ITC: Conditions To Claim Input Tax Credit under GST
- On January 18, 2020
- Avail ITC, Claim ITC, Conditions, Goods and Services, GST, GST Act, GST Blog, GST Regulation, GST Updates, ITC, Purchase Register, Suplier
Input Tax for a taxable person is the Goods and Services Tax levied on him/her for the supply of goods or services to him/her, which are used or are intended to be used, for the development of his business. ITC under GST is the most critical activity as well as a matter of concern for every business to settle its tax liability.
In the last blog, we learnt about ITC, its importance and how to claim it. But to claim ITC, one must be aware of the conditions to fulfil before claiming ITC. So, this time we bring you the blog which will cover all the conditions to be fulfilled to claim ITC. and, to notch it up more we will also inform about the items on which credit can’t be availed.
The conditions prescribed for the eligibility to ITC or eligible ITC are more or less the same as the pre-GST regime. Also, the rules listed below are very particular and firm in its approach.
So, let’s start with the conditions a registered person has to fulfil to claim ITC.
Conditions To Claim Input Tax Credit under GST –
A registered person would have to fulfil the following conditions to be eligible to claim Input Tax Credit –
1. One must have a tax invoice or debit note or document evidencing the said payment.
2. One must have the receipt of goods or services.
3. One must have the document of transfer of title of goods if the goods are directed by the registered person to be delivered to the other person by the supplier.
4. One must have the furnishing of a return.
5. If the goods are to be received in lots or instalments then the ITC could be availed when the last lot or instalment is received.
6. If the supplier failed to supply the goods or services within 180 days from the date of invoice and the receiver has already claimed ITC, the amount will be added to output tax liability and interest will be paid on the same. As soon as the payment to the supplier is made, ITC will be allowed to be claimed again.
7. If depreciation has been claimed on a capital good’s tax component, then no ITC will be allowed in such cases.
8. One must claim ITC against an Invoice or Debit Note before the below-mentioned dates:
- The due date of filing the GST Return for September of the next Financial year
- the date of filing the Annual Returns for that Financial year.
For instance, ED Corp, a buyer has a Purchase Invoice dated back to 8th July 2018( FY 2018-19), wants to claim GST paid on that purchase. According to the criteria set down to reckon the time limit:
The due date of filing GST returns for September 2019( belonging to FY 2019-20) is 20th October 2019 and the Date of filing GST Annual Return for FY 2018-19 is 31st December 2019, whichever is earlier will be the time within which ED Corp will have to claim ITC. Therefore, the date is 20th October 2019 and ED Corp can claim this ITC in any of the months between July 2018 to September 2019.
GST Tip: Above condition must be considered concerning Original Invoice Date for Debit Notes.
9. One must have the common credit of ITC used most commonly for
- Effecting exempted and taxable supplies
- Business and non-business related activities
10. Since 9th October 2019, a regular taxpayer can only claim provisional ITC in GSTR-3B up to the extent of 20% of the ITC available in GSTR-2A. So, the amount of ITC reported in GSTR-3B from 9th October 2019 will be a total of Actual ITC in GSTR-2A and provisional ITC being 20% of actual ITC in GSTR-2A. But the matching of purchase register or expense ledger with GSTR-2A is very crucial to claim ITC.
So, these were the conditions, a registered taxpayer have to fulfil before claiming and availing ITC. But there are some items on which credit is not allowed. Let’s have a look at them –
Items on which Credit can not be availed –
1. Motor vehicles and conveyances.
2. Such motor vehicles and conveyances which are further supplied i.e. sold.
3. Transport of passengers.
4. Such motor vehicles and conveyances used for imparting training on driving, flying and navigating.
5. Such motor vehicles and conveyances used for the transportation of goods.
6. Such motor vehicles and conveyances used for food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.
GST Tip: The credit will be available if the goods or services are used to deliver the same category of services or as a part of composite supply. For instance, Mr Amit purchases cosmetic creams to supply it to a customer, then the credit of ITC paid on the purchases can be availed.
7. Sale of membership in a club, health and fitness centre.
8. Rent-a-cab, health insurance and life insurances except those mentioned below:
- It is made obligatory by the government for employers to provide such to the employees.
- Goods or services are taken to deliver the same category of services or as a part of composite supply. For example, Mr Abid uses the service of rent-a-cab to supply to Mr Zakir, a client, then the credit of ITC paid on purchases will be allowed.
9. Leave or home travel concession or other benefits extended to employees on vacation.
10. Construction of an immovable property’s works contract service (except any plant & machinery or for providing further supply of works contract service).
11. Goods and services used for and in the construction of an immovable property irrespective of the usage for personal or business purpose.
12. Goods or services where tax have been paid under a composition scheme.
13. Goods or services used for personal use.
14. Goods or services received by a non-resident taxable person exempting the goods imported by him.
15. Goods that have been lost, stolen, destroyed, written off or disposed of as gifts or free samples.
16. In the case of any tax paid due to excessive refund, non-payment or short tax payment, or ITC availed or utilized by the reason of fraud or willful fabrication or suppression of facts or misappropriation and seizure of goods.
These were the conditions to be fulfilled and items which can and cannot claim or avail ITC respectively.
For more such pieces of information, stay tuned to Digitax Automation.