Input Tax Credit Claim

The GST regime promises seamless credit on goods and services across the entire supply chain which makes GST a value added tax. The input tax credit can be claimed by the business by filing monthly return GSTR 3B.

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Conditions For Availing ITC

The taxpayer can avail credit subject to certain conditions as mentioned below:

  • The goods or services purchased are further used for business purposes and not personal use
  • Must be in possession of tax invoice or debit note
  • Such tax invoice or debit note is filed by the supplier in Form GSTR-1 and it appears in the buyer’s Form GSTR-2B
  • The buyer has received the goods and/or services. Where the goods are received in lots or instalments, ITC will be allowed to be availed when the last lot or instalment is received
  • The buyer must furnish the GST returns in Form GSTR-3B
  • The buyer must pay towards the supply of goods and/or services within 180 days from the invoice date. If they fail to, then the ITC already claimed will be added back to output tax liability and interest must be paid on such tax. ITC claim will be reinstated once the payment is made to the supplier
  • No ITC will be allowed if depreciation has been claimed on the tax component of a capital good purchased
  • ITC on a tax invoice or debit note belonging to a financial year must be claimed within the time limit given by the GST provisions- Due date of filing GST returns for September of next FY or date of filing GSTR 9
  • In case of certain supplies listed down as blocked credits under Section 17(5) of the CGST Act such as motor vehicles & general insurance on them, food & beverages, club memberships, employee travel benefits, works contract services etc subject to exceptions.

Rule 86B under GST

This provision is applicable to person having taxable supply more than Rs. 50 lakhs per month. Such registered persons cannot utilize ITC in excess of 99% of liability to discharge their output tax liability i.e., at least 1% of the output tax liability shall be paid in cash on a monthly basis.