GST Input Tax Credit (Grade A)

Summary:

GST Input Tax Credit (ITC) creates a seamless tax credit chain, avoiding cascading taxes. Registered persons can use ITC for business-related goods and services, with specific conditions and limitations. ITC provisions cover special circumstances, inputs, capital goods sent for job work, and input service distributors. Excess distributed credit can be recovered with interest.

Excerpt:

GST Input Tax Credit (ITC)

• Uninterrupted and seamless chain of input tax credits is one of the key features of GST
• Mechanism to avoid cascading taxes
• Tax paid at every stage is available as set off for payment of tax at a subsequent stage

Section 16 to 21 of GST Act 2017 and Rules36 to Rule 45 covers the provisions related to ITC
– Eligibility and Conditions for Taking Input Tax Credit (u/s 16)
– Apportionment of Credit and Blocked Credits (u/s 17)
– Availability of ITC in Special Circumstances (u/s 18)
– ITC on Inputs and Capital Goods Sent for Job Work (U/S 19
– Input Tax Credit by Input Service Distributor  (U/s 20)
– Recovery of Credit Distributed in Excess (u/s 21)

Eligibility and Conditions for Taking Input Tax Credit (u/s 16)
– ITC to registered persons only
– The credit of input tax charged on any supply of goods or services used for business will be credited to the electronic ledger
– Four conditions must avail of credit
> Possession of tax invoice or debit note issued by a registered supplier.
> Receipt of goods or services.*(lots)
> The tax charged in respect of such supply has been actually paid to the Government.**(180)
> The return has been furnished

– ITC is allowed GST paid on the purchase of capital goods and plant and machinery etc only if depreciation on the tax component of the cost capital goods has not been availed under the provisions of the Income-tax.

– No ITC if the Invoice is delayed after the due date of furnishing of the return for the month of September following the end of the financial year to which such invoice pertains or furnishing of the relevant annual return, whichever is earlier