ELIGIBILITY OR CONDITIONS FOR TAKING INPUT TAX CREDIT

According to Section 16 of CGST Act and Rule 36 and Rule 37, a person has to comply with the
following conditions in order to avail the Input tax credit-

 The person should be a registered person. In other words, only registered person is allowed to
have input tax credit, an unregistered person is not eligible to have input tax credit. The
exception to this condition is that a registered person who has opted for composition scheme
can not avail Input Tax Credit.
 Every registered person is allowed to take input tax credit for only those goods and services
which are used or intended to be used by him in the course or furtherance of business. This
amount of input tax credit will be credited to electronic credit ledger of such person. For
example: If a person has purchased a laptop for his personal use, then he cannot take input
tax credit of such laptop. But if the registered person has taken this laptop for the use in his
business, in that case he can take input tax credit on such laptop and can set it off against his
output tax liability.
 In order to avail Input tax credit, a registered person must have the tax invoice or debit note
or a bill of entry in possession. The said documents should contain at least the following
details:
a. Amount of tax
b. Description of goods or services
c. Total value of supply of goods and services
d. GSTIN of the supplier and recipient
e. Place of supply in case of inter-State supply
f. HSN Code.
 The registered person or the agent on his behalf must have received the goods and services
for which he is claiming the input tax credit.
 The details of input tax credit in respect of the said supply communicated to such
registered person under section 38 have not been restricted. The ITC on invoice or debit
note can be availed only when the details of such input tax credit in respect of said
invoice/debit note have not been restricted in the GSTR-2B.
 Where goods are received on installment basis, the registered person can claim the input tar
jus not credit of such goods on the receipt of last installment.
 As per section 41 of CGST Act, the supplier of the goods or services or both must have paid
the tax to the government either in cash or by setting it off against his input tax credit.
 Every registered supplier is required to file the return in Form GSTR 1/GSTR 5 (non-resident
taxable person)/ GSTR 6 (input service distributor) for reporting details of all outward supplies
of goods and services made. On the basis of the details of outward supplies furnished as per
by the registered persons under section 37(1) in their respective and of such other supplies as
may be prescribed, and an auto-generated statement GSTR 2B containing the details of input
tax credit shall be made available electronically to the recipients of such supplies in such form
and manner, within such time, and subject to such conditions and restrictions as may be
prescribed. The recipient can claim such ITC reflected in their GSTR-2B.
 As per Rule 37A:
(a) Matching of Purchase Register with GSTR 2B is required and

(b) verification of furnishing of GSTR 3B by corresponding supplier maximum by 30 th

September following the end of the Financial Year in which the ITC in respect of Invoice or
Debit Note has been availed is required.

After such matching, The ITC taken in the electronic credit ledger would be a final ITC of
the registered person.

Note:-Consequence of non- furnishing of GSTR 3B by Corresponding Supplier

If the corresponding supplier hasn't furnished GSTR 3B till 30th September following the end of
the Financial year in which the ITC in respect of Invoice or Debit Note has been availed, then
the said amount of ITC shall be reversed by the said registered person, while furnishing a
return in Form GSTR 3B on or before the 30th day of November following the end of such
Financial year.

However, if the said amount of ITC is not reversed by the registered person in a return in Form
GSTR 3B on or before the 30th November following the end of such financial year during
which such ITC has been availed, such amount shall be payable by the said person with
interest (@18% under Section 50.

However, subsequently if the said supplier furnishes the return in Form GSTR-3B for the said
ule 8 tax period, the said registered person may re - avail the amount of such credit in the
return in Form GSTR 3B for a tax period thereafter.

 As per section 16(2) (ba) ITC in GSTR 3B can be availed only if ITC available in GSTR 2B has
not been restricted.
 Every registered person shall be entitled to avail the credit of eligible input tax, as self-
assessed. in his return and such amount shall be credited to his electronic credit ledger.
 If the registered dealer has not made the payment to the supplier, in that case also he can
avail the Input Tax Credit provided he must make payment to the supplier within 180 days from
the date of issue of invoice, otherwise the amount of input tax granted will be reversed/has to
be paid by registered person along with the interest at the rate of 18% per annum from the
date of entitlement of input tax credit till the date of payment by registered person. However,
this registered person still has a chance to avail the said input tax credit on his subsequent
payment to the supplier.
 As per section 16(2) of CGST Act, if the goods and/or services are delivered to the
transporter/to any person by the supplier on the direction of registered person (purchaser)
whether acting as an agent or otherwise, or before or during movement of goods, either by the
transfer of title of goods or otherwise will form a sufficient base to take input tax credit vide.
 As per Section 16(3) of CGST Act, if the registered person has claimed depreciation on the
cost of the capital asset and the input tax paid on such capital asset, in that case he will not be
allowed input tax credit calculated on the tax component of such capital asset.
  According to Section 16(4) of CGST Act, a registered person shall not be entitled to take input
tax credit for any invoices or debit notes for the supply of goods and services:

(a) After the 30th November following the end of the financial year to which such invoices or
debit note belongs.
Or
(b) The date of the relevant annual return. (Whichever is earlier)

Note:-The point to be noted here is that while availing ITC, calculate the period starting from
date of invoice or the date of debit note, as the case may be, till the date of availing ITC
(calculated from point (a) or (b) above), the said period must not be more than 1 year, else ITC
is not admissible after 1 year i.e. expiry of Invoice. For example, A Limited has got an invoice
dated 4ª January 2022, in this case last date taking the input tax credit for such invoice is30th
November 2022. But if date on which the annual return filed by A Limited is on 28th July 2022,
then the last date of availing the input tax credit will be 28th July 2022. Since date of Invoice is
4th Jan 2022 so it will expire on 4th Jan 2023. So A Limited is eligible to avail ITC on 28th July
2022.

 No registered person can claim input tax credit on account of fraud, willful misrepresentation
and suppression of facts.
 As per Notification No. 22/2024 where the orders were issued against the persons under
sections 73,74, 107 or 108 of CGST Act confirming demand for wrong availment of ITC as they
contravened section 16(4). Now these persons can avail ITC under section 16(5) or 16(6) of
CGST Act provided the said persons did not file an appeal against the order under section 107
or section 112 of CGST Act.
 Rule 36 of CGST Act has been revised thereby restricting input tax credit claim for tax paid
due to confirmed demands involving fraud or misrepresentation under Section 74 of the CGST
Act.

APPORTIONMENT OF CREDIT

There are the situations where the same inputs are used for both business and personal purpose, or
the same inputs are used for supply of taxable goods or services as well as for supply of exempted
goods or services. In these cases, the input tax credit has to be apportioned into various categories.
In general parlance this input tax credit is known as 'Common Credit' which has to be apportioned
into sub categories. The provisions in relation to apportionment of input tax credit and its subsequent
treatment is discussed as under:

1. According to section 17(1) of CGST Act, If a registered person is using the goods or services or
both, partly for the business purpose and partly for any other purpose, in that case only proportionate
input tax credit will be allowed for the goods or services or both used only for business purpose.

2. According to section 17(2) of CGST Act, if the registered person is using the goods or services or
both (inputs and capital goods), partly for the supplies made by him which are either taxable in nature
or zero rated supplies and partly for the supplies which are exempted in nature, in that case input tax
credit will be allowed only for the taxable supplies and zero rated supplies.
CGST Rule 42: Manner of Determination of Input Tax Credit in respect of Input Services Used
Commonly for Taxable and Exempt Supply/Non-business Supply

 According to Rule 42, the input tax credit in relation to the input goods will be granted in full but
subsequently the proportionate input tax credit of input in relation to the exempted supplies has
to be reversed on the basis of the turnover.

 CGST Rule 42(1)-ITC on inputs supplies used:-

Partly for business purposes and partly for other purposes,

OR
Partly for taxable & zero rated supplies and partly for exempt supplies shall be attributed to
business purpose or for taxable supplies in the following manner:

Procedure to calculate the Common Credit:-

(a) The total input tax involved on inputs and input services in a tax period, be denoted as T
(b) The amount of input tax, out of 'T: attributable to inputs and input services intended to be
used exclusively for the purposes other than business, be denoted as 'T1';
(c) The amount of input tax, out of 'T: attributable to inputs and input services intended to be
used exclusively for effecting exempt supplies, be denoted as 'T2';
(d) The amount of input tax, out of "T", in respect of inputs and input services on which creds is
not available under section 17(5), be denoted as 'T3';
e) The amount of input tax credit credited to the electronic credit ledger of registered person be
denoted as 'C1' and calculated as
C1= T- (T1+ T2 + T3);
f) The amount of input tax credit attributable to inputs and input services intended to be used
exclusively for effecting supplies other than exempted but including zero rated supplies, be
denoted as "T4';
g) Input tax credit left after attribution of input tax credit under clause (f) shall be called
common credit, be denoted as 'C2' and calculated as C2 = C1-T4
 Calculation of D1 and D2 has been explained below:-
The amount of input tax credit attributable towards exempt supplies, be denoted as 'D1' and
calculated as
D1 = (E / F) × C2
Where,
'E' is the aggregate value of exempt supplies during the tax period, and
'F' is the total turnover in the State of the registered person during the tax period

Determine ITC related to Non-business purpose (say D2)

D2 = C2 x 5%

Tax payable = D1 + D2 = Add to output tax liability