Input Tax Credit means Credit of ‘Input Tax’, where in relation to Registered Person Input Tax means CGST, SGST, UGST or IGST charged on supply of Goods or Service or both made to him and includes
IGST Charged on Imported Goods and Tax payable on Reverse Charge but excludes Tax paid under Composition Scheme.
Conditions to be Fulfilled for Entitlement of ITC
Any registered person will be entitled to claim Input Tax Credit only upon fulfillment of the following conditions:-
• He is in possession of tax invoice/ debit note issued by a registered supplier or any other prescribed tax paying documents.
• He has received the goods or services or both.
• The tax charged on such supply has actually been paid to the Government by the supplier (by way of cash or by utilizing input tax credit)
He has furnished a valid return.
Situations where the input tax credit cannot be taken under GST
1. Motor Vehicles and Conveyance
• Exception: - ITC will be available in following cases
• Transportation of Goods
• Transportation of Passengers
• Further Supply of Such Vehicle or Conveyance
• Imparting training on driving, flying, navigating such vehicle or conveyances.
2. Food, Beverages, Club Membership and others
3. Sale of Membership in a Club, Health, Fitness Center
4. Rent a Cab, Life Insurance, Health Insurance
5. Travel
6. Works Contract
7. Construction of Immovable Property for own account
8. Composition Scheme
9. No ITC for Personal Use
10. No ITC for Non Resident
11. Free Samples and Destroyed Goods
12. No ITC for Fraud Cases
13. No ITC of Restaurant.
Utilization of Credit from Input Tax Credit
• ITC can be utilized for payment of Tax liability.
• ITC cannot be utilized for payment of TDS/TCS/interest/penalty/fee/others.
• ITC cannot be utilized for payment tax liability under RCM.
• IGST Input Tax Credit shall be first be utilized towards payment of IGST liability and the amount remaining, if any, may be utilized towards the payment of CGST, SGST/UTGST liabilities in that order.
• CGST Input Tax Credit shall be first be utilized towards payment of CGST liability and the amount remaining, if any, may be utilized towards the payment of IGST liability.
• SGST Input Tax Credit shall be first be utilized towards payment of SGST liability and the amount remaining, if any, may be utilized towards payment of IGST liability if no CGST credit is available.
• UTGST Input Tax Credit shall first be utilized towards payment of UTGST liability and the amount remaining, if any, may be utilized towards payment of IGST liability if no CGST credit is available.
• CGST Input Tax Credit shall not be utilized towards payment of SGST/UTGST liabilities.
• SGST/UTGST Input Tax Credit shall not be utilized towards payment of CGST liabilities.
Manner of determination of ITC attributable to exempt supplies when Capital Goods are used for exempted supply as well as Taxable supply
The credits are determined in terms of Rule 43 of the CGST Rules, 2017 are as under:
a) Input tax in respect of capital goods used or intended to be used exclusively for non-business purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and shall not be credited to his electronic credit ledger
b) Input tax in respect of capital goods used or intended to be used exclusively for effecting taxable supplies including zero-rated supplies shall be indicated in FORM GSTR-2 and shall be credited to the electronic credit ledger
c) Out of the total input tax credit on capital goods, the amount of input tax credit in (a) and (b) shall be deducted from total input tax credit and shall be credited to the electronic credit ledger and the useful life of such good shall be taken as five years.
d) The common input tax credit attributable to exempt supplies shall be calculated as a ratio of the aggregate value of exempt supplies to the total turnover of the person in the tax period.
e) In case if the turnover details are not available then the values for the preceding tax period shall be taken for calculation.
Special Case of Input Tax Credit in GST
Input Tax Credit on Hotel Accommodation Bill
Hotel will always Charge CGST and SGST on Accommodation Bill. If Receiver of Service have GST Registration in State or Union Territory in which Supply of Service Made then Can Claim ITC otherwise cannot claim ITC on Accommodation Bill.
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IGST Charged on Imported Goods and Tax payable on Reverse Charge but excludes Tax paid under Composition Scheme.
Conditions to be Fulfilled for Entitlement of ITC
Any registered person will be entitled to claim Input Tax Credit only upon fulfillment of the following conditions:-
• He is in possession of tax invoice/ debit note issued by a registered supplier or any other prescribed tax paying documents.
• He has received the goods or services or both.
• The tax charged on such supply has actually been paid to the Government by the supplier (by way of cash or by utilizing input tax credit)
He has furnished a valid return.
Situations where the input tax credit cannot be taken under GST
1. Motor Vehicles and Conveyance
• Exception: - ITC will be available in following cases
• Transportation of Goods
• Transportation of Passengers
• Further Supply of Such Vehicle or Conveyance
• Imparting training on driving, flying, navigating such vehicle or conveyances.
- Motor Vehicles for Transportation of Persons having seating capacity of 13 or More (including driver), vessels and aircrafts. (w.e.f 1st February 2019)
2. Food, Beverages, Club Membership and others
3. Sale of Membership in a Club, Health, Fitness Center
4. Rent a Cab, Life Insurance, Health Insurance
5. Travel
6. Works Contract
7. Construction of Immovable Property for own account
8. Composition Scheme
9. No ITC for Personal Use
10. No ITC for Non Resident
11. Free Samples and Destroyed Goods
12. No ITC for Fraud Cases
13. No ITC of Restaurant.
Utilization of Credit from Input Tax Credit
• ITC can be utilized for payment of Tax liability.
• ITC cannot be utilized for payment of TDS/TCS/interest/penalty/fee/others.
• ITC cannot be utilized for payment tax liability under RCM.
• IGST Input Tax Credit shall be first be utilized towards payment of IGST liability and the amount remaining, if any, may be utilized towards the payment of CGST, SGST/UTGST liabilities in that order.
• CGST Input Tax Credit shall be first be utilized towards payment of CGST liability and the amount remaining, if any, may be utilized towards the payment of IGST liability.
• SGST Input Tax Credit shall be first be utilized towards payment of SGST liability and the amount remaining, if any, may be utilized towards payment of IGST liability if no CGST credit is available.
• UTGST Input Tax Credit shall first be utilized towards payment of UTGST liability and the amount remaining, if any, may be utilized towards payment of IGST liability if no CGST credit is available.
• CGST Input Tax Credit shall not be utilized towards payment of SGST/UTGST liabilities.
• SGST/UTGST Input Tax Credit shall not be utilized towards payment of CGST liabilities.
Manner of determination of ITC attributable to exempt supplies when Capital Goods are used for exempted supply as well as Taxable supply
The credits are determined in terms of Rule 43 of the CGST Rules, 2017 are as under:
a) Input tax in respect of capital goods used or intended to be used exclusively for non-business purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and shall not be credited to his electronic credit ledger
b) Input tax in respect of capital goods used or intended to be used exclusively for effecting taxable supplies including zero-rated supplies shall be indicated in FORM GSTR-2 and shall be credited to the electronic credit ledger
c) Out of the total input tax credit on capital goods, the amount of input tax credit in (a) and (b) shall be deducted from total input tax credit and shall be credited to the electronic credit ledger and the useful life of such good shall be taken as five years.
d) The common input tax credit attributable to exempt supplies shall be calculated as a ratio of the aggregate value of exempt supplies to the total turnover of the person in the tax period.
e) In case if the turnover details are not available then the values for the preceding tax period shall be taken for calculation.
Special Case of Input Tax Credit in GST
Input Tax Credit on Hotel Accommodation Bill
Hotel will always Charge CGST and SGST on Accommodation Bill. If Receiver of Service have GST Registration in State or Union Territory in which Supply of Service Made then Can Claim ITC otherwise cannot claim ITC on Accommodation Bill.
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