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Eligibility and Conditions for taking Input Tax Credit (ITC) [Section 16 of CGST Act] - GST Ready Reckoner - GSTExtract Eligibility and Conditions for taking Input Tax Credit (ITC) Section 16(1) of CGST Act, - Eligibility criteria for Taking Input Tax Credit Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49 of CGST Act, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. Section 16(2) of CGST Act - Condition for availing Input Tax Credit Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, Clause (a) He is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or Such other tax paying documents as may be prescribed under rule 36 of CGST Rules . Documentary requirements and conditions for claiming input tax credit Rule 36(1) - Eligible document for ITC a tax invoice issued by the supplier of goods services or both, as per section 31 CGST Act an invoice issued to payment of tax under reverse charge basis, as per section 31(3)(f) of CGST Act debit note issued by a supplier registered as per section 34 of CGST Act , or a bill of entry or similar document prescribed under Customs Act or Rules for assessment of IGST an invoice or credit note issued by a input services distributor as per rule 54(1) of CGST Rules 2017 Rule 36(2) - Requirement of all particular for ITC Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document. 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. Rule 36(3) - No ITC if tax paid by supplier Fraudulently No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts. Rule 36(4) - Furnishing the details of outward supplies in return No input tax credit shall be availed by a registered person in respect of invoices or debit notes the details of which are required to be furnished under section 37(1) unless,- (a) The details of such invoices or debit notes have been furnished by the supplier in the statement of outward supplies in FORM GSTR-1 or using the invoice furnishing facility; and (b) the details of input tax credit in respect of such invoices or debit notes have been communicated to the registered person in FORM GSTR-2B under rule 60(7) of CGST Rules. Important Clarification Regarding Rule 36(4) of CGST Rules Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19. [ Circular No. 183/15/2022-GST Dated 27th December, 2022 ] Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021 . [ Circular No. 193/05/2023-GST Dated 17th July 2023 ] It is clarified that consequent to insertion of clause (aa) to section 16(2) of the CGST Act and amendment of rule 36(4) of CGST Rules w.e.f. 01.01.2022, no ITC shall be allowed for the period 01.01.2022 onwards in respect of a supply unless the same is reported by his suppliers in their FORM GSTR-1 or using IFF and is communicated to the said registered person in FORM GSTR-2B Clause (aa) The details of the invoice or debit note referred to in clause (a), has been furnished by the supplier in the statement of outward supplies [in GSTR-1] , and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37. [in GSTR-2B]. Clause (b) He has received the goods or services or both. It shall be deemed that the registered person has received the goods or, as the case may be, services ( Bill to ship to model) Where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; Where the services are provided by the supplier to any person on the direction of and on account of such registered person. Clause (ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 of CGST Act has not been restricted. Clause (c) subject to the provisions of section 41 , the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and Clause (d) He has furnished the return under section 39 : Where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be paid by him along with interest payable under section 50 as manner may be prescribed under rule 37 of CGST Rules . The recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon. Section 16(3) of CGST Act - No ITC on the amount of deprecation on the tax component - Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961, the input tax credit on the said tax component shall not be allowed. Section 16(4) of CGST Act - Input Tax Credit cannot be taken after November of subsequent financial year A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both a) after the 30th of November, following the end of financial year to which such invoice or debit note pertains, or b) furnishing of the relevant annual return whichever is earlier of (a) or (b). Clarification in respect of section 16(4) of CGST Act for Debit note [ Circular No. 160/16/2021-GST dated 20th September, 2021 ] Issue 1:- Which of the following dates are relevant to determine the 'financial year' for the purpose of section 16(4): (a) date of issuance of debit note, or (b) date of issuance of underlying invoice. Clarification:- w.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act. Issue 2:- Whether any availment of input tax credit, on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, will be governed by the provisions of the amended section 16(4), or the amended provision will be applicable only in respect of the debit notes issued after 01.01.2021? Clarification:- The availment of ITC on debit notes in respect of amended provision shall be applicable from 01.01.2021. Accordingly, for availment of ITC on or after 01.01.2021, in respect of debit notes issued either prior to or after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4), whereas any ITC availed prior to 01.01.2021, in respect of debit notes, shall be governed under the provisions of section 16(4), as it existed before the said amendment on 01.01.2021. Examples Example 1 . A debit note dated 07.07.2021 is issued in respect of the original invoice dated 16.03.2021. As the invoice pertains to F.Y. 2020- 21, the relevant financial year for availment of ITC in respect of the said invoice in terms of section 16(4) of the CGST shall be 2020-21. However, as the debit note has been issued in FY 2021-22, the relevant financial year for availment of ITC in respect of the said debit note shall be 2021-22 in terms of amended provision of section 16(4) of the CGST Act. Example 2 . A debit note has been issued on 10.11.2020 in respect an invoice dated 15.07.2019. As per amended provision of section 16(4), the relevant financial year for availment of input tax credit on the said debit note, on or after 01.01.2021, will be FY 2020-21 and accordingly, the registered person can avail ITC on the same till due date of furnishing of FORM GSTR-3B for the month of September, 2021 or furnishing of the annual return for FY 2020-21, whichever is earlier. Extension of time limit of availing ITC for the financial year 2017-18 The registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under section 37(1) till the due date for furnishing the details under section 39(1) for the month of March, 2019.
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