section 16(1) of GST ACT,
Every registered taxable person entitled to take credit of Input Tax
Charged on any supply of G or S to him, which are used or intended to be
used in the course or Furtherance of his business and
The said amount shall be credit to the electronic credit ledger of such
person.

5. What are the
conditions necessary
for obtaining ITC?
As per section 16(2) of GST ACT, notwithstanding anything
contained in this section, following four conditions are to be satisfied by the registered taxable
person for obtaining ITC:
1.The registered taxable person should be in profession of tax paying document issued by a
supplier;
2.He has received the goods or services or both;
4.He has furnished the return u/s- 39.
3.The tax charged on such supply has been actually paid to the government either in cash or
through utilization of ITC;

6. Other important points
1.
• Provided that where the goods against an invoice are received in lots or installments, the registered
taxable person shall be entitled to the credit upon receipt of the last lot or installment.
2.
• A person can take ITC without payment of consideration for the supply along with the tax to the
supplier. But he is required to pay within 180 days from the date of issue of invoice. Otherwise
i) the amount of ITC would be added to output tax liability of the person,
ii) he would also be required to pay interest.
However he can take ITC again on payment of consideration and tax.
3.
• Entitlement for claim of ITC which is reversed recipient shall be entitled to avail of the credit of input
tax on payment made by him of amount towards the value of supply or G/S or both along with tax
payable thereon to the supplier of services.

7. IS ITC AVAILABLE ON TAX
PORTION IN RESPECT OF
CAPITAL GOODS?
Where the registered taxable person has claimed
depreciation on the tax component of the cost of
capital goods under the provisions of the Income Tax
Act, 1961, the ITC shall not be allowed on the said tax
component.
As per section 16(2) of GST ACT,

8. What is the time limit for
claiming ITC ?
Credit for an invoice pertaining to a FY cannot
be claimed after:
•Filing of the return for the month of September
of next FY(Due date is 31st Oct of next F.Y.) or
•Filing of the annual return of the FY (Due date
is 31st Dec of next F.Y.);
Whichever is earlier.

9. Apportionment of
credit and blocked
credit
Section 17 of GST ACT
Section 17(1)
Restriction of ITC attributable to the purposes of
business only where the G or S are used partly for
the purposes of his business and partly for other
purposes.
Section 17(2)
ITC restricted to the extent of taxable supplies
and zero-rated supplies where the G or S are used
partly for effecting taxable supply including zero-
rated supplies and partly for effecting exempt
amount.
Where, Zero-rated supply means taxable supply of G/S namely;
1. Export of G/S; or
2. Supply of G/S to a SEZ developer or an SEZ Unit.

10. Apportionment of
credit and blocked
credit
Section 17 of GST ACT
Section 17(4)
ITC incase of Banking company/Financial
Institution including a NBFC taxable person engaged
in supplying services by way of accepting deposits,
extending loans or advances shall have following two
options for availing ITC;
(a)
Either to follow for
the provisions of
section 17(2)
(b)
Avail of, every month, an amount
equal to 50% of the eligible ITC on
inputs, capital goods, and input
services in that month
Either of the option once exercised shall not be withdrawn during remaining part of the financial year.

11. Apportionment of
credit and blocked
credit
Section 17 of GST ACT
List of items on which ITC not admissible {section 17(5)}
Motor vehicles
and other
conveyance
Exception
When they are supplied in
the course of business or
are used for providing
following taxable services;
For further supply
or
Transport of
passenger or
Imparting training
on driving skills,
flying, navigating
such vehicle or
Transportation of
goods
Supply of G/S
provided in
relation to
i) Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery Except where
such inward supply used for making an outward taxable supply of the same category of G/S or both or as an element of
taxable composite or mixed supply.
ii) Membership of club, Health & Fitness Centre
iii) Rent-a-cab, Life insurance, health insurance, Except where;
(A) the govt. notifies the services which are obligatory for an employer to provide to its employees under any law for the
time being in force.
(B)such supply is used for making an outward taxable supply.......
iv) Travel benefits extended to employees on vacation such as leave or home Travel concession
Works Contract Services
When supplied for
construction of immovable
property, other than P&M.
Exception
Where it is an input
service for supply of
works contract services
i.e. credit availment on
services of sub-contractor
to a contractor then ITC is
allowed.
G/S received by
taxable Person
for construction
of an immovable
property on his
account, other
than P&M, even
when used in
course or
furtherance of
business.
Composition Scheme
i.e. G/S on which tax is
paid under composition
scheme
G/S or both received by NR taxable person,
Except On goods imported by him
Personal
Consumption
Goods lost,
stolen,
destroyed,
written off or
disposed off
by way of gift
or free sample
Any tax paid in terms of
Section 74 (Fraud cases)
Section 123 (Detention
and release of Goods or
Conveyance)
Section 130 (Confiscation
of Goods or Conveyance
and levy of penalty)

12. Availability of credit in special circumstances
Section 18 of GST Act
Section 18(1)(a)
ITC on opening stock of inputs at the time of new
registration
A person who has 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 r/o;
i) inputs held in stock, and
ii) inputs contained in semi finished goods held in stock, or
iii) finished goods held in stock
on the day immediately preceding the date from
which he becomes liable to pay tax under the
provisions of this Act.
Section 18(1)(b)
ITC on opening stock of inputs in case of voluntary
registration
A person who obtains voluntary registration is entitled to take
credit of input tax in r/o;
i) inputs in stock , and
ii)inputs contained in semi finished goods held in stock, or
iii)finished goods held in stock,
held on the day immediately preceding the date of registration.
Section 18(1)(c)
ITC on opening stock of inputs/capital goods if
taxable person switching from composition scheme
A registered taxable person ceases to pay tax under Section 10 i.e.
Composition Scheme, shall, be entitled to take credit of input tax in
r/o,
i) inputs held in stock, and
ii)inputs contained in semi-finished goods held in stock , or
iii)finished goods held in stock , and
iv)Capital goods
on the day immediately preceding the date from which he becomes liable
to pay tax under section 9(i.e. Regular dealer).
Section 18(1)(d)
ITC on exempt supply becoming taxable
A registered taxable person shall, subject to such conditions and
restrictions as may be prescribed, be entitled to take credit of
input tax in r/o,
i) inputs held in stock, and
ii)inputs contained in semi-finished goods held in stock, or
iii)finished goods held in stock, and
iv)Capital goods exclusively used for such exempt supply
on the day immediately preceding the date from which such supply
becomes taxable.
Availability of credit in
special circumstances

13. Other important points
Section 18(2)
Time limit for taking credit of ITC in all four cases as mentioned in last slide
within 1 Year from the date of Tax Invoice relating to such supply.
Section 18(3)
T/F of unutilized ITC in case change in the constitution of registered taxable
person( i.e. sale/merger/demerger/amalgamation etc.)
The transferor shall be allowed to transfer the ITC that remains unutilized in its
BOA to the sold, merged, demerged, amalgamated, leased or transferred
business in the manner prescribed.

14. Other important points
Section 18(4)
ITC reversal on closing stock of Input/ CG
Switching to
Composition Scheme
G/S becoming
Exempt absolutely
Where any registered taxable person who has availed of ITC on -
inputs held in stock, and
inputs contained in semi-finished goods held in stock, or
inputs contained in finished goods held in stock, and
capital goods
on the immediately preceding the date of such SWICH OVER or as the case may be date of
EXEMPTION of such G/S, is required to reverse the ITC availed on above, reduced by such
percentage points as may be prescribed.
Further provided that after payment of such amount, the balance of ITC, if any, lying in his electronic
credit ledger shall lapse.

15. Other important points
Section 18(6)
In case of supply of capital goods or P&M, on which ITC has been
taken, the registered taxable person shall be required to pay an
amount equal to
 the ITC taken on CG/P&M, reduced by the percentage points as
may be specified in this behalf or
 the tax on the transaction value of such CG/P&M under section
15(1),
Whichever is higher.

16. TAKING ITC IN R/O OF INPUTS/CAPITAL GOODS SENT
FOR JOB WORK (SECTION 19 of GST Act)
Section 19(1)/Section 19(4):ITC on inputs/capital goods subject to such restrictions as
may be prescribed , be allowed to PRINCIPAL towards inputs/capital goods sent to a
job worker for job-work.
• The principal shall be entitled to take credit of
input tax on Inputs even if the inputs are directly
sent to job worker for job work without their
being first brought to his place of business.
Section 19(2)/Section19(5)
If Inputs/Capital
goods directly
sent to job worker
• INPUT: within 1 year ; CG: within 3 year
• It shall be deemed that such Input/CG had been supplied by the
principal to the job-worker on the day when the said Input/CG were
sent out.
• And the period of 1 year/3 year shall be counted from the date of
receipt of inputs by the job worker. Section 19(3)/ Section 19(6)
If Inputs/Capital
goods sent for job
work not returned

17. MANNER OF UTILIZATION OF
INPUT TAX CREDIT
CGST IGSTUTGSTSGST
CGST
IGST
SGST
IGST
UTGST
IGST
IGST
UTGST
SGST
CGST

18. MANNER OF DISTRIBUTION OF CREDIT BY ISD
SECTION 20(1) OF GST ACT
when ISD & Recipient are
located in different states
when ISD & Recipient are
located in same states
credit of
CGST
credit of
SGST
CGST
or
IGST
SGST
or
IGST
credit of
CGST & IGST
credit of
SGST & IGST
CGST SGST
The ISD may distribute in such a manner as may be prescribed;
By way of issue of a prescribed document containing , inter alia, the amount of ITC
being distributed or being reduced thereafter.

19. CONDITIONS FOR DISTRIBUTION OF ITC BY ISD
SECTION 20(2) OF GST ACT
1. Documents required (invoice or other document issued to recipient of the
credit so distributed).
2. Distributed credit not to exceed the available credit.
3. Distribution of ITC to concerned recipient only.
4. Distribution of ITC to more than one recipient (on pro rata basis of the
turnover in a state of such recipient during the relevant period, to the aggregate
of the turnover of all such recipient to whom such input service is attributable
and which operational in the current year and during the relevant period).
5. ITC distribution on the basis of turnover in a state of such recipient (on pro
rata basis of the turnover in a state of such recipient during the relevant period,
to the aggregate of the turnover of all such recipient and which operational in
the current year and during the relevant period).

20. MANNER OF RECOVERY OF CREDIT DISTRIBUTED IN EXCESS
SECTION 21 OF GST ACT
The credit distributed in contravention of
provisions of section 20 could be recovered
from the recipient to which it is distributed
along with interest, and the provisions of
section 73 and 74, as the case may be, shall
apply mutatis mutandis for effecting such
recovery.

21. Matching of ITC
In order to have control and avoid leakage in flow of credit the Government has
introduced the concept of matching and mismatching in GST laws which is very
much similar to VAT laws. Thus, the principle of matching and mismatching will
be applicable now on goods as well as on services. Where, After filling of the
Form GSTR-3, following details relating to the Input Tax Credit (ITC) claimed
would be matched by Goods and Service Tax (GST) common portal:
a) GSTIN of the supplier;
b) GSTIN of the recipient;
c) Invoice/or debit note number;
d) Invoice/or debit note date;
e) Taxable value; and
f) Tax amount

22. Matching of ITC
Form of Return Person required to furnish Details required to be furnished
GSTR-1 Supplier Prescribed particulars in respect of outward supply
GSTR-2A Auto-populated for the recipient
Basis the Form GSTR-1 of supplier, the particulars
of inward supply would be auto populated
GSTR-2 Recipient
Recipient shall modify, delete or include the details
of inward supply basis the auto-populated from
GSTR-2A and furnish the final details of his inward
supply
GSTR-1A Auto-populated for the supplier
Basis the form GSTR-2 of recipient, the particulars
of outward supply as validated by the recipient
would be made available for the supplier ,which he
may accept to update and finalize his earlier
submitted Form GSTR-1
GSTR-3 Supplier and recipient
Matching of ITC would be done only after the due
date for furnishing the monthly return
Particulars to be furnished for supply (supply of goods and services) by
the supplier and recipient:

23. Mismatching of ITC
In terms of the provisions of Model GST law; the reversal of ITC arises when:
(a) There is excess claim of ITC by the recipient as against the tax
pronounced by the supplier, or
(b) The outward supply is not declared by the Supplier, or
(c) There is a duplication of claim of ITC by the recipient.

24. Thank
You
Jyoti Mishra
{CA Article at S. K.
Anand & Company }