GST – Input Tax Credit – Important Conditions

Considering the increase in litigation due to wrong availment of Input tax credit (ITC), here are the below pointers that need to be kept in mind by GST register buyer while availing the ITC.

• Possession of a tax invoice or debit note: Buyer must have possession of valid tax invoice and debit note, in case e-invoicing is applicable on the vendor/supplier then the invoice/debit note must be the e-invoice. One can check the applicability of the e -invoice on the vendor/supplier on https://einvoice1.gst.gov.in under the Tab Search – e invoice status of Tax payer.

 Further please note that tax invoice or debit note should have the all the valid field as specified in Rule 46 and Rule 53 of i.e.

• Invoice No
• Invoice Date
• Customer Name
• Shipping and Billing address
• Customer GSTIN & Vendor GSTIN
• Place of supply
• HSN Code/SAC Code
• Items- description, quantity, number
• Total value
• Taxable value
• GST rates and amount of taxes
• Whether GST is payable on reverse charge mechanism
• Signature of supplier

• ITC should be available in GSTR 2B: Details has been furnished by supplier in GSTR 1 and same should be available in GSTR 2B of buyer.

• Payment of tax by supplier: Tax has been actually paid by supplier and GSTR 3B has also been furnished by supplier.

• Receipt of goods and services: Buyer must have received the goods and services. If the goods are received in instalments, ITC can be availed when the last lots or instalment is received.

• Blocked credit – Section 17(5): Buyer must have to check the admissibility of the ITC; ITC is blocked on the goods/services as listed in section 17(5)

• motor vehicles
• services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles,
• food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles
• life insurance and health insurance
• works contract services when supplied for construction/renovation/repair of an immovable property
• goods or services or both received by a taxable person for construction/ construction/renovation/repair of an immovable property 
• goods or services or both on which tax has been paid under composition scheme
• 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

• Input tax credit should not be restricted u/s 38:  ITC should not available basis various scenario as specified in section 38 of CGST Act i.e. continuous default in payment of tax by supplier, tax shown by supplier in GSTR 1 is more that tax paid in GSTR 3B etc. supplier has availed the excess ITC etc.

• Payment to supplier within 180 days: Payment to supplier should be made within 180 days from the date of invoice. If payment is not made within 180 days, ITC should be reversed along with interest. However, ITC can be re-availed once the payment to the supplier is made. Further, please note that there is no-time limit for re-availment of ITC once payment is made to the supplier.

• Due date for Availment of ITC: Time limit to avail the ITC against invoice or debit note should be earlier of 30^thNovember of next financial year or due date of filing the Annual return for that financial year. No ITC can be claimed beyond aforesaid dates.

• Depreciation on GST portion: No ITC will be allowed if depreciation is claimed on the GST component of capital goods purchased.

• Preparation of Self Invoice – RCM- In those cases where GST ITC is claimed under RCM then it is mandatory to prepare the self-invoice.

We advised you to kindly ensure the compliance of the above, feel free to reach out to us for any clarification/information.

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