A Short overview of the laws related to ITC under GST
1. Input Tax Credit Under GST
ITC is a key feature of the Goods and Services Tax system that allows businesses to offset the tax paid on inputs, input services, and capital goods against their output tax liability.
2. Eligibility for Claiming ITC
To claim ITC, a taxpayer must meet the following conditions:
The claimant must be a registered taxpayer under GST.
The goods and/or services must be used for business purposes.
A valid tax invoice or debit note issued by a registered supplier must be available.
The supplier must have uploaded the invoice in GSTR-1, and it must be reflected in the recipient’s GSTR-2B.
The recipient must have paid the supplier (including tax) within 180 days of the invoice date.
ITC must not be restricted under Section 17(5) of the CGST Act (Blocked ITC).
3. Documents Required for ITC Claim
To claim ITC, the following documents are required:
Tax Invoice issued by a registered supplier.
Debit Note, if applicable.
Bill of Entry for imported goods.
Input Service Distributor (ISD) Invoice or Credit Note for distributed input services.
Any other document prescribed under GST rules.
4. Time Limit for Claiming ITC
ITC must be claimed within the earlier of the following:
The due date of filing GSTR-3B for September of the following financial year.
The date of filing the annual return (GSTR9) for the relevant financial year.
5. Blocked ITC (Section 17(5) of CGST Act)
Certain ITC claims are restricted under Section 17(5) of the Act, including:
Motor vehicles, except when used for specific purposes like transportation of goods, passengers, or training.
Food, beverages, outdoor catering, beauty treatment, health services, etc., unless used for taxable outward supply.
Club memberships, health, and fitness center expenses.
Works contract services for constructing immovable property (except where used for further supply of works contracts).
Goods or services used for personal consumption.
Travel benefits provided to employees, such as leave travel concessions.
6. Reversal of ITC
ITC must be reversed in the following cases:
Non-payment to suppliers within 180 days from the invoice date.
Use of inputs or capital goods for exempt supplies or non-business purposes.
Claiming ITC on blocked items under Section 17(5).
Mismatch of ITC in GSTR-2B, leading to ineligible credit claims.
7. ITC on Capital Goods
ITC on capital goods is available if they are used for business purposes.
If a capital good is used partially for personal purposes, ITC must be proportionately reversed.
If ITC is availed on capital goods, depreciation cannot be claimed on the GST component of the asset.
8. ITC in Special Cases
ITC in Job Work:
ITC can be claimed on goods sent for job work if they are received back within:
1 year (for inputs)
3 years (for CG)
9. ITC Matching and Reconciliation
ITC claimed in GSTR-3B must match the details available in GSTR-2B.
