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• GST is a destination based consumption tax. i.e.
GST is
ultimately payable in the State or union Territory in
which goods and services are consumed.
• Input Tax Credit is core aspect of GST, which will ensure
this basic goals of GST of avoiding cascading effect.
• Input credit means at the time of paying tax on output,
you can reduce the tax you have already paid on inputs
• Input Credit Mechanism is available only when one is
covered under the GST Act.
Which means a manufacturer, supplier, agent, e-
commerce operator, aggregator or any of the persons
mentioned, registered under GST, are eligible to claim
INPUT CREDIT for tax paid by them on their PURCHASES.
EXPLANATION OF ITC
• You are a registered dealer.
• When you buy a product/service from a registered dealer you pay
taxes on the purchase.
• On selling, you collect the tax (which is again to be paid).
• You adjust the taxes paid at the time of purchase with the amount
of output tax (tax on sales) and balance liability of tax (tax on
sales - tax on purchase) has to be paid to the government.
• This mechanism is called utilization of input tax credit.
EXAMPLE: you are a manufacturer:

a. Tax payable on output (sales-FINAL PRODUCT) is Rs 500
b. Tax paid on input (PURCHASES) is Rs 300
c. You can claim INPUT CREDIT of Rs 300 and you only need to
deposit Rs 200 in taxes to the government.
Input tax-Section 2(62) of CGST Act
• Input tax in relation to a registered person, means the Central
Tax (CGST), State tax(SGST), integrated tax(IGST) or Union
Territory tax(UTGST) charged on any of the supply of goods or
services or both made to him and includes the integrated goods
and services tax charged on import of goods and also the tax
payable under reverse charge of CGST,IGST, SGST and UTGST.
• It does not include the tax paid under the composition levy.
• Every registered taxable person, subject to the conditions and
restrictions, are entitled to take the credit of input tax in the
manner specified under Sec 49 of CGST Act, which are used or
intended to be used in the course or furtherance of the
business.
• Input tax credit is eligible only when it is credited to electronic
credit ledger of taxable person.
Requirements to claim input credit under GST? (or) who can claim GST?
The input tax credit shall be availed by/ entitled to a registered person, in
respect of any supply of goods or services or both on the basis of the
following conditions.
• He is in possession of tax invoice(of purchase) or debit note issued by a
GST registered supplier or such other tax paying document as may be
prescribed.
• He has received the goods or services or both.
• The tax charged in respect of such supply has been actually paid to the
credit of the appropriate Government, either in cash or through
utilization of the input tax credit admissible in respect of the said
supply. (tax on the purchase has to be deposited/paid to the
government by the supplier).
• He has furnished the returns under Section 39(every taxable person is
required to file electronic returns every month as per Section 39 of
CGST Act)
• Supplier also should have filed the returns.
• Where goods are received in lots/installments, credit will be available
against the tax invoice upon receipt of last lot or installment.
• Where recipient does not pay the value of service or tax thereon
within 3 months of issue of invoice and he has already availed input
credit based on the invoice, the said credit will be added to his
output tax liability along with interest.
• the input credit is ONLY allowed if the supplier has deposited the tax
he collected from the purchaser. So every input credit that the
purchaser claiming shall be matched and validated before claiming.
• Therefore, to allow a person to claim input credit on Purchases all
his/her suppliers must be GST compliant as well.
• One must be a registered taxable person.
• One can claim Input Tax Credit only if the goods and services received
is used for business purposes.
• Input Tax Credit can be claimed on exports/zero-rated supplies and
are taxable.
DOCUMENTS REQUIRED TO CALIM ITC
• An invoice or invoice of debit note issued by the
supplier of goods or services or both in
accordance with the provisions of Section 31 and
34 the Act.
• A bill of entry
• An invoice issued in accordance with the
provisions of “tax paid on reverse charge basis”
• Documents issued by the Input Service
Distributor in accordance with the Invoice Rules
and Input Tax Credit Rules.
ITC CANNOT BE TAKEN IN THE FOLLOWING
CIRCUMSTANCES
i. Input tax credit cannot be taken after one year from
the date of invoice or filing of annual return
ii. Input tax credit cannot be taken if GST was paid by
the supplier on the advance paid to him since credit
cannot be claimed unless the goods are not received.
iii. Reversal of input tax credit if payment to the supplier
is not made within 180 days from the date of issue of
invoice.
iv. ITC is not available on the motor vehicles and other
conveyances- except on taxable supplies and
transportation of goods
v. Food, beverages, club memberships and others- exception-ITC
will be available if the category of inward and outward supply
is same or the component belongs to a mixed or composite
supply under GST.
vi. No ITC is allowed on services of general insurance, servicing,
repair and maintenance in so far as they relate to motor
vehicles, vessels or aircraft referred in (iv)
vii. Sale of membership in a club, health, fitness centre
viii. Rent-a-cab, life insurance, health insurance
ix. ITC is not available in the case of travel, benefits extended to
employees on vacation such as leave or home travel
concession.
x. No ITC is available for goods/services for construction of an
immovable property on his own account. Even if such
goods/services are used in the course or furtherance of
business, ITC will not be available.
v. Composition Scheme
vi. No ITC for Non-residents
vii. No ITC for personal use
viii. Free samples and destroyed goods
ix. ITC will not be available for any tax paid due to
detection of fraud or goods removed on contavention
or suppression
x. No ITC on restaurants

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• GST is a destination based consumption tax. i.e.

EXAMPLE: you are a manufacturer:

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