Input Tax Credit (ITC) under GST

ITC

 

Any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

 

ITC Conditions

•      The said goods or services or both are used or intended to be used in the course or in the furtherance of his business

•      He is in possession of a tax invoice or debit note or  other tax paying documents as per Invoice rules.

•      He has received the goods or services or both

•      The supplier has uploaded the relevant invoice on the GSTN

•      The supplier tax charged in respect of such supply has been actually paid to the Government.

•      Supplier & receiver has furnished the return under section 39

•      He – claimant of input tax credit

•      Payment to suppliers within 180 days

•      Not  claimed depreciation on the tax component on capital goods

•      ITC cannot be availed after the due date of filing the return for September month of the next Financial year or on furnishing the Annual Return whichever is earlier.

•      No registered person is permitted to avail any input tax credit pursuant to an order of demand on account of fraud, willful misstatement, or suppression of fact.

 

Modes of ITC

•      Tax charged on any supply of goods or services or both including capital goods (31)

•      Debit note issued (34)

•      IGST charged on import of goods

•      Tax payable on reverse charge basis

•      TDS/TCS

•      ISD

 

ITC-Apportionment and blocked credit

Where the goods or services or both are used by the registered person partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

 

 ITC-not permitted

•      Motor vehicles and other conveyances

•      Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both.

•      Membership of a club, health and fitness centre

•      rent-a-cab, life insurance, health insurance other than mandatory as per law.

•      LTA

•      works contract services when supplied for construction of immovable property (other than machinery)

•      goods or services or both received from composite dealer

•      goods or services or both received by a non-resident taxable person except on goods imported by him

•      goods or services or both used for personal consumption

•      goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples and

•      any tax paid

 

ITC-conversion

•      Declaration in FORM GST ITC 1 must be filed within thirty (30) days from the date of becoming eligible to input tax credit. Rule 5 requires a declaration to be filed containing details of stocks and capital goods along with a certificate from a Chartered Accountant or Cost Accountant where the credit so claimed exceeds Rs.2 lakhs.

•      The supplier will not be entitled to credit of goods and or services or both after expiry of 1 year from date of tax invoice.

•      The credit on capital goods shall be reduced by five (5) percentage per quarter or part thereof from the date of invoice.

Such credits are subject to verification of details furnished by the supplier in GSTR - 1 or GSTR – 4 on the common portal.

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With Regards,
Kondapaneni Mallikarjuna

Eswaraiah & Co

Chartered Accountants