SUB GST p3

Input Tax Credit, Eligibility and Conditions

27 May 2020

Tax charged on the tax invoice by a registered person on his outward supply of goods or services or both is an Input Tax for the buyer of such goods or services or both. The tax charged by the supplier on the tax invoice could be either Central Tax and State Tax / Union Territory Tax or Integrated tax. The taking of credit of the said input tax by the buyer is called as Input Tax Credit.

Eligibility of “Input Tax Credit”

Input Tax Credit of the taxes paid on the inward supplies of inputs, capital goods, and services that are used in the course or furtherance of the business, subject to certain restrictions, can be taken by a registered person affecting taxable supplies.

A person who is not registered under GST cannot take the benefit of ITC. A person registered under GST but has opted for composition scheme also cannot take the benefit of ITC.

Documents/Conditions for taking ITC:

• A registered taxpayer must have an invoice on hand at the time of taking credit.

• Goods or Services must have been received/taken.

• The buyer must have paid the value of the invoice along with the tax to the supplier of goods or services within 180 days from the date of the invoice.

• The supplier must have paid the tax that has been collected from the buyer through the invoice into the Govt. account.

• The supplier must also provide details of tax invoice details in the GST return.

• In the case of import goods the bill of entry is a document based on which credit has been taken. IGST paid challan on the import should also be attached to the bill of entry.

• In case of import of service the invoice and the payment of IGST GSTR-3B are the basis for taking credit.

• A credit note is a document based on which the supplier can reduce tax liability. The supplier must give a copy of the credit note to the customer so that the buyer can do the reversal of the already taken ITC.

• A debit note is a document based on which the customer can take ITC.

• A tax invoice based on which credit has been taken must be addressed to the location where goods/services are supplied.

List of Eligible ITC under GST:

Inputs:

• Raw material,

• Packing material,

• Engineering spares,

• Consumables,

• Printing and stationery etc.

Capital goods:

• Plant and machinery,

• Support structure to plant and machinery,

• A motor vehicle used for transportation of goods e.g. truck, forklift, etc.,

• Repairs to motor vehicles used for the transportation of goods.

• Computers / laptop,

• Printers,

• Air conditioner,

• Furniture and Fittings 

Services:

• Factory rent,

• Godown rent,

• Housekeeping charges,

• Manpower supply,

• Loading unloading,

• Professional fees for audit, tax assessments,

• Clearing and forwarding,

• Internet service,

• Mobile used for office purpose,

• Bank charges,

• Postage and Courier,

• Repair and Maintenance,

• Freight inward and outward,

• Advocate fees,

• Advertisement Expense,

• Research and Development Expense,

• Conference expense 

• Works contract services when supplied for construction of a plant and machinery.

Zero-rated / Exports:

ITC of inputs, capital goods, services used for effecting zero-rated supplies is allowed to take credit even if the goods exported are exempted from GST.

GST Return for ITC:

GST credit is taken through the filing of return in Form GSTR-3B. Invoice-wise details of inward supplies are not required to be furnished. However, the details of such inward invoices need to be kept in record safely as they will play an essential role in the future at the time of assessments.