An input tax credit means the tax paid on by the acquisition of goods or services and the same can be stable against the liability on the sale of goods or services. The credit was claimed under the pre-GST regime based on the acquisition of invoices available with the taxpayer.
Time Limit for Claiming ITC
The debit notes which are less than a year old, ITC can only be claimed for that tax invoices. In any other Instance, the last date to claim ITC is the earlier of the following:
- Before filing valid GST returns for a month following the end of the financial year applicable to that invoice.
- Before filing a relevant annual return.
GST Input Tax Credit Rules
You may be eligible to Input Tax Credit if you fulfill the below-mentioned conditions:
- It is necessary for you to register as a taxable person under GST.
- Goods & services on which you want to claim ITC is supposed to be used only for business purposes.
- Input Tax Credit can be claimed on taxable & zero-rated supplies (exports).
- If the constitution of registered taxable person changes because of sale, merger or transfer of business, then unused ITC must be transferred to the sold, merged or transferred business.
- You need supporting documents like tax invoice, debit note, supplementary invoice, etc. to claim ITC
- You can claim Input Tax Credit if you have got some goods & services.
- The Input Tax must be paid through electronic cash ledger or electronic credit ledger to claim ITC.
- Filing all the applicable GST returns is mandatory.
- You can claim ITC only after you have received final goods which are received in lots
You cannot claim Input Tax Credit in the following cases:
- If you have gained goods & services under a contract that outcomes in the construction of immovable property apart from plant & machinery.
- If you have paid tax on goods & services under the GST composition scheme.
- Such goods & services that are used by employees for their own use.
- If depreciation was claimed on the cost of capital goods (including ITC amount), then they are not entitled to Input Tax credit.
- No ITC can be claimed for goods or services used for their own purposes.
Documents Required to Claim Input Tax Credit
- Invoice issued by the supplier
- In case the total amount is less than Rs 200 or a case where the reverse charge mechanism is applicable, the invoice issued by the supplier which is like Bill of Supply
- Bill of Supply issued by the supplier
- Document issued by ISD could be an invoice or credit note
- Bill of Entry or similar documents issued by the Customs Department
- A debit note issued by the supplier (if any)
Businesses need to observe the following rules to claim the input tax credit.
- The buyer must hold a proper tax invoice, debit note, or other specified document issued by a registered dealer.
- The supplier must have paid the tax due on the buyer’s acquisitions to the government either in cash or by claiming the input tax credit.
- The buyer must have obtained the goods or services.
- The supplier should have filed GST returns.
- The buyer should pay the supplier for the supplies received (inclusive of tax) within 180 days from the date of issuing the invoice to claim ITC.
- Goods or services that are mandatory for an employer to provide to their employees, under any law.
- General insurance, repair, and maintenance with respect to motor vehicles, vessels, and aircraft.