The process of adjusting the tax liability on output (sales) against the tax already paid on input (purchases) is called utilization of input tax credit. Post GST regime the taxpayer was allowed to avail the benefit of input tax credit only on VAT paid under the state act. While under the GST regime a taxpayer will be eligible to claim input tax credit on both State Goods and Service Tax and Central Goods and Service Tax.

Requirements for Availing Input Tax Credit:

  • Only a registered person can avail the input tax credit paid on the inward supply of goods and services both, which is intended to be used in the course of business.
  • He possesses a relevant Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act.
  • The said goods/services have been received.
  • The tax has actually been paid by the supplier.
  • He has furnished the return in GSTR-3.
  • If the inputs are received in lots he will be eligible to avail the credit only when the last lots of the inputs are received.

Documents required for availing Input Tax Credit:

  • Invoice issued by the supplier of Goods or Services or both.
  • A debit note issued by the supplier.
  • Revised Invoice
  • Invoice issued by recipient along with proof of tax.
  • Documents issued by Input service distributor.
  • Bill of entry or any similar document prescribed under the Customs Act.

Items on which benefit of Input Tax Credit is not available

  • On Motor Vehicles and Other conveyance– Input tax credit facility cannot be claimed in this case until they are further supplied, used for transporting passengers or goods and used for imparting training on driving, flying, or navigating such vehicles.
  • On Food, Beverages, outdoor catering, Beauty treatment, plastic surgery and health surgery – In following cases no input tax credit can be claimed unless they have been used for making an outward supply of the same category of goods and services.
  • When the claim is made after due date- The claim should be made within 1 year from the date of issuing the invoice , the date of filing of the return for September of the next financial year or before the date of filing the annual return.
  • Registration has not been made within required time period- If a taxpayer fails to apply for registration within 30 days from the date on which liability to register arises he will lose his right

Of claiming any input credit.

  • Composition Tax Payer – A person who is registered under the composition tax scheme is not eligible to claim input tax credit.
  • Goods and services used for personal purposes– A taxpayer is not eligible to claim input tax credit on goods and services used by him for personal consumption.
  • Where goods and services are used for manufacturing exempted products – A taxpayer cannot claim any input tax credit if the good he manufactures is an exempted good.
  • On Capital Goods, if depreciation has already been claimed– No input tax credit will be allowed in case of capital goods if depreciation has already been claimed in return.
  • On travel benefits provided to employees.
  • On Goods lost, stolen, destroyed, written off or disposed of as gifts or free samples.
  • On membership of clubs and fitness centers.