Input tax credit under GST - Concept clarity

Most beneficial feature to GST is Input tax credit Flow.
here we will discuss the followings:
What is input tax credit?
Who can claim ITC?
which Type of Goods ITC cannot be claimed?
Reversal of Input Tax Credit
Documents required for claiming ITC

What is input tax credit?

Input Tax Cretit (ITC) means Tax paid on Purchases can be set off from Tax to be paid on Sale.
lets take and example
Mr. A purchased Material of Rs.20000 and paid GST on the same 2400, his sale in that month was Rs.50000 on which he have to pay GST of Rs.6000. here he can take benefit of GST of RS.2400 as ITC so he have to pay Rs.3600 (6000-2400) as his final liability

Who can claim ITC?

ITC can be claimed by a person registered under GST only if following conditions satisfied
The dealer should be in possession of tax invoice
The said goods/services have been received
Returns have been filed.
The tax charged has been paid to the government by the supplier.
When goods are received in installments ITC can be claimed only when the last lot is received.

No ITC will be allowed if depreciation has been claimed on tax component of a capital good

Note: Composite dealers cannot claim ITC

Which Type of Goods ITC cannot be claimed?

ITC can be claimed only for business purposes.
ITC will not be available for goods or services exclusively used for:
Personal use
Exempt supplies
Blocked Credit under section 17(5) Separate Article

Reversal of Input Tax Credit

Reversal of ITC can be done in following cases:

1) Non-payment of invoices in 180 days– ITC will be reversed for invoices which were not paid within 180 days of issue.
2) Credit note issued to ISD by seller– This is for ISD. If a credit note was issued by the seller to the HO then the ITC subsequently reduced will be reversed.
3) Inputs partly for business purpose and partly for exempted supplies or for personal use – This is for businesses which use inputs for both business and non-business (personal) purpose. ITC used in the portion of input goods/services used for the personal purpose must be reversed proportionately.
4) Capital goods partly for business and partly for exempted supplies or for personal use – This is similar to above except that it concerns capital goods.
5) ITC reversed is less than required- This is calculated after the annual return is furnished. If total ITC on inputs of exempted/non-business purpose is more than the ITC actually reversed during the year then the difference amount will be added to output liability. Interest will be applicable.

Documents Required for Claiming ITC:
The following documents are required for claiming ITC:
1. Invoice issued by the supplier of goods/services
2. The debit note issued by the supplier to the recipient (if any)
3. Bill of entry
4. An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs 200 or in situations where the reverse charge is applicable as per GST law.
5. An invoice or credit note issued by the Input Service Distributor(ISD) as per the invoice rules under GST.
6. A bill of supply issued by the supplier of goods and services or both.

Blocked credit is that credit on which ITC will not available as per section 17(5)
we discussed this in another article.

Team CA Guruji


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