Eligibility Conditions for Input Tax Credit under Section 16(2) of the CGST Act, 2017

Eligibility Conditions for Input Tax Credit under Section 16(2) of the CGST Act, 2017

• Eligibility: A registered person can claim ITC for goods or services used in business, provided they have a tax invoice or debit note, have received the goods or services, and the tax has been paid to the government. They must also file the relevant returns.
• Conditions:

• Invoice Requirement: ITC is allowed only if the invoice details are shared by the supplier and communicated to the recipient.
• Receipt of Goods/Services: ITC is only allowed once the goods or services are received.
• Payment to Government: Tax must be paid to the government, either in cash or by using ITC.
• Return Filing: The recipient must file the necessary returns.

• Special Cases:

• Depreciation: ITC is not allowed on the tax component if depreciation is claimed under the Income-tax Act.
• Timeliness: ITC must be claimed by November 30 of the following financial year or before filing the relevant annual return. However, there are extended provisions for invoices related to the financial year 2017-18.

• Payment Delay: If payment is not made to the supplier within 180 days of the invoice date, ITC must be reversed along with interest.

Rule 36: Documentary Requirements and Conditions for Claiming Input Tax Credit

1. Eligible Documents:
   • Invoice: Issued by the supplier according to section 31.
   • Debit Note: Issued in accordance with section 34.
   • Bill of Entry: For imported goods, under the Customs Act.
   • Input Service Distributor Documents: Invoices, credit notes, or other documents from an Input Service Distributor, following rule 54.
2. Requirements for Claiming ITC:
   • The document must include all required details as per Chapter VI and be reported in FORM GSTR-2B.
   • If not all details are present but the tax amount, description, value of supply, GSTINs, and place of supply (for inter-State supplies) are included, ITC can still be claimed.
3. Exclusions:
   • ITC cannot be claimed on tax paid due to fraud, willful misstatement, or suppression of facts.
4. Supplier and Communication Requirements:
   • ITC can only be claimed if the supplier’s invoice or debit note details are submitted in FORM GSTR-1 and the recipient is notified through FORM GSTR-2B.

Rule 37: Reversal of Input Tax Credit (ITC) in the Case of Non-Payment of Consideration

1. Reversal of ITC:
   • If a registered person claims ITC on inward supplies (excluding reverse charge supplies) but does not pay the supplier within 180 days from the invoice date, they must reverse the ITC amount (or a proportionate amount if partially unpaid) along with interest.
   • The reversal must be made while filing FORM GSTR-3B for the tax period following the 180-day period.
2. Payment and Re-Claim:
   • If the payment is later made to the supplier, the registered person can re-avail the ITC that was previously reversed.
3. Interest on Reversal:
   • Interest is due on the reversed ITC from the date of availing the credit until the date the reversed amount is added to the output tax liability.
4. Time Limit for Re-Claim:
   • The time limit for claiming ITC does not apply when re-claiming credit that was previously reversed.

Block Input Tax credit 17(5)

• Motor Vehicles:

• No ITC for motor vehicles with a seating capacity of up to 13 persons unless:
  • They are used for further supply, transportation of passengers, or driving training.
• No ITC for general insurance, servicing, repair, and maintenance of such vehicles unless:
  • Used for the specified purposes or received by manufacturers or insurers.

• Vessels and Aircraft:

• No ITC unless used for:
  • Further supply, passenger transportation, training on navigation or flying, or transportation of goods.

• Services:

• No ITC on:
  • Food and beverages, outdoor catering, beauty treatments, health services, cosmetic surgery, leasing or renting motor vehicles, vessels, or aircraft (unless used for specified purposes), life and health insurance.
  • Memberships of clubs, health/fitness centers, and travel benefits for employees (unless legally required).

• Works Contract Services:

• No ITC for construction of immovable property (excluding plant and machinery), unless for further supply of works contract services.

• Goods/Services for Construction:

• No ITC for construction of immovable property on own account, except when used in the course of business.

• Other Exceptions:

• No ITC on goods/services where tax is paid under Section 10.
• No ITC for non-resident taxable persons except on imported goods.
• No ITC for goods/services used for corporate social responsibility activities.
• No ITC for personal consumption, goods lost/stolen/destroyed, or disposed of as gifts/samples.
• No ITC on tax paid under Sections 74, 129, and 130.