Conditions for Availing Input Tax Credit

The taxpayer in GST can avail Input Tax Credit on goods or services purchased. However, there are few binding on the taxpayers, so that he can take only eligible ITC under Goods and Service Tax. These measures restrict the buyer to take false credit. Since the concept is very clear and the taxpayer knows the conditions for availing input tax credit under GST, he need not have to reverse ITC later.

Thus, as per section 16(2) and (3) of the revised model GST law, registered taxable person shall be eligible for ITC if he has fulfilled the following conditions:

image for conditions for availing input tax credit

1) He is in possession of a :

  • Tax invoice issued by a registered supplier
  • A debit note issued by a registered supplier, or
  • any other prescribed taxpaying document.

2) The registered taxable person has received the goods and/or services.

  • It shall be considered that the taxable person has received the goods if delivered by the supplier to a recipient or even to the third person. for eg. Supplier has Billed to A & shipped to B then A could claim the ITC even if goods are delivered to B.
  • Goods received in lots:  if the goods are received in installments or lots then the registered taxable person is entitled to claim ITC on the receipt of the last lot or installment.

3) Payment of output tax by the supplier:

  • Tax charged to the receiver of the goods must be actually paid to the government or through the utilization of ITC by the supplier of goods or services or both.
  • If the inward details filed by the recipient of the goods do not match with the outward details filed by the supplier in his return, the supplier would be required to rectify the mismatch within the specified period.   if the mismatch continues, the ITC claimed shall be added to the output tax liability of the recipient.

4) He has furnished the GST Return under section 34.

5) Failure to pay consideration (with tax) to the supplier within 3 months:

If the receiver of the goods fails to pay the supplier within 3 months with the tax amount, then the ITC availed by the receiver will be added to the output tax liability of the receiver.

It is important to note that this provision is applicable only for the services and not the goods.

6) No ITC on the amount of depreciation on the tax component:

If the registered taxable person has claimed the depreciation of the tax component of the cost of capital goods under the provisions of the Income-tax act, 1961, the ITC shall not be allowed on the said tax component.

The FAQ on ITC conditions

What documents are needed for claiming ITC?

The GST Invoice, Debit note or any other document as per the existing law.

When can we claim ITC?

As soon as you receive the goods or services and the proper documents specified above.

Can I claim ITC on expenses?

Yes, you can claim the ITC on expenses that lead to the furtherance of your business.

What is the time limit to take ITC?

You can take the current FY ITC before filing the next FY GSTR 3B for the month of September. For eg., the ITC of invoices received in February 2020 can be availed before filing GSTR 3B of September 2020.

Can we claim ITC in annual return?


Can we claim ITC before registration?

Since you do not have valid registration and valid invoices with your registration details you can not avail ITC before the GST Registration.

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