Input Tax Credit (ITC) under GST: Eligibility Criteria

The introduction of the Goods and Services Tax (GST) brought the concept of Input Tax Credit (ITC), allowing businesses to claim credits for GST paid on business-related purchases. Here's a concise guide on the conditions necessary for claiming ITC.

In essence, the conditions under GST law closely mirror the pre-GST era, now incorporating aspects like GSTR-2B. Following these regulations is crucial due to their strict nature.

• Section 16: Amended to require buyers to repay ITC with interest if suppliers aren't paid invoice amounts, including GST, within 180 days.
• Sections 37, 39, 44, 52: Amendments made to prohibit filing GSTR-1, GSTR-3B, GSTR-9, and GSTR-8 three years past the due date.
• Section 17(5): Corporates' CSR expenses marked as ineligible for ITC.
• Section 17(3): Excludes ITC for high sea sales, marking them as exempt transactions.
• Schedule III: Amendments effective retrospectively from July 1, 2017.
• Section 10 (CGST Act): Businesses supplying through e-commerce operators can opt for the composition scheme.

*Updates are pending CBIC notification.

For details on fulfilling GST conditions and claiming ITC, check out this video.

Key Requirements for Claiming ITC under GST:

Under Section 16, certain criteria apply for registered buyers to claim ITC:

1. Goods/services must be business-related, not personal.
2. Possession of valid tax documents like invoices or debit notes is necessary.

Example: If Mr. Manoj wants ITC worth Rs.5,600, he's ineligible until he has the invoice at return filing.

3. The supplier must register tax documents in GSTR-1, visible in the buyer's GSTR-2B.

Example: No ITC claim possible for Mr. Manoj without entries in GSTR-2B by the deadline.

4. From January 1, 2022, only verified ITC from GSTR-2B can be claimed.
5. Goods/services must be received by the buyer.
6. GST returns need to be filed in GSTR-3B.
7. For goods in installments, ITC is available only after the final receipt.
8. Payments must be settled within 180 days of the invoice date to avoid ITC reversal with interest under Section 50. ITC can be re-claimed post-payment.
9. Depreciation claims on capital goods' tax components make ITC unavailable.
10. ITC claims on invoices or debit notes must adhere to GST-specified deadlines.

Non-eligible ITC items include motor vehicles with under 13 seats, certain insurance services, and CSR activities.

Deadline for ITC Claims:

ITC claims must be made by the earlier of:
1. November 30 of the following fiscal year
2. Date of filing annual returns via GSTR-9

Example: For XY Corp's invoice from December 8, 2021, the claim expires on November 30, 2022, or at the GSTR-9 filing for FY 2021-22 (by December 31, 2022).

Consider exceptions for debit notes as independent from their original invoices.

ITC Disallowed Items Include:

• Motor vehicles (under 13 seats)
• Health and fitness services, club memberships
• Personal-use goods/services
• Works contract services (for constructing immovable property)

However, exceptions may allow some ITC claims.

Maximizing Accurate ITC Claims:

Utilize tools like Clear GST and Clear Max ITC for precise ITC management. These tech solutions enhance reconciliation processes, vendor communication, and strategic payment management, optimizing ITC activities and boosting business profits.

Disclaimer: The above information reflects the latest amendments. Always refer to official publications and engage experts for comprehensive GST compliance.