Input tax credit is claiming the credit on the GST paid on the purchases of goods and services, being a manufacturer, supplier, agent, aggregator or an e-commerce operator which are utilized in further business processes. Being one of the most essential reason for introduction of GST is considered as the backbone of GST. The tax so paid at the time of purchase is available for deduction from tax payable. While in other words, input tax credit is tax reduced from output tax payable on account of sales. Example – a trader purchased goods costing 100 rupees and pays the tax amount of 10% on it. The trader sold the same goods at rupees 150 and collect the tax amount of 15 from the buyer. Now the trader stands under the obligation to payoff this Rs.15 as tax to the government but as he had already paid the amount of Rs.10 as tax on the same goods so this is defined as ITC of the trader and is allowed to deduct from tax payable and would be left with an obligation to pay only Rs.5 as a tax balance.

What are the basic requisites to claim input tax credit? There exists some of the basic requisites which a person need to fulfil to claim input tax credit which includes: • One need to get registered under GST law. • A tax invoice or a debit note showing the tax amount so issued by the supplier must be there. • Received goods and services • Suppliers must have compulsorily filled returns and paid tax amount to the government. • ITC will be claimed only on the last installment or lots if the goods are received in parts or installments. • The situation where input tax credit is already included in the cost of capital goods and depreciation is claimed over the tax, then input tax credit remains unclaimable. • Input tax credit need to be claimed within the prescribed limit mentioned.

Documents necessary to claim input tax credit Some of the following documents on which a trader can successfully claim the amount of input tax credit • A tax invoice issued by the registered supplier. • A debit note issued earlier of the tax invoice by the registered supplier under the GST Act. • An effective invoice issued by the recipient of goods and services who had paid the tax under the mechanism of reverse charge. • In case of imports there need to be bill of entry or some other similar document. • Issuance of credit note or an invoice by the Input Service Distributor.

Reversal of Input Tax Credit and in what conditions it gets reversed? There exists some conditions under which the input tax credit can be reversed which includes: • Inability to pay the supplier back within 180 days from the date of issuance of an invoice. • Goods and services utilized for personal purpose be it capital goods or inputs. • Where goods and services are used either for production or supply of exempted goods. • Selling off of capital goods or plant and machinery on which input tax credit was effectively claimed. • Input service distributor on issuing the credit note or similar invoice. • Transition from the registered regular dealer to the composite dealer. Conditions where input tax credit gets reversed: • The amount so reversed would be included in the output tax paying obligation in the very month when it got replaced. • To reclaim the reverse credit amount no time restriction is applicable. • Interest shall be paid from the date of availing credit till the date when the amount is reversed and paid.

The procedure to claim credit when tax had been payable under Reverse Charge Mechanism The month in which the payment has been made, the very month one can avail input tax credit on the reverse charge basis. There exists some of the following conditions: • If liability has been discharged and claimed through cash. • Goods and services are utilized for business purposes. • Self-invoicing is done on such purchases as no tax invoice can be issued by unregistered supplier.

What is the time limit within which one can claim Input Tax Credit? There are some of the mentioned dates before the end of which one can claim the input tax credit on the basis of invoice, debit note or credit note. • Due date of GST return filing for the month of September of the next financial year. • Date of filing annual return for that financial year. For the FY 18-19, period to be claimed ITC was extended to March 2020. If no such credit is claimed till March, 2020 if any such credit to be availed which cannot be claimed even through the GSTR 9 annual return.

Certain special cases where ITC can be claimed As per Section 18 of CGST Act, input tax credit can be claimed under following circumstances: • In case of compulsory registration availability of input tax credit • Availability of input tax credit in case of voluntarily registration • Availability of Input Tax Credit when the registered person ceases to be applicable for GST composition scheme. • Availability when supplies so exempted earlier becomes taxable. • If there is change in constitutional laws then there is input tax credit available. Items on which no input tax credit is allowed There is a list of items on which input tax credit is not allowed to claim: • Purchase of motor cycles or conveyance with certain exemptions. • Any expenditure with respect to insurance of motor cycles and conveyance. • If membership is sold of health clubs or fitness centers. • ITC applicable on food, beverages, outdoor catering services, beauty treatment, health services, cosmetic and plastic surgery • Travel allowances given to employees. • ITC on works contract services availed for construction of immovable property, including goods and services used for construction for immovable property (except plant and machinery). • Any registered person who had opted for the composition scheme, on the purchases if any ITC to be deducted. • Goods and services used for personal consumption. • Input tax credit on the tax paid due to any fraudulent cases. Setoff regulations of Input Tax Credit With the introduction of new alterations in the GSTN portal with effect from 1st July, 2019, it can be setoff in following manner: • Firstly, IGST credit need to be fully utilized. • In case of CGST liability, CGST credit is to utilized first and then IGST credit. However, one must take into consideration that no IGST credit is pending • While in the case of SGST liability, SGST credit would be used first then IGST credit leaving no IGST credit behind. • CGST credit cannot be utilized against setting off SGST liability and vice versa, SGST credit cannot be utilized to set off CGST liability. • The primary objective of the setting off the credit against tax liabilities is to have minimum tax-payout amount after complying with all the provisions of GST Act. The time limit within which the ITC should be claimed on monthly basis through the forms of GSTR 2B reconciliation and GSTR 3 B filling.

Conclusion For getting the amount of input tax credit over the eligible goods and services following under the GST Act must all be claimed against the tax liabilities within the prescribed time limits set by the Constitution and provisions of the Act.