Goods and Service Tax - Input Tax Credit Rules | 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) a debit note issued by a supplier in accordance with the provisions of section 34; 
(c) a bill of entry;  
(d) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) 
of section 31; 
(e) a document issued by an Input Service Distributor in accordance with the 
provisions of sub-rule (1) of rule invoice.7; 
(f) a document issued by an Input Service Distributor, as prescribed in clause (g) of 
sub-rule (1) of rule 4. 
 
(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 raised 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 and the amount of input tax credit availed 
of in FORM GSTR-2 for the month immediately following the period of one hundred and 
eighty days from the date of issue of invoice. 
 
(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. 
 
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 - 
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) a debit note issued by a supplier in accordance with the provisions of section 34; 
(c) a bill of entry;  
(d) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) 
of section 31; 
(e) a document issued by an Input Service Distributor in accordance with the 
provisions of sub-rule (1) of rule invoice.7; 
(f) a document issued by an Input Service Distributor, as prescribed in clause (g) of 
sub-rule (1) of rule 4. 
 
(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 raised 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 and the amount of input tax credit availed 
of in FORM GSTR-2 for the month immediately following the period of one hundred and 
eighty days from the date of issue of invoice. 
 
(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. 
 
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 - 
2 
 
 
(a) the said company or institution shall not avail the credit of tax paid on inputs 
and  input services that are used for non-business purposes and 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 16 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining 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 in-eligible as input tax credit under the provisions 
of sub-section (5) of section 17 and the amount eligible as 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 
‘R1 ’, 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, “C1”, to be 
calculated by applying the following formula:- 
 
C1 = (t1÷T) × C 
 
where,  
“C ” is the amount of credit to be distributed,  
“t1 ” is the turnover, as referred to in section 20, of person R1 during the relevant 
period, and  
“T ” is the aggregate of the turnover of all recipients during the relevant period; 
 
 
(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 shall,  
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) a debit note issued by a supplier in accordance with the provisions of section 34; 
(c) a bill of entry;  
(d) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) 
of section 31; 
(e) a document issued by an Input Service Distributor in accordance with the 
provisions of sub-rule (1) of rule invoice.7; 
(f) a document issued by an Input Service Distributor, as prescribed in clause (g) of 
sub-rule (1) of rule 4. 
 
(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 raised 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 and the amount of input tax credit availed 
of in FORM GSTR-2 for the month immediately following the period of one hundred and 
eighty days from the date of issue of invoice. 
 
(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. 
 
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 - 
2 
 
 
(a) the said company or institution shall not avail the credit of tax paid on inputs 
and  input services that are used for non-business purposes and 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 16 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining 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 in-eligible as input tax credit under the provisions 
of sub-section (5) of section 17 and the amount eligible as 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 
‘R1 ’, 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, “C1”, to be 
calculated by applying the following formula:- 
 
C1 = (t1÷T) × C 
 
where,  
“C ” is the amount of credit to be distributed,  
“t1 ” is the turnover, as referred to in section 20, of person R1 during the relevant 
period, and  
“T ” is the aggregate of the turnover of all recipients during the relevant period; 
 
 
(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 shall,  
3 
 
(i) in respect of a recipient located in the same State in which the Input Service 
Distributor is located, be distributed as input tax credit of central tax and State tax 
respectively; 
   
(ii) in respect of a recipient located in a State 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 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 (g) 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 has been 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; and  
 
(ii) added to the output tax liability of the recipient and where the amount so 
apportioned is in the negative by virtue of the amount of credit to be distributed is 
less than the amount to be adjusted. 
 
(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, mutatis mutandis apply 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 lying in stock or inputs contained in semi-finished or finished goods lying 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 - 
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) a debit note issued by a supplier in accordance with the provisions of section 34; 
(c) a bill of entry;  
(d) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) 
of section 31; 
(e) a document issued by an Input Service Distributor in accordance with the 
provisions of sub-rule (1) of rule invoice.7; 
(f) a document issued by an Input Service Distributor, as prescribed in clause (g) of 
sub-rule (1) of rule 4. 
 
(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 raised 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 and the amount of input tax credit availed 
of in FORM GSTR-2 for the month immediately following the period of one hundred and 
eighty days from the date of issue of invoice. 
 
(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. 
 
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 - 
2 
 
 
(a) the said company or institution shall not avail the credit of tax paid on inputs 
and  input services that are used for non-business purposes and 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 16 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining 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 in-eligible as input tax credit under the provisions 
of sub-section (5) of section 17 and the amount eligible as 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 
‘R1 ’, 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, “C1”, to be 
calculated by applying the following formula:- 
 
C1 = (t1÷T) × C 
 
where,  
“C ” is the amount of credit to be distributed,  
“t1 ” is the turnover, as referred to in section 20, of person R1 during the relevant 
period, and  
“T ” is the aggregate of the turnover of all recipients during the relevant period; 
 
 
(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 shall,  
3 
 
(i) in respect of a recipient located in the same State in which the Input Service 
Distributor is located, be distributed as input tax credit of central tax and State tax 
respectively; 
   
(ii) in respect of a recipient located in a State 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 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 (g) 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 has been 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; and  
 
(ii) added to the output tax liability of the recipient and where the amount so 
apportioned is in the negative by virtue of the amount of credit to be distributed is 
less than the amount to be adjusted. 
 
(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, mutatis mutandis apply 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 lying in stock or inputs contained in semi-finished or finished goods lying 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 - 
4 
 
 
(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 lying 
in stock or inputs contained in semi-finished or finished goods lying 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 this 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 (c) shall be duly certified by a 
practicing chartered account or cost accountant if the aggregate value of claim on account 
of central tax, State tax and integrated tax exceeds two lakh rupees.  
  
(e) The input tax credit claimed in accordance with 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.  
 
6. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business 
 
(1) A registered person shall, on 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 to transfer the 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. 
  
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) a debit note issued by a supplier in accordance with the provisions of section 34; 
(c) a bill of entry;  
(d) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) 
of section 31; 
(e) a document issued by an Input Service Distributor in accordance with the 
provisions of sub-rule (1) of rule invoice.7; 
(f) a document issued by an Input Service Distributor, as prescribed in clause (g) of 
sub-rule (1) of rule 4. 
 
(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 raised 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 and the amount of input tax credit availed 
of in FORM GSTR-2 for the month immediately following the period of one hundred and 
eighty days from the date of issue of invoice. 
 
(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. 
 
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 - 
2 
 
 
(a) the said company or institution shall not avail the credit of tax paid on inputs 
and  input services that are used for non-business purposes and 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 16 and not 
covered under clause (a); 
 
(c) fifty per cent. of the remaining 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 in-eligible as input tax credit under the provisions 
of sub-section (5) of section 17 and the amount eligible as 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 
‘R1 ’, 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, “C1”, to be 
calculated by applying the following formula:- 
 
C1 = (t1÷T) × C 
 
where,  
“C ” is the amount of credit to be distributed,  
“t1 ” is the turnover, as referred to in section 20, of person R1 during the relevant 
period, and  
“T ” is the aggregate of the turnover of all recipients during the relevant period; 
 
 
(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 shall,  
3 
 
(i) in respect of a recipient located in the same State in which the Input Service 
Distributor is located, be distributed as input tax credit of central tax and State tax 
respectively; 
   
(ii) in respect of a recipient located in a State 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 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 (g) 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 has been 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; and  
 
(ii) added to the output tax liability of the recipient and where the amount so 
apportioned is in the negative by virtue of the amount of credit to be distributed is 
less than the amount to be adjusted. 
 
(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, mutatis mutandis apply 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 lying in stock or inputs contained in semi-finished or finished goods lying 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 - 
4 
 
 
(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 lying 
in stock or inputs contained in semi-finished or finished goods lying 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 this 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 (c) shall be duly certified by a 
practicing chartered account or cost accountant if the aggregate value of claim on account 
of central tax, State tax and integrated tax exceeds two lakh rupees.  
  
(e) The input tax credit claimed in accordance with 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.  
 
6. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business 
 
(1) A registered person shall, on 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 to transfer the 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. 
  
5 
 
(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 certain cases and  reversal thereof 
(1) The input tax credit in respect of inputs or input services, which attract the provisions of 
sub-sections (1) or (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 exempted 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  ‘T1’; 
 
(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 ‘T2’; 
 
(d) the amount of input tax, out of ‘T’, in respect of inputs on which credit is not available 
under sub-section (5) of section 17, be denoted as ‘T3’; 
 
 
(e) the amount of input tax credit credited to the electronic credit ledger of registered person, 
be denoted as ‘C1’ and calculated as: 
C1 = T- (T1+T2+T3); 
 
(f) the amount of input tax credit attributable to inputs and input services used exclusively in 
or in relation to taxable supplies including zero rated supplies, be denoted as ‘T4’; 
 
(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the 
invoice level in FORM GSTR-2; 
 
(h) Input tax credit left after attribution of input tax credit under clause (g) shall be called 
common credit, be denoted as ‘C2’ and calculated as: 
C2 = C1- T4; 
 
(i) The amount of input tax credit attributable towards exempt supplies, be denoted as ‘D1’ and 
calculated as: 
D1= (E÷F) × C2 
where, 
 
‘E’ is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero 
rated supplies, during the tax period, and 
 
‘F’ is the total turnover of the registered person during the tax period: 
 
Provided that where the registered person does not have any turnover during the said tax period 
or the aforesaid information is not available, the value of ‘E/F’ shall calculated by taking values 
of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous 
to the month during which the said value of ‘E/F’ is to calculated;