INPUT TAX CREDIT
Conditions to claim ITC
- Must possess a Tax invoice / Debit Note / Credit Note / Supplementary Invoice
- Should have received Goods or Services
- Must have filed returns GSTR -3
- Must ensure tax charged by supplier has been paid to the government
- Complete Invoice matching in GSTR 2A and arrive at final ITC post reversals
Claim of ITC on provisional basis
- Provisional credit of 10% of eligible credit available from 1 Jan 2020 onwards.
- Provisional credit eligibility was 20% for the period 9 Oct 2019 to 31 Dec 2019.
- Eligible credit are credit of those invoices which are booked by registered person in his books and also appearing in his GSTR 2A.
- Sum of provisional credit and matched credit cannot be over and above the eligible credit for a financial year.
Ineligible credit under section 17(5)
- Motor Vehicles, vessels, aircraft.However, claim of ITC on all the above expenses are allowed if used for/by:
- Reselling of motor vehicles, vessels, aircraft.Used for transport of passengers
- A vehicle with approved seating capacity of over 13 persons and used for transport of persons
- Imparting training
- Transportation of good.
- General insurance, repairs on above. However, claim of ITC on above expenses are allowed if used for/by
- Purposes mentioned in a to be above.
- Manufacturer of motor vehicles, vessels, aircraft.
- Leasing, hiring , renting of above. However, claim of ITC on above expenses are allowed if used for/by
- Purposes mentioned in a to e above
- Outward supply of leasing, hiring, renting services.
- Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except when used for providing same category of output services.
- Membership in a club, health, fitness center.
- Travel benefits extended to employees on vacation such as leave or home travel concession. However ITC on these expenses shall be allowed if it is obligatory for employers to provide the same to employees.
- Works- contract services for construction of immovable property (other than Plant & Machinery) . However ITC on this expenses shall be allowed if it is an input for output of similar services.
- Goods and services or both received by a taxable person for construction of an immovable property (other than Plant & Machinery) on his own account
- GST charged by composition suppliers u/s 10
- Goods or services received by NRTP except on goods imported by him
- Personal consumption
- Goods lost, stolen, destroyed ,written off, disposed, gifted, free samples.
- Tax paid on confiscation of goods u/s 130
- Tax paid on detention, seizure u/s 129
- Tax paid on issue of SCN u/s 74.
Reversal of ITC
ITC on inputs and input services and capital goods to be reversed if used for :
- Non-business purposes.
- Exempt supplies
- Nil Rated supplies
- Non-GST supplies
Note: ITC is allowed on Zero rated supplies defined under section 16 of the IGST Act.
Set-off Rules
IGST Credit:
- First set off against IGST liability
- Then set off against CGST / SGST liability in any manner
CGST Credit:
- First set off against CGST liability
- Then set off against IGST liability
SGST Credit:
- First set off against SGST liability
- Then set off against IGST liability
Exhaust IGST Credit entirely before utilizing CGST/SGST Credit.
CGST credit cannot be utilized to set off SGST liability.
SGST credit cannot be utilized to set off CGST liability.
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