Ch 10 - Input Tax Credit (ITC) | GST Saral by CA Dhruv Aggarwal PDF Download

 Page 1


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 10 - Input  Tax Credi t (ITC) 
 
 
 
 
 
CHAPTER 10 
 
Input Tax Credit (ITC) 
EXECUTIVE SUMMARY 
?   GST is destination based consumption tax i.e. GST is ultimately payable  in the State or Union 
Territory in which goods and services are consumed. 
?   Input Tax Credit is core aspect of GST, which will ensure this basic goal of GST of avoiding 
cascading effect of taxes. 
?   Input Tax Credit is available only if included in GSTR-2 return and tax i nvoice contains a l required 
details. 
?   Supplier of goods and services can avail input tax credit of IGST, CGST, SGST and UTGST paid 
by suppliers on their input goods and services and capital goods. 
?   Input tax Credit of SGST can be utilised for payment of SGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of UTGST can be utilised for payment of UTGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of CGST can be utilised for payment of CGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of IGST can be utilised for payment of IGST, CGST and SGST (in that order) on 
outward supply. 
?   Input tax credit of CGST and SGST/UTGST is not inter-changeable. 
?   A l input goods and services and capital goods used or intended to be used in course or furtherance 
of business are eligible for availment of input tax credit, except few. 
?   Input goods and services used for construction of office and factory buildi ng, rent-a-cab, food and 
beverages,  beauty treatment,  health services,  cosmetic  and  plastic  surgery,  leave  travel are not 
eligible. 
?   Motor vehicles and other conveyances are eligible only if used for further supply, transportation of 
passenger or goods and imparting training for driving or flying. 
?   Input tax credit is available only when supplier of goods and services has paid tax in fu l. 
Page 2


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 10 - Input  Tax Credi t (ITC) 
 
 
 
 
 
CHAPTER 10 
 
Input Tax Credit (ITC) 
EXECUTIVE SUMMARY 
?   GST is destination based consumption tax i.e. GST is ultimately payable  in the State or Union 
Territory in which goods and services are consumed. 
?   Input Tax Credit is core aspect of GST, which will ensure this basic goal of GST of avoiding 
cascading effect of taxes. 
?   Input Tax Credit is available only if included in GSTR-2 return and tax i nvoice contains a l required 
details. 
?   Supplier of goods and services can avail input tax credit of IGST, CGST, SGST and UTGST paid 
by suppliers on their input goods and services and capital goods. 
?   Input tax Credit of SGST can be utilised for payment of SGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of UTGST can be utilised for payment of UTGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of CGST can be utilised for payment of CGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of IGST can be utilised for payment of IGST, CGST and SGST (in that order) on 
outward supply. 
?   Input tax credit of CGST and SGST/UTGST is not inter-changeable. 
?   A l input goods and services and capital goods used or intended to be used in course or furtherance 
of business are eligible for availment of input tax credit, except few. 
?   Input goods and services used for construction of office and factory buildi ng, rent-a-cab, food and 
beverages,  beauty treatment,  health services,  cosmetic  and  plastic  surgery,  leave  travel are not 
eligible. 
?   Motor vehicles and other conveyances are eligible only if used for further supply, transportation of 
passenger or goods and imparting training for driving or flying. 
?   Input tax credit is available only when supplier of goods and services has paid tax in fu l. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
?   If payment is not made by recipient to supplier of goods or services or both within 180 days, the 
Page 3


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 10 - Input  Tax Credi t (ITC) 
 
 
 
 
 
CHAPTER 10 
 
Input Tax Credit (ITC) 
EXECUTIVE SUMMARY 
?   GST is destination based consumption tax i.e. GST is ultimately payable  in the State or Union 
Territory in which goods and services are consumed. 
?   Input Tax Credit is core aspect of GST, which will ensure this basic goal of GST of avoiding 
cascading effect of taxes. 
?   Input Tax Credit is available only if included in GSTR-2 return and tax i nvoice contains a l required 
details. 
?   Supplier of goods and services can avail input tax credit of IGST, CGST, SGST and UTGST paid 
by suppliers on their input goods and services and capital goods. 
?   Input tax Credit of SGST can be utilised for payment of SGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of UTGST can be utilised for payment of UTGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of CGST can be utilised for payment of CGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of IGST can be utilised for payment of IGST, CGST and SGST (in that order) on 
outward supply. 
?   Input tax credit of CGST and SGST/UTGST is not inter-changeable. 
?   A l input goods and services and capital goods used or intended to be used in course or furtherance 
of business are eligible for availment of input tax credit, except few. 
?   Input goods and services used for construction of office and factory buildi ng, rent-a-cab, food and 
beverages,  beauty treatment,  health services,  cosmetic  and  plastic  surgery,  leave  travel are not 
eligible. 
?   Motor vehicles and other conveyances are eligible only if used for further supply, transportation of 
passenger or goods and imparting training for driving or flying. 
?   Input tax credit is available only when supplier of goods and services has paid tax in fu l. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
?   If payment is not made by recipient to supplier of goods or services or both within 180 days, the 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
input tax credit is required to be reversed. Interest will be payable from date of taking input tax 
credit [as per rule 2 of Input Tax Credit Rules]. This will create problems and huge compliance 
costs. It is not clear why Government is acting as 'recovery agent' of supplier, as tax element has 
already been received by Government. 
?   Banking company/NBFC/FI can take only 50% of Input Tax Credit. 
?   Life of capital goods will be taken as five years and reversal of input tax credit on capital goods 
removed after use shall be as per rule 9 of Input Tax Credit Rules. 
10.1 ITC is core provision of GST 
 
Input Tax Credit (ITC) is the core concept of GST as GST is destination based tax. ITC avoids cascading 
effect of taxes. 
"Input tax credit" means credit of 'input tax' - section 2(56) of CGST Act. 
 
Burden of proof on taxable person availing input tax credit - Where any person claims that he is eligible 
for input tax credit under this Act, the burden of proving such claim shall lie on such person - section 155 of 
CGST Act. 
10.1-1 Input Tax 
 
Section 2(62) of CGST Act defines 'input tax' as follows - 
 
"Input tax" in relation to a registered person, means the central tax (CGST), State tax (SGST), integrated tax 
(IGST) or Union territory tax (UTSGT) charged on any supply of goods or services or both made to him and 
includes-- 
 
(a)   the integrated goods and services tax charged on import of goods; 
(b)   the tax payable under the provisions of sub-sections (3) and (4) of section 9 [reverse charge of 
CGST] 
(c)   the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods 
and Services Tax Act [reverse charge of IGST] 
(d)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 9 of the 
respective State Goods and Services Tax Act; [reverse charge of SGST] or 
(e)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 7 of the Union 
Territory Goods and Services Tax Act [reverse charge of UTGST] 
but does not include the tax paid under the composition levy. 
 
Input Tax Credit is eligible only when it is credited to electronic credit ledger of taxable person. 
 
10.2 Manner of taking  input  tax credit 
 
Every registered taxable person sha l, subject to such conditions and restrictions as may be prescribed and in 
the manner specified in section 49 of CGST Act, be entitled to take credit of input tax charged on any supply 
of goods or services or both to him which are used or intended to be used in the course or furtherance of his 
business and the said amount shall be credited to the electronic credit ledger of such person - section 16(1) of 
CGST Act. 
Electronic Credit Ledger means the electronic credit ledger referred to in section 49(2) of CGST Act - section 
2(46) CGST Act. 
 
"Electronic credit ledger" is the input tax credit ledger in electronic form maintained at the common portal for 
each registered taxable person. This credit can be utilized for GST liability as specified in section 49(4) of 
Page 4


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 10 - Input  Tax Credi t (ITC) 
 
 
 
 
 
CHAPTER 10 
 
Input Tax Credit (ITC) 
EXECUTIVE SUMMARY 
?   GST is destination based consumption tax i.e. GST is ultimately payable  in the State or Union 
Territory in which goods and services are consumed. 
?   Input Tax Credit is core aspect of GST, which will ensure this basic goal of GST of avoiding 
cascading effect of taxes. 
?   Input Tax Credit is available only if included in GSTR-2 return and tax i nvoice contains a l required 
details. 
?   Supplier of goods and services can avail input tax credit of IGST, CGST, SGST and UTGST paid 
by suppliers on their input goods and services and capital goods. 
?   Input tax Credit of SGST can be utilised for payment of SGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of UTGST can be utilised for payment of UTGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of CGST can be utilised for payment of CGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of IGST can be utilised for payment of IGST, CGST and SGST (in that order) on 
outward supply. 
?   Input tax credit of CGST and SGST/UTGST is not inter-changeable. 
?   A l input goods and services and capital goods used or intended to be used in course or furtherance 
of business are eligible for availment of input tax credit, except few. 
?   Input goods and services used for construction of office and factory buildi ng, rent-a-cab, food and 
beverages,  beauty treatment,  health services,  cosmetic  and  plastic  surgery,  leave  travel are not 
eligible. 
?   Motor vehicles and other conveyances are eligible only if used for further supply, transportation of 
passenger or goods and imparting training for driving or flying. 
?   Input tax credit is available only when supplier of goods and services has paid tax in fu l. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
?   If payment is not made by recipient to supplier of goods or services or both within 180 days, the 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
input tax credit is required to be reversed. Interest will be payable from date of taking input tax 
credit [as per rule 2 of Input Tax Credit Rules]. This will create problems and huge compliance 
costs. It is not clear why Government is acting as 'recovery agent' of supplier, as tax element has 
already been received by Government. 
?   Banking company/NBFC/FI can take only 50% of Input Tax Credit. 
?   Life of capital goods will be taken as five years and reversal of input tax credit on capital goods 
removed after use shall be as per rule 9 of Input Tax Credit Rules. 
10.1 ITC is core provision of GST 
 
Input Tax Credit (ITC) is the core concept of GST as GST is destination based tax. ITC avoids cascading 
effect of taxes. 
"Input tax credit" means credit of 'input tax' - section 2(56) of CGST Act. 
 
Burden of proof on taxable person availing input tax credit - Where any person claims that he is eligible 
for input tax credit under this Act, the burden of proving such claim shall lie on such person - section 155 of 
CGST Act. 
10.1-1 Input Tax 
 
Section 2(62) of CGST Act defines 'input tax' as follows - 
 
"Input tax" in relation to a registered person, means the central tax (CGST), State tax (SGST), integrated tax 
(IGST) or Union territory tax (UTSGT) charged on any supply of goods or services or both made to him and 
includes-- 
 
(a)   the integrated goods and services tax charged on import of goods; 
(b)   the tax payable under the provisions of sub-sections (3) and (4) of section 9 [reverse charge of 
CGST] 
(c)   the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods 
and Services Tax Act [reverse charge of IGST] 
(d)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 9 of the 
respective State Goods and Services Tax Act; [reverse charge of SGST] or 
(e)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 7 of the Union 
Territory Goods and Services Tax Act [reverse charge of UTGST] 
but does not include the tax paid under the composition levy. 
 
Input Tax Credit is eligible only when it is credited to electronic credit ledger of taxable person. 
 
10.2 Manner of taking  input  tax credit 
 
Every registered taxable person sha l, subject to such conditions and restrictions as may be prescribed and in 
the manner specified in section 49 of CGST Act, be entitled to take credit of input tax charged on any supply 
of goods or services or both to him which are used or intended to be used in the course or furtherance of his 
business and the said amount shall be credited to the electronic credit ledger of such person - section 16(1) of 
CGST Act. 
Electronic Credit Ledger means the electronic credit ledger referred to in section 49(2) of CGST Act - section 
2(46) CGST Act. 
 
"Electronic credit ledger" is the input tax credit ledger in electronic form maintained at the common portal for 
each registered taxable person. This credit can be utilized for GST liability as specified in section 49(4) of 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
CGST Act. 
 
"Input" means any goods other than capital goods, used or intended to be used by a supplier in the course or 
furtherance of business - section 2(59) of CGST Act. 
"Input Service" means any service used or intended to be used by a supplier in the course or furtherance of 
business - section 2(60) of CGST Act. 
"Outward supply" in relation to a person, means supply of goods or services, whether by sale, transfer, barter, 
exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in 
the course or furtherance of business- section 2(83) of CGST Act. 
10.2-1 Documentary requirements and conditions for claiming input  tax credit 
 
The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis 
of any of the fo lowing documents [rule 1(1) of Input Tax Credit Rules]. 
 
(a)   an invoice issued by the supplier of goods or services or both in accordance with the provisions of 
section 31 [Invoice of supplier of goods or services or both]. 
(b)   a debit note issued by a supplier in accordance with the provisions of section 34. 
(c)   a Bill of entry. 
(d)   an i nvoice issued in accordance with the provisions of section 31(3)(f) [tax paid on reverse charge 
basis]. 
(e)   a document issued by an Input Service Distributor in accordance  with the provisions of Invoice 
Rules. 
(f)  a document issued by an Input Service Distributor, as prescribed in rule 4(1)(g) of Input Tax Credit 
Rules. 
Input  Tax  Credit  only  if invoice  complete  in  all  respects  -  Input tax credit shall be availed  by a 
registered person only if a l the applicable particulars as prescribed in Invoice Rules are contained in the said 
document, and the relevant information, as contained in the said document, is furnished in form GSTR-2 by 
such person - rule 1(2) of Input Tax Credit Rules. 
10.2-2 Input tax credit cannot  be taken after one year from date  of invoice or filing of annual return 
 
A taxable person shall not be entitled to take input tax credit in respect of any supply of goods and/or services 
to him after the expiry of one year from the date of issue of tax invoice relating to such supply - section 18(2) 
of CGST Act. 
Further, a taxable person shall not be entitled to take input tax credit in respect of any i nvoice or debit note for 
supply of goods or services or both, after the f iling of the return under section 39 of CGST Act for the month 
of September fo lowing the end of financial year to which such i nvoice or invoice relating to debit note pertains 
or filing of the relevant annual return, whichever is earlier - section 16(4) of CGST Act. 
Rea ly, in view of section 16(4), in case of invoices receive after October, the taxable person gets less than 
one year to take input tax credit. 
10.2-3 No Input tax credit if GST was paid by supplier on advance paid to him 
 
Norma ly, ITC is taken on basis of 'Electronic Credit Ledger'. However, if advance payment was made before 
receipt of goods and services, input tax credit cannot be taken as goods and services are not received. 
At the time of payment of GST on advance, the supplier of goods and services cannot issue tax invoice. He 
has to issue only 'receipt voucher'. 
Page 5


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 10 - Input  Tax Credi t (ITC) 
 
 
 
 
 
CHAPTER 10 
 
Input Tax Credit (ITC) 
EXECUTIVE SUMMARY 
?   GST is destination based consumption tax i.e. GST is ultimately payable  in the State or Union 
Territory in which goods and services are consumed. 
?   Input Tax Credit is core aspect of GST, which will ensure this basic goal of GST of avoiding 
cascading effect of taxes. 
?   Input Tax Credit is available only if included in GSTR-2 return and tax i nvoice contains a l required 
details. 
?   Supplier of goods and services can avail input tax credit of IGST, CGST, SGST and UTGST paid 
by suppliers on their input goods and services and capital goods. 
?   Input tax Credit of SGST can be utilised for payment of SGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of UTGST can be utilised for payment of UTGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of CGST can be utilised for payment of CGST first and balance for payment of 
IGST on outward supply. 
?   Input tax Credit of IGST can be utilised for payment of IGST, CGST and SGST (in that order) on 
outward supply. 
?   Input tax credit of CGST and SGST/UTGST is not inter-changeable. 
?   A l input goods and services and capital goods used or intended to be used in course or furtherance 
of business are eligible for availment of input tax credit, except few. 
?   Input goods and services used for construction of office and factory buildi ng, rent-a-cab, food and 
beverages,  beauty treatment,  health services,  cosmetic  and  plastic  surgery,  leave  travel are not 
eligible. 
?   Motor vehicles and other conveyances are eligible only if used for further supply, transportation of 
passenger or goods and imparting training for driving or flying. 
?   Input tax credit is available only when supplier of goods and services has paid tax in fu l. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
?   If payment is not made by recipient to supplier of goods or services or both within 180 days, the 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
input tax credit is required to be reversed. Interest will be payable from date of taking input tax 
credit [as per rule 2 of Input Tax Credit Rules]. This will create problems and huge compliance 
costs. It is not clear why Government is acting as 'recovery agent' of supplier, as tax element has 
already been received by Government. 
?   Banking company/NBFC/FI can take only 50% of Input Tax Credit. 
?   Life of capital goods will be taken as five years and reversal of input tax credit on capital goods 
removed after use shall be as per rule 9 of Input Tax Credit Rules. 
10.1 ITC is core provision of GST 
 
Input Tax Credit (ITC) is the core concept of GST as GST is destination based tax. ITC avoids cascading 
effect of taxes. 
"Input tax credit" means credit of 'input tax' - section 2(56) of CGST Act. 
 
Burden of proof on taxable person availing input tax credit - Where any person claims that he is eligible 
for input tax credit under this Act, the burden of proving such claim shall lie on such person - section 155 of 
CGST Act. 
10.1-1 Input Tax 
 
Section 2(62) of CGST Act defines 'input tax' as follows - 
 
"Input tax" in relation to a registered person, means the central tax (CGST), State tax (SGST), integrated tax 
(IGST) or Union territory tax (UTSGT) charged on any supply of goods or services or both made to him and 
includes-- 
 
(a)   the integrated goods and services tax charged on import of goods; 
(b)   the tax payable under the provisions of sub-sections (3) and (4) of section 9 [reverse charge of 
CGST] 
(c)   the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods 
and Services Tax Act [reverse charge of IGST] 
(d)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 9 of the 
respective State Goods and Services Tax Act; [reverse charge of SGST] or 
(e)   the tax payable under the provisions of sub-section (3) and sub-section (4) of section 7 of the Union 
Territory Goods and Services Tax Act [reverse charge of UTGST] 
but does not include the tax paid under the composition levy. 
 
Input Tax Credit is eligible only when it is credited to electronic credit ledger of taxable person. 
 
10.2 Manner of taking  input  tax credit 
 
Every registered taxable person sha l, subject to such conditions and restrictions as may be prescribed and in 
the manner specified in section 49 of CGST Act, be entitled to take credit of input tax charged on any supply 
of goods or services or both to him which are used or intended to be used in the course or furtherance of his 
business and the said amount shall be credited to the electronic credit ledger of such person - section 16(1) of 
CGST Act. 
Electronic Credit Ledger means the electronic credit ledger referred to in section 49(2) of CGST Act - section 
2(46) CGST Act. 
 
"Electronic credit ledger" is the input tax credit ledger in electronic form maintained at the common portal for 
each registered taxable person. This credit can be utilized for GST liability as specified in section 49(4) of 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
CGST Act. 
 
"Input" means any goods other than capital goods, used or intended to be used by a supplier in the course or 
furtherance of business - section 2(59) of CGST Act. 
"Input Service" means any service used or intended to be used by a supplier in the course or furtherance of 
business - section 2(60) of CGST Act. 
"Outward supply" in relation to a person, means supply of goods or services, whether by sale, transfer, barter, 
exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in 
the course or furtherance of business- section 2(83) of CGST Act. 
10.2-1 Documentary requirements and conditions for claiming input  tax credit 
 
The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis 
of any of the fo lowing documents [rule 1(1) of Input Tax Credit Rules]. 
 
(a)   an invoice issued by the supplier of goods or services or both in accordance with the provisions of 
section 31 [Invoice of supplier of goods or services or both]. 
(b)   a debit note issued by a supplier in accordance with the provisions of section 34. 
(c)   a Bill of entry. 
(d)   an i nvoice issued in accordance with the provisions of section 31(3)(f) [tax paid on reverse charge 
basis]. 
(e)   a document issued by an Input Service Distributor in accordance  with the provisions of Invoice 
Rules. 
(f)  a document issued by an Input Service Distributor, as prescribed in rule 4(1)(g) of Input Tax Credit 
Rules. 
Input  Tax  Credit  only  if invoice  complete  in  all  respects  -  Input tax credit shall be availed  by a 
registered person only if a l the applicable particulars as prescribed in Invoice Rules are contained in the said 
document, and the relevant information, as contained in the said document, is furnished in form GSTR-2 by 
such person - rule 1(2) of Input Tax Credit Rules. 
10.2-2 Input tax credit cannot  be taken after one year from date  of invoice or filing of annual return 
 
A taxable person shall not be entitled to take input tax credit in respect of any supply of goods and/or services 
to him after the expiry of one year from the date of issue of tax invoice relating to such supply - section 18(2) 
of CGST Act. 
Further, a taxable person shall not be entitled to take input tax credit in respect of any i nvoice or debit note for 
supply of goods or services or both, after the f iling of the return under section 39 of CGST Act for the month 
of September fo lowing the end of financial year to which such i nvoice or invoice relating to debit note pertains 
or filing of the relevant annual return, whichever is earlier - section 16(4) of CGST Act. 
Rea ly, in view of section 16(4), in case of invoices receive after October, the taxable person gets less than 
one year to take input tax credit. 
10.2-3 No Input tax credit if GST was paid by supplier on advance paid to him 
 
Norma ly, ITC is taken on basis of 'Electronic Credit Ledger'. However, if advance payment was made before 
receipt of goods and services, input tax credit cannot be taken as goods and services are not received. 
At the time of payment of GST on advance, the supplier of goods and services cannot issue tax invoice. He 
has to issue only 'receipt voucher'. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
10.3 Requirements for availing Input Tax Credit 
 
As per section 16(2) of CGST Act, registered taxable person shall not be entitled to the credit of any input tax 
in respect of any supply of goods or services or both to him unless fo lowing conditions are satisfied. 
 
(a)   he is in possession of a tax invoice or debit note issued by a supplier registered under GST Act or 
such other tax paying document as may be prescribed, 
(b)   he has received the goods or services or both. 
(c)   Subject to section 41 of CGST Act, the tax charged in respect of such supply has been actua ly paid 
to the credit of the appropriate Government, either in cash or through utilization of input tax credit 
admissible in respect of the said supply [section 41 of CGST Act a lows taking input tax credit in 
electronic credit ledger on self assessment basis] and 
(d)   he has furnished the return under section 39 [every taxable person is required to f ile electronic return 
every month as per section 39 of CGST Act] 
Inputs  or capital goods received in instalments  - Where the goods against an invoice are received in lots 
or instalments,  the registered  taxable person shall be entitled to the credit upon receipt of the last lot or 
instalment - first proviso to section 16(2) of CGST Act. 
Delivery to transporter by supplier is sufficient  to take input  tax credit = For the purpose of section 
16(2)(b) of CGST Act, it shall be deemed that the taxable person has received the goods where the goods are 
delivered by the supplier to a recipient or any other person on the direction of such registered person, whether 
acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents 
of title to goods or otherwise - Explanation to section 16(2)(b) of CGST Act. 
Input  tax credit only after supplier makes payment of GST - The receiver (of goods and services) can 
take provisional credit on basis of return f iled by supplier. However, he will be eligible to take final Input Tax 
Credit only after the supplier of such goods and services has paid the tax. 
Taking input tax credit in respect of inputs sent for job work - Input tax credit is available in respect of 
goods sent for job work and brought back for further use. Provisions are contained in another chapter under 
job work. 
10.3-1 Reversal of input  tax credit if payment not made  to supplier within 180 days 
 
Where a recipient fails to pay to the supplier of goods or services or both (other than the supplies on which tax 
is payable on reverse charge basis), the amount towards the value of supply along with tax payable thereon 
within a period of 180 days from the date of issue of invoice by the supplier, an amount equal to the input tax 
credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such 
manner as may be prescribed - second proviso to section 16(2) of CGST Act. 
If the recipient later makes payment to supplier, he can take credit of input tax - third proviso to section 16(2) 
of CGST Act. 
 
Purpose of this provision is not clear. The recipient can take input tax credit only if tax has been actua ly paid 
by supplier. Then how Government is concerned about payment of invoice amount to supplier? 
Often in case of large works contracts, some retention money is kept which is released after warranty period. 
 
Further, some deductions from i nvoice for various reasons is common. In such case, this provision will create 
great nuisance to taxable persons. 
It is not clear why Government is acting as recovery agent of the supplier of service. 
 
Proportionate reversal if part amount  paid - Though the provision does not specifica ly say so, it is logical