Section 16 of Central Goods & Service Tax Act, 2017 prescribes the following rules to claim Input Tax Credit:
- Both Buyer & Supplier shall be registered under GST Law & supplies should be made to the registered persons.
- The Buyer shall possess a tax invoice of purchase or debit note or any other prescribed documents issued by the registered dealer.
- The Recipient or buyer of goods or services shall have received the goods or services.
- The supplier shall have paid the taxes due on purchases to the government either in cash or by claiming ITC.
- When goods or Services are received in parts or in installments, Input Tax Credit may be claimed on receipt of the last slot or installment.
- The seller must have filed GST return i.e. GSTR 1. The detail filed by seller in GSTR1 will automatically reflect in GSTR 2A of buyer.
Note: If seller fails to file GSTR1 on time, buyer can claim only 5% of eligible ITC.
When Input Tax Credit cannot be claimed?
ITC cannot be claimed in the following cases:
- Purchase of capital goods used for non-business purposes.
- Purchase of capital goods used for manufacturing exempted goods
- Purchase from Composition dealers
- Blocked Credits as per Section17 (5)
In case of any query related to GST Return or to undertake the process of claiming Input Tax Credit, Contact your Trustworthy Advisor ‘Manthan Experts’.
What is Input Tax Credit (ITC)?