Input Tax Credit

Under GST

CA Rajesh Saluja
LUNAWAT & Co.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit

Section – 16 – Eligibility and conditions for taking input tax credit
Section – 17 – Apportionment of credits and blocked credits
Section – 18 – Availability of credit in special circumstances
Section – 19 – Recovery of Input Tax Credit and Interest thereon
Section – 20 – Taking ITC in respect of inputs sent for job-work
Section – 21 – Manner of distribution of credit by Input Service
Distributor
Section – 22 – Manner of recovery of credit distributed in excess
Section – 36 – Claim of ITC and provisional acceptance thereof
Section – 37 – Matching, reversal and reclaim of ITC
Section – 167 to 178, 186 to 197 – Transitional Provisions
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit

Section – 2(56) - “input tax credit” means credit of ‘input tax’ as
defined in sub-section (55)

Section – 2(55) - "input tax" in relation to a taxable person,

means the IGST, including that on import of goods, CGST and
SGST charged on any supply of goods or services to him and
includes the tax payable under sub-section (3) of section 8,
but does not include the tax paid under section 9

Section – 8(3) – Reverse Charge

Section – 9 – Composition levy

 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 16

Section – 16(1)

Every registered taxable person shall…….be entitled to take

credit of input tax charged on any supply of goods or
services….which are used or intended to be used in the course
or furtherance of his business and the said amount shall be
credited to the electronic credit ledger of such person.

Provided…..ITC in respect of pipelines and telecommunication

towers fixed to earth…..shall not exceed 1/3rd of the total ITC,
for three years starting from the year in which said goods are
received.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 16

Section – 16(2)

To avail ITC, a RTP must satisfy the following:

(a) he is in possession of a tax invoice or debit note issued by a
supplier registered under this Act, or such other taxpaying
document(s) as may be prescribed;
(b) he has received the goods and/or services;
(c) the tax charged in respect of such supply has been actually
paid to the account of the appropriate Government; and
(d) he has furnished the return under section 34.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 16

Section – 16(2)

PROVIDED that where the goods against an invoice are

received in lots or instalments, the registered taxable person
shall be entitled to take credit upon receipt of the last lot or
instalment

PROVIDED – Where a recipient of services fails to pay to the

supplier within 3 months of issue of invoice, the amount availed
by recipient as ITC, shall be added to his output tax liability plus
interest thereon.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 17

Section – 17 – ITC in the following cases to be allowed to the
extent attributable to business purpose:
1. Where goods and/or services are used partly for the
purpose of any business and partly for other purposes.
2. Where goods and / or services are used partly for effecting
taxable supplies including zero-rated supplies and partly
for effecting exempt supplies

Supply of Goods and/or

Input Tax Credit
Services

Exempt Disallow
Taxable Supply Allowable ITC
Supply ed ITC
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 17

Section – 17(4) – ITC shall not be available in respect of the
following:
(a) motor vehicles and other conveyances except when they
are used
(i) for making the following taxable supplies, namely
(A) further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such
vehicles or conveyances;
(ii) for transportation of goods.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 17

Section – 17(4) – ITC shall not be available in respect of the
following:
(b) supply of goods and services, namely,
(i) food and beverages, outdoor catering, beauty treatment,
health services, cosmetic and plastic surgery except where these
are used as input services by a RTP providing the same services.
(ii) membership of a club, health and fitness centre,
(iii) rent-a-cab, life insurance, health insurance except where the
Government notifies the services which are obligatory for an
employer to provide to its employees under any law for the time
being in force; and
(iv) travel benefits extended to employees on vacation such as
leave or home travel concession
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 17

Section – 17(4) – ITC shall not be available in respect of the
following:
(c) works contract services when supplied for construction of
immovable property, other than plant and machinery, except
where it is an input service for further supply of works contract
service;
(d) goods or services received by a taxable person for
construction of an immovable property on his own account,
other than plant and machinery, even when used in course or
furtherance of business;
(e) goods and/or services on which tax has been paid under
section 9;
(f) goods and/or services used for personal consumption;
(g) goods lost, stolen, destroyed, written off or disposed of by
way of gift or free samples; and
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 17

Section – 17(4) – ITC shall not be available in respect of the
following:
(h) any tax paid in terms of sections 67, 89 or 90

Section 67 – Determination of tax not paid or short paid or

erroneously refunded or input tax credit wrongly availed or
utilized by reason of fraud or any wilful-misstatement or
suppression of facts
Section 89 – Detention, seizure and release of goods and
conveyances in transit
Section 90 – Detention, seizure and release of goods and
conveyances in transit
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 18(1) to (5)

Input Tax on: Compulsory/Voluntary Registration
Person Ceases to pay tax under composition
scheme
Exempt supply of G&S becomes taxable
Raw Material Section 18(1) -subject to such conditions and
Semi Finished Goods restrictions as may be Prescribed, and in case
of compulsory registration, if applied for
Finished Goods registration within 30 days of being liable
Section 18(5) - No Credit available after one
year from date of invoice

Input Services received Not Available

prior to registration
Capital goods Not Available
purchased prior to
registration
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 18(6)

Sale Lease

Merger

ITC Change in Demerger

Allowed Constitution

amalgamation

Transfer of business
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 18(7)

• Where a RTP under regular scheme switched over to composition

scheme, or
• Where goods and/or services provided by a RTP become
absolutely exempt U/s 11,

He shall be liable to pay tax on the stock and capital goods held by
him on the date immediately preceding the day of switchover
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 19

Recovery of Input Tax Credit and Interest thereon

Where credit has been taken wrongly, the same shall be recovered
from the registered taxable person in accordance with the
provisions of this Act.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 20

Taking input tax credit in respect of inputs sent for job work
1. “principal” shall be entitled to take credit of input tax on inputs
even if the inputs are directly sent to a job worker for job-work
without their being first brought to his place of business
2. Where the inputs sent for job-work are not received back by
the “principal”, within a period of one year of their being sent
out, it shall be deemed that such inputs had been supplied by
the principal to the job-worker on the day when the said inputs
were sent out.
3. The “principal” shall, subject to such conditions and restrictions
as may be prescribed, be allowed input tax credit on capital
goods sent to a job-worker for job-work.
4. Where the capital goods sent for job-work are not received
back by the “principal” within a period of three years of their
being sent out, it shall be deemed that such capital goods had
been supplied by the principal to the jobworker on the day
when the said capital goods were sent out.
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 21

Different States Same State

Input Input
Service Recipient Service Recipient
Distributor Distributor

IGST/CGST/SGST SGST/CGST

IGST – CGST – SGST –

SGST & IGST – CGST & IGST -
IGST or CGST or SGST or
SGST CGST
CGST IGST IGST
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 21

The Input Service Distributor may distribute the credit subject to the
following conditions:
(a) The credit can be distributed against a prescribed document issued
to each of the recipients of the credit;
(b) the amount of the credit distributed shall not exceed the amount
of credit available for distribution;
(c) the credit of tax paid on input services attributable to a recipient of
credit shall be distributed only to that recipient;
(d) the credit of tax paid on input services attributable to more than
one recipient shall be pro rata on the basis of the turnover in a State of
such recipient;
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 22

Manner of recovery of credit distributed in excess
Where the Input Service Distributor distributes the credit in
contravention of the provisions contained in section 21 resulting in
excess distribution of credit to one or more recipients of credit, the
excess credit so distributed shall be recovered from such recipient(s)
along with interest, and the provisions of section 66 or 67, as the case
may be, shall apply mutatis mutandis for effecting such recovery
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 36

Claim of input tax credit and provisional acceptance thereof

(1) Every registered taxable person shall,

subject to such conditions and restrictions
be entitled to take credit of input tax,
as self assessed in his return and
such amount shall be credited, on a provisional basis,
to his electronic credit ledger

(2) The credit referred to in sub-section (1) shall be utilised only for
payment of self assessed output tax liability as per the return referred
to in sub-section (1).
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 37

Matching, reversal and reclaim of input tax credit
The details of every inward supply furnished by a registered taxable
person shall be matched with:
a. the corresponding details of outward supply furnished by the
corresponding taxable person
b. with the additional duty of customs paid in respect of goods
imported by him, and
c. for duplication of claims of input tax credit.
Where there is a mismatch on account of:
a. Input Tax claimed by recipient is in excess
b. Outward supply is not declared by the supplier
The discrepancy shall be communicated to both such persons in the
manner as may be prescribed.
If the discrepancy is not rectified by the supplier in the return of the
month in which discrepancy was communicated.
Then in the succeeding month the same shall be added to the
output tax liability of the recipient, along with interest thereon
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 37

Matching, reversal and reclaim of input tax credit
The amount claimed as input tax credit that is found to be in excess
on account of duplication of claims shall be added to the output
tax liability of the recipient in his return for the month in which the
duplication is communicated.

The recipient shall be eligible to reduce, from his output tax liability,
the amount added under sub-section (5) if the supplier declares the
details of the invoice and/or debit note in his valid return within the
time specified in sub-section (9) of section 34.

In the above case, the interest earlier paid, would be refunded, by

crediting the amount in his electronic cash ledger
 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Section 38

Matching, reversal and reclaim of reduction in output tax liability
The details of every credit note relating to outward supply for a tax
period shall be matched with
(a) with the corresponding reduction in the claim for input tax credit
by the corresponding taxable person
(b) for duplication of claims for reduction in output tax liability

a. Where the reduction of output tax liability in respect of outward

supplies exceeds the corresponding reduction in the claim for
input tax credit
b. Corresponding credit note is not declared by the supplier
The discrepancy shall be communicated to both such persons in the
manner as may be prescribed.
If the discrepancy is not rectified by the supplier in the return of the
month in which discrepancy was communicated.
Then in the succeeding month the same shall be added to the
output tax liability of the recipient, along with interest thereon.
 CA Rajesh Saluja
LUNAWAT & Co.

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 CA Rajesh Saluja
LUNAWAT & Co.

Input tax credit – Transitional Provisions

Matching, reversal and reclaim of reduction in output tax liability
The details of every credit note relating to outward supply for a tax
period shall be matched with
(a) with the corresponding reduction in the claim for input tax credit
by the corresponding taxable person
(b) for duplication of claims for reduction in output tax liability

a. Where the reduction of output tax liability in respect of outward

supplies exceeds the corresponding reduction in the claim for
input tax credit
b. Corresponding credit note is not declared by the supplier
The discrepancy shall be communicated to both such persons in the
manner as may be prescribed.
If the discrepancy is not rectified by the supplier in the return of the
month in which discrepancy was communicated.
Then in the succeeding month the same shall be added to the
output tax liability of the recipient, along with interest thereon.
 CA Rajesh Saluja
LUNAWAT & Co.

Section 167

Amount of CENVAT Credit carried forward to be allowed to registered

taxable person under GST other than a person opting to pay tax
under composition levy

• RTP shall be entitled to take credit of the amount of eligible CENVAT

credit carried forward in return filed, not later than 90 days from the
said date, under earlier law for the period ending immediately prior
to appointed day

Provided that the taxable person shall not be allowed to take credit unless the said
amount is admissible as credit under this Act.

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 168

Amount of un-availed* CENVAT Credit of Capital goods to be

allowed to registered taxable person under GST other than
person opting to pay tax under composition levy

• RTP shall be entitled to take credit of the Un-availed CENVAT

credit not carried forward in return filed under earlier law for
the period ending immediately prior to appointed day

Provided that the taxable person shall not be allowed to take credit unless the said
amount is admissible as credit under this Act.
*Un-availed amount of CENVAT credit in respect of Capital goods =
Aggregate amount of CENVAT Credit (-) Credit already availed in respect of capital goods
in earlier return
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 CA Rajesh Saluja
LUNAWAT & Co.

Section 169
A registered taxable person (RTP)
 Who was not liable to be registered under the earlier law or
 Who was engaged in the manufacture of exempted goods or provision of an exempted
services or
 Providing exempted works contract service and availing benefit of abatement under
notification 26/2012 dated 20.06.2012
 First stage dealer (FSD) or second stage dealer(SSD) or registered importer
shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in
respect of inputs held in stock and inputs contained in semi-finished or finished goods held in
stock on the appointed day subject to the following conditions:
a. Such inputs and / or goods are used or intended to be used for making taxable
supplies under this Act.
b. Said taxable person passes on the benefit of such credit by way of reduced price to the
recipient
c. RTP is eligible for input tax credit on such inputs under this Act.
d. RTP is in possession of invoice and/or other prescribed documents evidencing payment
of duty under the earlier law in respect of such inputs* and
e. Such invoices and /or other prescribed documents were issued not earlier than twelve
months immediately preceding the appointed day.
f. Supplier of services is not eligible for any abatement under the Act.

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 169

“Provided that where a taxable person, other than a manufacturer or

a supplier of services, is not in possession of an invoice or any other
documents evidencing payment of duty in respect of inputs, then such
taxable person shall, subject to such conditions, limitations and
safeguards as may be prescribed, be allowed to take credit at the
rate and in the manner prescribed.”

Note: This provision has been inserted keeping in mind

traders dealing in excisable goods but not registered as first
stage dealer (FSD), second stage dealer (SSD) or importer.

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 170

A registered taxable person (RTP)

Who was engaged in the manufacture of non-exempted as well as exempted

goods under the Central Excise Act, 1944 or
Who was engaged in the provision of non-exempted as well as exempted
services under Chapter V of Finance Act, 1994

shall be entitled to take, in his electronic credit ledger-

- Amount of Cenvat credit carried forward in a return furnished under the

earlier law by him in terms of section 167.
- Amount of Cenvat credit of eligible duties in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock on the
appointed day, relating to exempted goods or services, in terms of section
169

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 171

Under CGST Law

A registered taxable person (RTP)

- shall be entitled to take, in his electronic credit ledger,

- credit of eligible duties and taxes, in respect of inputs or input services
- received on or after the appointed day but the duty or tax in respect of which
has been paid before the appointed day,
- subject to the condition that the invoice or any other duty/tax paying
document of the same was recorded in the books of accounts of such person
- within a period of thirty days from the appointed day

The said registered taxable person shall furnish a statement, in such manner as may
be prescribed, in respect of credit that has been taken under sub-section (1).

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 171

Under SGST Law

A registered taxable person (RTP)

- shall be entitled to take, in his electronic credit ledger,

- credit of Value Added Tax [and entry tax], in respect of inputs
- received on or after the appointed day but the duty or tax in respect of which
has been paid before the appointed day,
- subject to the condition that the invoice or any other duty/tax paying
document of the same was recorded in the books of accounts of such person
- within a period of thirty days from the appointed day

The said registered taxable person shall furnish a statement, in such manner as may
be prescribed, in respect of credit that has been taken under sub-section (1).

32
 CA Rajesh Saluja
LUNAWAT & Co.

Section 172 read with section 18(3)

A registered taxable person (RTP)

- who was either paying tax at a fixed rate or

- paying a fixed amount in lieu of the tax payable under the earlier law

shall be entitled to take, in his electronic credit ledger, credit of eligible duties in
respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the appointed date subject to the following conditions:

a. Such inputs and / or goods are used or intended to be used for making
taxable supplies under this Act.
b. RTP is not paying tax under Section 9(i.e. composition levy)
c. RTP is eligible for input tax credit on inputs under this Act.
d. RTP is in possession of invoice and/or other prescribed documents
evidencing payment of duty under the earlier law in respect of such inputs
and
e. Such invoices and /or other prescribed documents were issued not earlier
than twelve months immediately preceding the appointed day.
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 CA Rajesh Saluja
LUNAWAT & Co.

Section 190

Notwithstanding anything to the contrary contained in this

Act, the input tax credit on account of any services
received prior to the appointed day by an Input Service
Distributor shall be eligible for distribution as credit under
this Act even if the invoice(s) relating to such services is
received on or after the appointed day.

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 173

If such goods are returned

within a period of 6
months from the No tax shall be
appointed day (01.07.2017 payable
Goods had been exempt to 31.12.2017) and such
under the earlier law at the goods are identifiable to
time of removal thereof and the satisfaction of proper
such goods had been officer
removed not earlier than 6
months prior to the
appointed day (i.e. from If such goods are returned Tax shall be
1.01.2017 to 30.06.2017) after a period of 6 months payable by the
from the appointed day person
(i.e. 01.01.2018 onwards) returning the
and such goods are liable goods
to tax under GST
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 CA Rajesh Saluja
LUNAWAT & Co.

Section 174

It shall be
If such goods are returned deemed to be a
on or after the appointed supply
Tax has been paid on goods day by a Registered
under the earlier law at the Taxable Person
time of removal thereof and
such goods had been
removed not earlier than 6
months prior to the
appointed day (i.e. from The RTP shall be
1.01.2017 to 30.06.2017) If such goods are returned
on or after the appointed eligible for
day by a person other refund under
than a Registered Taxable earlier law
Person

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 CA Rajesh Saluja
LUNAWAT & Co.

Section 175
Any inputs received in a factory had been removed as such or removed after being
partially processed to a job worker for further processing, testing, repair, reconditioning or any
other purpose in accordance with the provisions of earlier law prior to the appointed day (i.e. on or
before 01.07.2017) and such inputs, after completion of the job work, are returned to the said
factory on or after the appointed day (on or after 01.07.2017)

If such inputs are returned within

the period of 6 months (upto If such inputs are not
30.12.2017) which may be returned within a
extended for a further period not period of 6 months or
exceeding two months on the extended period
sufficient cause

The input tax credit shall be

No tax shall be
liable to be recovered from
payable
principal in terms of Sec 184
Manufacturer and jobworker to declare the details of stock and input credit thereof
 CA Rajesh Saluja
LUNAWAT & Co.

Section 176
Any semi-finished goods had been removed from the factory to any other premises for
carrying out certain manufacturing processes in accordance with the provisions of earlier
law prior to the appointed day (i.e. on or before 30.06.2017) and such goods after
undergoing manufacturing processes (herein after referred to as "the said goods") are
returned to the said factory on or after the appointed day (on or after 01.07.2017)

If such inputs are returned within

the period of 6 months (upto If such inputs are not
31.12.2017) which may be returned within a
extended for a further period not period of 6 months or
exceeding two months on the extended period
sufficient cause

The input tax credit shall be

No tax shall be
liable to be recovered from
payable
principal in terms of Sec 184
Manufacturer and jobworker to declare the details of stock and input credit thereof
 CA Rajesh Saluja
LUNAWAT & Co.

Section 177
Any excisable goods manufactured in a factory had been removed without payment of duty for
carrying out tests or any other process (not amounting to manufacture), to any other premises,
whether registered or not, in accordance with the provisions of earlier law prior to the appointed
day and such goods, after undergoing tests or any other process (herein after referred to as the
"said goods") are returned to the said factory on or after the appointed day

If such inputs are returned within

the period of 6 months (upto If such inputs are not
31.12.2017) which may be returned within a
extended for a further period not period of 6 months or
exceeding two months on the extended period
sufficient cause

The input tax credit shall be

No tax shall be
liable to be recovered from
payable
principal in terms of Sec 184
 CA Rajesh Saluja
LUNAWAT & Co.

Section 195

Goods had been sent on approval basis under the earlier law, not earlier than 6 months prior to the
appointed day (i.e. from 1.01.2017 to 30.06.2017) and such goods had been rejected or not
approved by the buyer and returned to the seller on or after the appointed date

If such goods are returned within If such goods are

the period of 6 months (upto returned after a period If such goods are not
31.12.2017) which may be of 6 months (i.e. returned within a
extended for a further period not 31.12.2017 onwards) or period of 6 months or
exceeding two months on the extended period and the extended period
sufficient cause liable to tax under GST

Tax shall be payable by the

No tax shall be Tax shall be payable by the person who has sent the
payable person returning the goods goods
CA Rajesh Saluja
LUNAWAT & Co.
CA Rajesh Saluja
LUNAWAT & Co.