Final Input Tax Credit - Goods and Service Tax Rules - 17052017 | Learn About GST : Updates and Rules PDF Download

 Page 1


1	
	
CHAPTER---- 
 
Input Tax Credit  
 
 
1.        Documentary requirements and conditions for claiming input tax credit 
 
(1) The input tax credit shall be availed by a registered person, including the Input 
Service Distributor, on the basis of any of the following documents, namely:- 
 
(a) an invoice issued by the supplier of goods or services or both in accordance with 
the provisions of section 31; 
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section 
(3) of section 31, subject to payment of tax; 
(c) a debit note issued by a supplier in accordance with the provisions of section 34; 
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or 
rules made thereunder for assessment of integrated tax on imports;  
(e) an ISD invoice or ISD credit note or any document issued by an Input Service 
Distributor in accordance with the provisions of sub-rule (1) of rule invoice.7. 
 
(2) Input tax credit shall be availed by a registered person only if all the applicable 
particulars as prescribed in Chapter ---- (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. 
 
(3) No input tax credit shall be availed by a registered person in respect of any tax that 
has been paid in pursuance of any order where any demand has been confirmed  on account 
of any fraud, willful misstatement or suppression of facts.    
 
2.    Reversal of input tax credit in case of non-payment of consideration 
 
(1) A registered person, who has availed of input tax credit on any inward supply of 
goods or services or both, but fails to pay to the supplier thereof the value of such supply 
along with the tax payable thereon within the time limit specified in the second proviso to 
sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not 
paid and the amount of input tax credit availed of proportionate to such amount not paid to 
the supplier in FORM GSTR-2 for the month immediately following the period of one 
hundred and eighty days from the date of issue of invoice. 
 
Provided that the value of supplies made without consideration as specified in Schedule I 
shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of 
section 16. 
 
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax 
liability of the registered person for the month in which the details are furnished.  
 
(3) The registered person shall be liable to pay interest at the rate notified under sub-section 
(1) of section 50 for the period starting from the date of availing credit on such supplies till 
the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is 
paid. 
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or these rules, that had 
been reversed earlier.   
Page 2


1	
	
CHAPTER---- 
 
Input Tax Credit  
 
 
1.        Documentary requirements and conditions for claiming input tax credit 
 
(1) The input tax credit shall be availed by a registered person, including the Input 
Service Distributor, on the basis of any of the following documents, namely:- 
 
(a) an invoice issued by the supplier of goods or services or both in accordance with 
the provisions of section 31; 
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section 
(3) of section 31, subject to payment of tax; 
(c) a debit note issued by a supplier in accordance with the provisions of section 34; 
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or 
rules made thereunder for assessment of integrated tax on imports;  
(e) an ISD invoice or ISD credit note or any document issued by an Input Service 
Distributor in accordance with the provisions of sub-rule (1) of rule invoice.7. 
 
(2) Input tax credit shall be availed by a registered person only if all the applicable 
particulars as prescribed in Chapter ---- (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. 
 
(3) No input tax credit shall be availed by a registered person in respect of any tax that 
has been paid in pursuance of any order where any demand has been confirmed  on account 
of any fraud, willful misstatement or suppression of facts.    
 
2.    Reversal of input tax credit in case of non-payment of consideration 
 
(1) A registered person, who has availed of input tax credit on any inward supply of 
goods or services or both, but fails to pay to the supplier thereof the value of such supply 
along with the tax payable thereon within the time limit specified in the second proviso to 
sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not 
paid and the amount of input tax credit availed of proportionate to such amount not paid to 
the supplier in FORM GSTR-2 for the month immediately following the period of one 
hundred and eighty days from the date of issue of invoice. 
 
Provided that the value of supplies made without consideration as specified in Schedule I 
shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of 
section 16. 
 
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax 
liability of the registered person for the month in which the details are furnished.  
 
(3) The registered person shall be liable to pay interest at the rate notified under sub-section 
(1) of section 50 for the period starting from the date of availing credit on such supplies till 
the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is 
paid. 
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or these rules, that had 
been reversed earlier.   
2	
	
 
3. Claim of credit by a banking company or a financial institution 
 
A banking company or a financial institution, including a non-banking financial company, 
engaged in supply of services by way of accepting deposits or extending loans or advances 
that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance 
with the option permitted under sub-section (4) of that section, shall follow the procedure 
specified below - 
 
(a) the said company or institution shall not avail the credit of,- 
(i) tax paid on inputs and  input services that are used for non-business 
purposes, and  
(ii)    the credit attributable to supplies specified in sub-section (5) of section 
17,  
in FORM GSTR-2;  
(b) the said company or institution shall avail the credit of tax paid on inputs and 
input services referred to in the second proviso to sub-section (4) of section 17 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit 
admissible to the company or the institution and shall be furnished in FORM GSTR-2; 
 
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of 
sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or 
the institution.  
 
 
4.    Procedure for distribution of input tax credit by Input Service Distributor 
 
(1) An Input Service Distributor shall distribute input tax credit in the manner and subject 
to the conditions specified below- 
 
(a) the input tax credit available for distribution in a month shall be distributed in 
the same month and the details thereof shall be furnished in FORM GSTR-6 in 
accordance with the provisions of Chapter ---- (Return Rules); 
 
(b) the Input Service Distributor shall, in accordance with the provisions of clause 
(d), separately distribute the amount of ineligible  input tax credit (ineligible under the 
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible 
input tax credit;  
 
(c) the input tax credit on account of central tax, State tax, Union territory tax and 
integrated tax shall be distributed separately in accordance with the provisions of clause 
(d); 
 
(d) the input tax credit that is required to be distributed in accordance with the 
provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients 
‘R
1
’, whether registered or not, from amongst the total of all the recipients to whom 
input tax credit is attributable, including the recipient(s) who are engaged in making 
exempt supply, or are otherwise not registered for any reason, shall be the amount, 
“C
1
”, to be calculated by applying the following formula:- 
 
C
1
 = (t
1
÷T) × C 
Page 3


1	
	
CHAPTER---- 
 
Input Tax Credit  
 
 
1.        Documentary requirements and conditions for claiming input tax credit 
 
(1) The input tax credit shall be availed by a registered person, including the Input 
Service Distributor, on the basis of any of the following documents, namely:- 
 
(a) an invoice issued by the supplier of goods or services or both in accordance with 
the provisions of section 31; 
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section 
(3) of section 31, subject to payment of tax; 
(c) a debit note issued by a supplier in accordance with the provisions of section 34; 
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or 
rules made thereunder for assessment of integrated tax on imports;  
(e) an ISD invoice or ISD credit note or any document issued by an Input Service 
Distributor in accordance with the provisions of sub-rule (1) of rule invoice.7. 
 
(2) Input tax credit shall be availed by a registered person only if all the applicable 
particulars as prescribed in Chapter ---- (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. 
 
(3) No input tax credit shall be availed by a registered person in respect of any tax that 
has been paid in pursuance of any order where any demand has been confirmed  on account 
of any fraud, willful misstatement or suppression of facts.    
 
2.    Reversal of input tax credit in case of non-payment of consideration 
 
(1) A registered person, who has availed of input tax credit on any inward supply of 
goods or services or both, but fails to pay to the supplier thereof the value of such supply 
along with the tax payable thereon within the time limit specified in the second proviso to 
sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not 
paid and the amount of input tax credit availed of proportionate to such amount not paid to 
the supplier in FORM GSTR-2 for the month immediately following the period of one 
hundred and eighty days from the date of issue of invoice. 
 
Provided that the value of supplies made without consideration as specified in Schedule I 
shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of 
section 16. 
 
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax 
liability of the registered person for the month in which the details are furnished.  
 
(3) The registered person shall be liable to pay interest at the rate notified under sub-section 
(1) of section 50 for the period starting from the date of availing credit on such supplies till 
the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is 
paid. 
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or these rules, that had 
been reversed earlier.   
2	
	
 
3. Claim of credit by a banking company or a financial institution 
 
A banking company or a financial institution, including a non-banking financial company, 
engaged in supply of services by way of accepting deposits or extending loans or advances 
that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance 
with the option permitted under sub-section (4) of that section, shall follow the procedure 
specified below - 
 
(a) the said company or institution shall not avail the credit of,- 
(i) tax paid on inputs and  input services that are used for non-business 
purposes, and  
(ii)    the credit attributable to supplies specified in sub-section (5) of section 
17,  
in FORM GSTR-2;  
(b) the said company or institution shall avail the credit of tax paid on inputs and 
input services referred to in the second proviso to sub-section (4) of section 17 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit 
admissible to the company or the institution and shall be furnished in FORM GSTR-2; 
 
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of 
sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or 
the institution.  
 
 
4.    Procedure for distribution of input tax credit by Input Service Distributor 
 
(1) An Input Service Distributor shall distribute input tax credit in the manner and subject 
to the conditions specified below- 
 
(a) the input tax credit available for distribution in a month shall be distributed in 
the same month and the details thereof shall be furnished in FORM GSTR-6 in 
accordance with the provisions of Chapter ---- (Return Rules); 
 
(b) the Input Service Distributor shall, in accordance with the provisions of clause 
(d), separately distribute the amount of ineligible  input tax credit (ineligible under the 
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible 
input tax credit;  
 
(c) the input tax credit on account of central tax, State tax, Union territory tax and 
integrated tax shall be distributed separately in accordance with the provisions of clause 
(d); 
 
(d) the input tax credit that is required to be distributed in accordance with the 
provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients 
‘R
1
’, whether registered or not, from amongst the total of all the recipients to whom 
input tax credit is attributable, including the recipient(s) who are engaged in making 
exempt supply, or are otherwise not registered for any reason, shall be the amount, 
“C
1
”, to be calculated by applying the following formula:- 
 
C
1
 = (t
1
÷T) × C 
3	
	
 
where,  
“C” is the amount of credit to be distributed,  
“t
1
” is the turnover, as referred to in section 20, of person R
1
 during the relevant 
period, and  
“T” is the aggregate of the turnover, during the relevant period, of all recipients 
to whom the input service is attributable in accordance with the provisions of 
section 20,; 
 
 
(e) the input tax credit on account of integrated tax shall be distributed as input tax 
credit of integrated tax to every recipient; 
  
(f)   the input tax credit on account of central tax and State tax or Union territory tax 
shall,  
(i) in respect of a recipient located in the same State or Union territory in which 
the Input Service Distributor is located, be distributed as input tax credit of 
central tax and State tax or Union territory tax respectively; 
    
(ii) in respect of a recipient located in a State or Union territory other than that 
of the Input Service Distributor, be distributed as integrated tax and the amount 
to be so distributed shall be equal to the aggregate of the amount of input tax 
credit of central tax and State tax or Union territory tax that qualifies for 
distribution to such recipient in accordance with clause (d); 
 
(g) The Input Service Distributor shall issue an ISD invoice, as prescribed in sub-rule 
(1) of rule invoice-7, clearly indicating in such invoice that it is issued only for 
distribution of input tax credit.  
 
(h) The Input Service Distributor shall issue an ISD credit note, as prescribed in sub-
rule (1) of rule Invoice-7, for reduction of credit in case the input tax credit already 
distributed gets reduced for any reason.  
 
(i) Any additional amount of input tax credit on account of issuance of a debit note to 
an Input Service Distributor by the supplier shall be distributed in the manner and 
subject to the conditions specified in clauses (a) to (f) and the amount attributable to 
any recipient shall be calculated in the manner provided in clause (d) above and such 
credit shall be distributed in the month in which the debit note is included in the return 
in FORM GSTR-6.  
 
(j) Any input tax credit required to be reduced on account of issuance of a credit note to 
the Input Service Distributor by the supplier shall be apportioned to each recipient in 
the same ratio in which input tax credit contained in the original invoice was distributed 
in terms of clause (d) above, and the amount so apportioned shall be,- 
 
(i) reduced from the amount to be distributed in the month in which the credit 
note is included in the return in FORM GSTR-6; or 
 
(ii) added to the output tax liability of the recipient where the amount so 
apportioned is in the negative by virtue of the amount of credit under distribution 
being less than the amount to be adjusted. 
 
Page 4


1	
	
CHAPTER---- 
 
Input Tax Credit  
 
 
1.        Documentary requirements and conditions for claiming input tax credit 
 
(1) The input tax credit shall be availed by a registered person, including the Input 
Service Distributor, on the basis of any of the following documents, namely:- 
 
(a) an invoice issued by the supplier of goods or services or both in accordance with 
the provisions of section 31; 
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section 
(3) of section 31, subject to payment of tax; 
(c) a debit note issued by a supplier in accordance with the provisions of section 34; 
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or 
rules made thereunder for assessment of integrated tax on imports;  
(e) an ISD invoice or ISD credit note or any document issued by an Input Service 
Distributor in accordance with the provisions of sub-rule (1) of rule invoice.7. 
 
(2) Input tax credit shall be availed by a registered person only if all the applicable 
particulars as prescribed in Chapter ---- (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. 
 
(3) No input tax credit shall be availed by a registered person in respect of any tax that 
has been paid in pursuance of any order where any demand has been confirmed  on account 
of any fraud, willful misstatement or suppression of facts.    
 
2.    Reversal of input tax credit in case of non-payment of consideration 
 
(1) A registered person, who has availed of input tax credit on any inward supply of 
goods or services or both, but fails to pay to the supplier thereof the value of such supply 
along with the tax payable thereon within the time limit specified in the second proviso to 
sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not 
paid and the amount of input tax credit availed of proportionate to such amount not paid to 
the supplier in FORM GSTR-2 for the month immediately following the period of one 
hundred and eighty days from the date of issue of invoice. 
 
Provided that the value of supplies made without consideration as specified in Schedule I 
shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of 
section 16. 
 
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax 
liability of the registered person for the month in which the details are furnished.  
 
(3) The registered person shall be liable to pay interest at the rate notified under sub-section 
(1) of section 50 for the period starting from the date of availing credit on such supplies till 
the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is 
paid. 
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or these rules, that had 
been reversed earlier.   
2	
	
 
3. Claim of credit by a banking company or a financial institution 
 
A banking company or a financial institution, including a non-banking financial company, 
engaged in supply of services by way of accepting deposits or extending loans or advances 
that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance 
with the option permitted under sub-section (4) of that section, shall follow the procedure 
specified below - 
 
(a) the said company or institution shall not avail the credit of,- 
(i) tax paid on inputs and  input services that are used for non-business 
purposes, and  
(ii)    the credit attributable to supplies specified in sub-section (5) of section 
17,  
in FORM GSTR-2;  
(b) the said company or institution shall avail the credit of tax paid on inputs and 
input services referred to in the second proviso to sub-section (4) of section 17 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit 
admissible to the company or the institution and shall be furnished in FORM GSTR-2; 
 
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of 
sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or 
the institution.  
 
 
4.    Procedure for distribution of input tax credit by Input Service Distributor 
 
(1) An Input Service Distributor shall distribute input tax credit in the manner and subject 
to the conditions specified below- 
 
(a) the input tax credit available for distribution in a month shall be distributed in 
the same month and the details thereof shall be furnished in FORM GSTR-6 in 
accordance with the provisions of Chapter ---- (Return Rules); 
 
(b) the Input Service Distributor shall, in accordance with the provisions of clause 
(d), separately distribute the amount of ineligible  input tax credit (ineligible under the 
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible 
input tax credit;  
 
(c) the input tax credit on account of central tax, State tax, Union territory tax and 
integrated tax shall be distributed separately in accordance with the provisions of clause 
(d); 
 
(d) the input tax credit that is required to be distributed in accordance with the 
provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients 
‘R
1
’, whether registered or not, from amongst the total of all the recipients to whom 
input tax credit is attributable, including the recipient(s) who are engaged in making 
exempt supply, or are otherwise not registered for any reason, shall be the amount, 
“C
1
”, to be calculated by applying the following formula:- 
 
C
1
 = (t
1
÷T) × C 
3	
	
 
where,  
“C” is the amount of credit to be distributed,  
“t
1
” is the turnover, as referred to in section 20, of person R
1
 during the relevant 
period, and  
“T” is the aggregate of the turnover, during the relevant period, of all recipients 
to whom the input service is attributable in accordance with the provisions of 
section 20,; 
 
 
(e) the input tax credit on account of integrated tax shall be distributed as input tax 
credit of integrated tax to every recipient; 
  
(f)   the input tax credit on account of central tax and State tax or Union territory tax 
shall,  
(i) in respect of a recipient located in the same State or Union territory in which 
the Input Service Distributor is located, be distributed as input tax credit of 
central tax and State tax or Union territory tax respectively; 
    
(ii) in respect of a recipient located in a State or Union territory other than that 
of the Input Service Distributor, be distributed as integrated tax and the amount 
to be so distributed shall be equal to the aggregate of the amount of input tax 
credit of central tax and State tax or Union territory tax that qualifies for 
distribution to such recipient in accordance with clause (d); 
 
(g) The Input Service Distributor shall issue an ISD invoice, as prescribed in sub-rule 
(1) of rule invoice-7, clearly indicating in such invoice that it is issued only for 
distribution of input tax credit.  
 
(h) The Input Service Distributor shall issue an ISD credit note, as prescribed in sub-
rule (1) of rule Invoice-7, for reduction of credit in case the input tax credit already 
distributed gets reduced for any reason.  
 
(i) Any additional amount of input tax credit on account of issuance of a debit note to 
an Input Service Distributor by the supplier shall be distributed in the manner and 
subject to the conditions specified in clauses (a) to (f) and the amount attributable to 
any recipient shall be calculated in the manner provided in clause (d) above and such 
credit shall be distributed in the month in which the debit note is included in the return 
in FORM GSTR-6.  
 
(j) Any input tax credit required to be reduced on account of issuance of a credit note to 
the Input Service Distributor by the supplier shall be apportioned to each recipient in 
the same ratio in which input tax credit contained in the original invoice was distributed 
in terms of clause (d) above, and the amount so apportioned shall be,- 
 
(i) reduced from the amount to be distributed in the month in which the credit 
note is included in the return in FORM GSTR-6; or 
 
(ii) added to the output tax liability of the recipient where the amount so 
apportioned is in the negative by virtue of the amount of credit under distribution 
being less than the amount to be adjusted. 
 
4	
	
(2)  If the amount of input tax credit distributed by an Input Service Distributor is 
reduced later on for any other reason for any of the recipients, including that it was 
distributed to a wrong recipient by the Input Service Distributor, the process prescribed 
in clause (j) of sub-rule (1) shall apply, mutatis mutandis, for reduction of credit.  
 
(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the ISD credit 
note specified in clause (h) of sub-rule (1), issue an ISD Invoice to the recipient entitled to 
such credit and include the ISD credit note and the ISD Invoice in the return in FORM 
GSTR-6 for the month in which such credit note and invoice was issued. 
 
5. Manner of claiming credit in special circumstances 
 
(1) Input tax credit claimed in accordance with the provisions of sub-section (1) of section 18 
on the inputs held in stock or inputs contained in semi-finished or finished goods held in 
stock, or the credit claimed on capital goods in accordance with the provisions of clauses (c) 
and (d) of the said sub-section, shall be subject to the following conditions - 
 
(a) The input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of 
section 18, shall be claimed after reducing the tax paid on such capital goods by five 
percentage points per quarter of a year or part thereof from the date of invoice or such other 
documents on which the capital goods were received by the taxable person. 
 
(b) The registered person shall within thirty days from the date of his becoming eligible to 
avail of input tax credit under sub-section (1) of section 18 shall make a declaration, 
electronically, on the Common Portal in FORM GST ITC-01 to the effect that he is eligible 
to avail of input tax credit as aforesaid. 
 
(c) The declaration under clause (b) shall clearly specify the details relating to the inputs held 
in stock or inputs contained in semi-finished or finished goods held in stock, or as the case 
may be, capital goods– 
(i) on the day immediately preceding the date from which he becomes liable to pay 
tax under the provisions of the Act, in the case of a claim under clause (a) of sub-
section (1) of section 18, 
(ii) on the day immediately preceding the date of grant of registration, in the case of a 
claim under clause (b) of sub-section (1) of section 18, 
(iii) on the day immediately preceding the date from which he becomes liable to pay 
tax under section 9, in the case of a claim under clause (c) of sub-section (1) of 
section 18, 
(iv) on the day immediately preceding the date from which supplies made by the 
registered person becomes taxable, in the case of a claim under clause (d) of sub-
section (1) of section 18. 
 
(d) The details furnished in the declaration under clause (b) shall be duly certified by a 
practicing chartered accountant or a cost accountant if the aggregate value of claim on 
account of central tax, State tax, Union territory tax and integrated tax exceeds two lakh 
rupees.  
  
(e) The input tax credit claimed in accordance with the provisions of clauses (c) and (d) of 
sub-section (1) of section 18 shall be verified with the corresponding details furnished by 
the corresponding supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 
4, on the Common Portal.  
 
 
Page 5


1	
	
CHAPTER---- 
 
Input Tax Credit  
 
 
1.        Documentary requirements and conditions for claiming input tax credit 
 
(1) The input tax credit shall be availed by a registered person, including the Input 
Service Distributor, on the basis of any of the following documents, namely:- 
 
(a) an invoice issued by the supplier of goods or services or both in accordance with 
the provisions of section 31; 
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section 
(3) of section 31, subject to payment of tax; 
(c) a debit note issued by a supplier in accordance with the provisions of section 34; 
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or 
rules made thereunder for assessment of integrated tax on imports;  
(e) an ISD invoice or ISD credit note or any document issued by an Input Service 
Distributor in accordance with the provisions of sub-rule (1) of rule invoice.7. 
 
(2) Input tax credit shall be availed by a registered person only if all the applicable 
particulars as prescribed in Chapter ---- (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. 
 
(3) No input tax credit shall be availed by a registered person in respect of any tax that 
has been paid in pursuance of any order where any demand has been confirmed  on account 
of any fraud, willful misstatement or suppression of facts.    
 
2.    Reversal of input tax credit in case of non-payment of consideration 
 
(1) A registered person, who has availed of input tax credit on any inward supply of 
goods or services or both, but fails to pay to the supplier thereof the value of such supply 
along with the tax payable thereon within the time limit specified in the second proviso to 
sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not 
paid and the amount of input tax credit availed of proportionate to such amount not paid to 
the supplier in FORM GSTR-2 for the month immediately following the period of one 
hundred and eighty days from the date of issue of invoice. 
 
Provided that the value of supplies made without consideration as specified in Schedule I 
shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of 
section 16. 
 
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax 
liability of the registered person for the month in which the details are furnished.  
 
(3) The registered person shall be liable to pay interest at the rate notified under sub-section 
(1) of section 50 for the period starting from the date of availing credit on such supplies till 
the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is 
paid. 
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or these rules, that had 
been reversed earlier.   
2	
	
 
3. Claim of credit by a banking company or a financial institution 
 
A banking company or a financial institution, including a non-banking financial company, 
engaged in supply of services by way of accepting deposits or extending loans or advances 
that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance 
with the option permitted under sub-section (4) of that section, shall follow the procedure 
specified below - 
 
(a) the said company or institution shall not avail the credit of,- 
(i) tax paid on inputs and  input services that are used for non-business 
purposes, and  
(ii)    the credit attributable to supplies specified in sub-section (5) of section 
17,  
in FORM GSTR-2;  
(b) the said company or institution shall avail the credit of tax paid on inputs and 
input services referred to in the second proviso to sub-section (4) of section 17 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit 
admissible to the company or the institution and shall be furnished in FORM GSTR-2; 
 
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of 
sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or 
the institution.  
 
 
4.    Procedure for distribution of input tax credit by Input Service Distributor 
 
(1) An Input Service Distributor shall distribute input tax credit in the manner and subject 
to the conditions specified below- 
 
(a) the input tax credit available for distribution in a month shall be distributed in 
the same month and the details thereof shall be furnished in FORM GSTR-6 in 
accordance with the provisions of Chapter ---- (Return Rules); 
 
(b) the Input Service Distributor shall, in accordance with the provisions of clause 
(d), separately distribute the amount of ineligible  input tax credit (ineligible under the 
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible 
input tax credit;  
 
(c) the input tax credit on account of central tax, State tax, Union territory tax and 
integrated tax shall be distributed separately in accordance with the provisions of clause 
(d); 
 
(d) the input tax credit that is required to be distributed in accordance with the 
provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients 
‘R
1
’, whether registered or not, from amongst the total of all the recipients to whom 
input tax credit is attributable, including the recipient(s) who are engaged in making 
exempt supply, or are otherwise not registered for any reason, shall be the amount, 
“C
1
”, to be calculated by applying the following formula:- 
 
C
1
 = (t
1
÷T) × C 
3	
	
 
where,  
“C” is the amount of credit to be distributed,  
“t
1
” is the turnover, as referred to in section 20, of person R
1
 during the relevant 
period, and  
“T” is the aggregate of the turnover, during the relevant period, of all recipients 
to whom the input service is attributable in accordance with the provisions of 
section 20,; 
 
 
(e) the input tax credit on account of integrated tax shall be distributed as input tax 
credit of integrated tax to every recipient; 
  
(f)   the input tax credit on account of central tax and State tax or Union territory tax 
shall,  
(i) in respect of a recipient located in the same State or Union territory in which 
the Input Service Distributor is located, be distributed as input tax credit of 
central tax and State tax or Union territory tax respectively; 
    
(ii) in respect of a recipient located in a State or Union territory other than that 
of the Input Service Distributor, be distributed as integrated tax and the amount 
to be so distributed shall be equal to the aggregate of the amount of input tax 
credit of central tax and State tax or Union territory tax that qualifies for 
distribution to such recipient in accordance with clause (d); 
 
(g) The Input Service Distributor shall issue an ISD invoice, as prescribed in sub-rule 
(1) of rule invoice-7, clearly indicating in such invoice that it is issued only for 
distribution of input tax credit.  
 
(h) The Input Service Distributor shall issue an ISD credit note, as prescribed in sub-
rule (1) of rule Invoice-7, for reduction of credit in case the input tax credit already 
distributed gets reduced for any reason.  
 
(i) Any additional amount of input tax credit on account of issuance of a debit note to 
an Input Service Distributor by the supplier shall be distributed in the manner and 
subject to the conditions specified in clauses (a) to (f) and the amount attributable to 
any recipient shall be calculated in the manner provided in clause (d) above and such 
credit shall be distributed in the month in which the debit note is included in the return 
in FORM GSTR-6.  
 
(j) Any input tax credit required to be reduced on account of issuance of a credit note to 
the Input Service Distributor by the supplier shall be apportioned to each recipient in 
the same ratio in which input tax credit contained in the original invoice was distributed 
in terms of clause (d) above, and the amount so apportioned shall be,- 
 
(i) reduced from the amount to be distributed in the month in which the credit 
note is included in the return in FORM GSTR-6; or 
 
(ii) added to the output tax liability of the recipient where the amount so 
apportioned is in the negative by virtue of the amount of credit under distribution 
being less than the amount to be adjusted. 
 
4	
	
(2)  If the amount of input tax credit distributed by an Input Service Distributor is 
reduced later on for any other reason for any of the recipients, including that it was 
distributed to a wrong recipient by the Input Service Distributor, the process prescribed 
in clause (j) of sub-rule (1) shall apply, mutatis mutandis, for reduction of credit.  
 
(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the ISD credit 
note specified in clause (h) of sub-rule (1), issue an ISD Invoice to the recipient entitled to 
such credit and include the ISD credit note and the ISD Invoice in the return in FORM 
GSTR-6 for the month in which such credit note and invoice was issued. 
 
5. Manner of claiming credit in special circumstances 
 
(1) Input tax credit claimed in accordance with the provisions of sub-section (1) of section 18 
on the inputs held in stock or inputs contained in semi-finished or finished goods held in 
stock, or the credit claimed on capital goods in accordance with the provisions of clauses (c) 
and (d) of the said sub-section, shall be subject to the following conditions - 
 
(a) The input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of 
section 18, shall be claimed after reducing the tax paid on such capital goods by five 
percentage points per quarter of a year or part thereof from the date of invoice or such other 
documents on which the capital goods were received by the taxable person. 
 
(b) The registered person shall within thirty days from the date of his becoming eligible to 
avail of input tax credit under sub-section (1) of section 18 shall make a declaration, 
electronically, on the Common Portal in FORM GST ITC-01 to the effect that he is eligible 
to avail of input tax credit as aforesaid. 
 
(c) The declaration under clause (b) shall clearly specify the details relating to the inputs held 
in stock or inputs contained in semi-finished or finished goods held in stock, or as the case 
may be, capital goods– 
(i) on the day immediately preceding the date from which he becomes liable to pay 
tax under the provisions of the Act, in the case of a claim under clause (a) of sub-
section (1) of section 18, 
(ii) on the day immediately preceding the date of grant of registration, in the case of a 
claim under clause (b) of sub-section (1) of section 18, 
(iii) on the day immediately preceding the date from which he becomes liable to pay 
tax under section 9, in the case of a claim under clause (c) of sub-section (1) of 
section 18, 
(iv) on the day immediately preceding the date from which supplies made by the 
registered person becomes taxable, in the case of a claim under clause (d) of sub-
section (1) of section 18. 
 
(d) The details furnished in the declaration under clause (b) shall be duly certified by a 
practicing chartered accountant or a cost accountant if the aggregate value of claim on 
account of central tax, State tax, Union territory tax and integrated tax exceeds two lakh 
rupees.  
  
(e) The input tax credit claimed in accordance with the provisions of clauses (c) and (d) of 
sub-section (1) of section 18 shall be verified with the corresponding details furnished by 
the corresponding supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 
4, on the Common Portal.  
 
 
5	
	
(2) The amount of credit in case of supply of capital goods or plant and machinery, for the 
purposes of sub-section (6) of section 18, shall be calculated by reducing the input tax on the 
said goods at the rate of five percentage points for every quarter or part thereof from the date 
of issue of invoice for such goods.  
 
6. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business 
 
(1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or 
transfer or change in ownership of business for any reason, furnish the details of sale, merger, 
de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, 
electronically on the Common Portal along with a request for transfer of unutilized input tax 
credit lying in his electronic credit ledger to the transferee: 
 
Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of 
the value of assets of the new units as specified in the demerger scheme.   
 
(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered 
account or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or 
transfer of business has been done with a specific provision for transfer of liabilities. 
 
(3) The transferee shall, on the Common Portal, accept the details so furnished by the 
transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 
shall be credited to his electronic credit ledger. 
  
(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee 
in his books of account. 
 
7.    Manner of determination of input tax credit in respect of inputs or input services 
and  reversal thereof 
(1) The input tax credit in respect of inputs or input services, which attract the provisions of 
sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of business 
and partly for other purposes, or partly used for effecting taxable supplies including zero 
rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of 
business or for effecting taxable supplies in the following manner, namely,- 
 
(a)   total input tax involved on inputs and input services in a tax period, be denoted as ‘T’; 
 
(b) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be 
used exclusively for purposes other than business, be denoted as  ‘T
1
’; 
 
(c) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be 
used exclusively for effecting exempt supplies, be denoted as ‘T
2
’; 
 
(d) the amount of input tax, out of ‘T’, in respect of inputs and input services on which credit 
is not available under sub-section (5) of section 17, be denoted as ‘T
3
’; 
 
 
(e) the amount of input tax credit credited to the electronic credit ledger of registered person, 
be denoted as ‘C
1
’ and calculated as: 
C
1 
= T- (T
1
+T
2
+T
3
);