FAQs (Source: Issued by CBIC)
Q1. What is input tax?
Ans. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services or both made to a registered person. It also includes tax paid on reverse charge basis and integrated tax charged on import of goods. It does not include tax paid under composition levy.
Q2. What is Input Tax Credit?
Ans. Input Tax Credit means the credit of input tax on the supplies of goods or services or both received by a registered person.
Q3. Can GST paid on reverse charge basis be considered as input tax?
Ans. The definition of input tax includes the tax payable under the reverse charge.
Q4. Does input tax includes tax (CGST/IGST/SGST) paid on input goods, input services and capital goods?
Ans. Yes, it includes taxes paid on input goods, input services and capital goods. Credit of tax paid on capital goods is permitted to be availed in one instalment.
Q5. Is credit of all input tax charged on supply of goods or services allowed under GST?
Ans. A registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business, subject to other conditions and restrictions.
Q6. What are the conditions necessary for obtaining ITC?
Ans. Following four conditions are to be satisfied by the registered taxable person for obtaining ITC:
- he is in possession of tax invoice or debit note or such other tax paying documents (such as bill of entry or any other document prescribed under the Customs Act, ISD invoice as prescribed in Rule 36(1) of the CGST Rules).
- he has received the goods or services or both;
- the supplier has actually paid the tax charged in respect of the supply to the government; and
- he has furnished the return under section
Q7. Whether all particulars necessary in the documents- tax invoice or debit note or such other tax paying documents for claiming ITC?
Ans. If the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person. (Proviso to Rule 36(2) of CGST Rules, 2018 inserted vide Notification no.39/2018-Central Tax issued dated 04.09.18)
Q8. Where the goods against an invoice are received in lots or instalments, how will a registered person be entitled to ITC?
Ans. The registered person shall be entitled to the credit only upon receipt of the last lot or installment.
Q9. Can a person take input tax credit without payment of consideration for the supply along with tax to the supplier?
Ans. Yes, the recipient can take ITC. But he is required to pay the consideration along with tax within 180 days from the date of issue of invoice. This condition is not applicable where tax is payable on reverse charge basis.
Q10. What would happen of the ITC taken by the registered person if he has not paid the consideration along with tax within 180 days from the date of issue of invoice?
Ans. The amount of ITC would be added to output tax liability of the person. He would also be required to pay interest. However, he can take ITC again on payment of consideration and tax.
Q11. Can the recipient reclaim the credit; in case he makes the payment any time after 180 days?
Ans. The recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.
Q12. Is there any time limit for re-claiming the credit where payment is made after 180 days from the date of issue of invoice?
Ans. The time limit specified in section 16(4) shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or these rules that had been reversed earlier.
Q13. Certain supplies mentioned in Schedule I of the Act are deemed to be supplies even if made without consideration. Will the payment within 180 days’ rule for credit apply even to such cases?
Ans. The value of supplies made without consideration as specified in Schedule I shall be deemed to have been paid for the purposes of the second proviso to section 16(2). (Proviso to Rule 37 of the CGST Rules, 2017)
Q14. How can a trader avail ITC while selling goods/services to unregistered/exempted GST traders?
Ans. The fact that a registered person is supplying goods to an unregistered or exempted person has no consequence on availment of ITC by the supplier.
Q15. Please clarify ITC Credit status for the following condition: if Commission received Without Deducting GST in cases where distributor under Exemption OR composition Scheme
Ans. In case of unregistered dealer, recipient will pay tax on reverse charge basis. He can get the ITC provided he fulfills other conditions as mentioned in section 16 of the CGST Act, 2017. In case of purchase from composition taxable person, the composition person cannot charge any tax and hence the question of availing ITC does not arise.
Q16. How a service Provider can get input GST credit benefit in pure labour Contract under Input Credit?
Ans. He needs to use input for furtherance of business and should fulfill the conditions mentioned in section 16 of CGST Act, 2017. The input should not fall within the negative list provided in section 17(5) of the CGST Act, 2017.
Q17. As per section 15(2)(b) of the CGST Act, 2017, any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both are added in the value of a supply. In such cases, no consideration is to be paid to the supplier. Whether ITC is available in such cases?
Ans. Value of supplies on account of any amount added in accordance with the provisions of section 15(2)(b) is deemed to have been paid for the purposes of the second proviso to section 16(2). Therefore, ITC is admissible. (Second Proviso to Rule 37 of CGST Rules, 2017)
Q18. Who will get the ITC where goods have been delivered to a person other than taxable person (‘bill to’- ‘ship to ’scenarios)?
Ans. It would be deemed that the registered person has received the goods when the goods have been delivered to a third party on the direction of such taxable person. So ITC will be available to the person on whose order the goods are delivered to third person.
Q19. Who will get the ITC where services are provided by the supplier to a person on the direction of and on account of such registered person?
Ans. It would be deemed that the registered person has received the services where the services are provided by the supplier to any person on the direction of and on account of such registered person. [Explanation clause to Section 16(2)(b) inserted vide CGST(Amendment) Act, 2018]
Q20. What is the time limit for taking ITC and reasons therefor?
Ans. A registered person cannot take ITC in respect of any invoice or debit note for supply of goods or services after the due date for furnishing the return under section 39 for the month of September following the end of financial year to which such invoice/invoice relating to debit note pertains or furnishing of the relevant annual return, whichever is earlier. So, the upper time limit for taking ITC is 20th October of the next FY or the date of filing of annual return whichever is earlier.
The underlying reasoning for this restriction is that no change in return is permitted after September of next FY. If annual return is filed before the month of September, then no change can be made after filing of annual return.
However, in cases of new registration or where a person shifts from composition scheme to regular tax payment or where an exempt supply become taxable, the time limit for taking ITC is one year from the date of invoice of inward supplies. [Section 18(2) of CGST Act]
Q21. Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961 will ITC be allowed in such cases?
Ans. The input tax credit shall not be allowed on the said tax component in respect of which depreciation has been claimed.