MATCHING OF ITC

1. The final credit is allowed only when details of supplies made by supplier match with the recipient's return of availing credit.
2. The matching has to be done in respect of GSTIN of supplier and GSTIN of recipient w.r.t. each supply and recipient, Invoice number, Debit Note number, Credit Note number; Taxable Value and Tax amount involved.
3. In case the details match or the return filed by supplier is accepted by recipient, the matter ends there. In such case an intimation of acceptance of credit would be sent to recipient in FORM GST MIS-1.
4. If details don't match and discrepancy is noticed, same would be communicated to both the supplier and recipient in case fault is that of supplier, or only to the recipient in case fault is that of recipient.
5. The discrepancies could be availing credit in excess of the tax declared by the supplier, or the outward supply is not declared by the supplier, or there is a duplication of claim of ITC by the recipient.
6. In case of difference of figures of amount of supplier and recipient or non-declaration of outward supply by supplier, the supplier would be asked to rectify the discrepancy in the return of month in which discrepancy is informed to him. In case of failure, such ITC would be added to the output tax liability of recipient next month.
7. Where ITC has been claimed in duplicate by recipient, same would be informed only to him and rectified in the month of communication. In case of failure, same would be added in the liability register of recipient.
8. Recipient is liable to pay an interest @ 18% on the amount added to the output tax liability from the date of availing the ITC till the discrepancy is reflected in returns.
9. In case the supplier rectifies the discrepancies after reversal of credit by recipient ITC can be reclaimed by recipient. In such a case, interest paid, if any would be refundable by crediting amount to the recipient's Electronic Cash Ledger.

COMMON CREDIT FOR TAXABLE/BUSINESS PURPOSE AND EXEMPTED OR NIL RATED /NON-BUSINESS PURPOSE

1. Credit in such a case would be restricted to the extent of use in taxable supplies for taxable on business purpose.
2. Rules provide as to how the amount attributable to such supplies is to be calculated and to Electronic Liability Register on provisional basis added to Electronic Liability Register on provisional basis. 
3. The ratio of amount to be reversed is based on aggregate value of exempted/non-business purpose supplies and total turnover in the State during the tax period. In case these figures for the relevant tax period are not available, figures for last tax period can also be taken
4. Common credit is arrived at by deducting amount of credit of input tax used exclusively in taxable supplies from the total credit.
5. Once common credit figure is available, 5% of it would be straight forward disallowed in case it represents amount of input tax towards non-business purpose This amount would be added in Electronic Liability Register.
6. Where supplies consist of both taxable and exempted/non-taxable supplies, formula for arriving at the amount attributable to exempted supplies is- Common Credit (Value of exempted supplies/Total turnover) Common credit. This amount would be added in Electronic Liability Register.
7. Final calculations will be made for the whole financial year before the due date of filing the return for September of the next financial year. Difference, if any, would be payable with interest of 18% from 1st of April till date of payment. If amount provisionally paid is in excess, difference shall be claimed as credit within the month of September of next year.

UTILIZATION OF INPUT TAX CREDIT

1. CGST credit - First utilize it for payment of CGST and then utilize balance for IGST. Don't utilize it for SGST payment.
2. SGST credit-It has to be utilized for payment of SGST and then IGST in that order. Don't utilize it for payment of CGST.
3. IGST credit- Utilize it for payment of IGST,CGST and SGST in that order

REVERSAL OF CREDIT IS REQUIRED TO BE DONE IN FOLLOWING CASES

1. When registered person opts out from normal scheme to composition scheme, credit on stocks on the relevant date has to be reversed.
2. When registered person gets his registration cancelled due to closure of business or goods and services dealt with become exempt or nil rated, credit on stocks on the relevant date has to be reversed. 
3. When capital goods on which credit has been taken are supplied after use.
4. When consideration for supplies is not made within 180 days of issuance of invoice.
5. When there is mismatch of returns of supplier and recipient.
6. When credit has been availed twice.
7. When credit has been availed on common inputs, reversal has to be to the extent of credit attributable to exempted supplies or supplies for non-business purpose.
8. When capital goods or plant and machinery are supplied after use, credit taken reduced by five percentage points per quarter of a year or part thereof from the date of invoice etc. has to be reversed. However this amount should not be less than tax on transaction value. However in case of refractory bricks, moulds and dies, jigs and fixtures the taxable person may pay tax on the transaction value.

EXCLUSION OF SPECIFIC GOODS AND SERVICES (NO ITC PERMISSIBLE) UNDER GST ACT, 2017

• Motor vehicles and other conveyances except when they are used for transportation of goods or further supply of taxable supplies of transportation of passengers, imparting training on driving etc. and transporting vehicles or conveyances.
• Food and beverages except where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• Outdoor catering services except where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• Beauty treatment services except where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• Health services except where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• Cosmetic and plastic surgery except where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• Membership of a club, health and fitness centre
• Rent-a-cab services except when notified as obligatory to provide such service by employer to employee or where same category of goods or services is used for making outward supply or an element of mixed or composite supply
• Life insurance services except when notified as obligatory to provide such service by employer to employee or where same category of goods or services is used for making outward supply on an element of mixed or composite supply.
• Health insurance services except when notified as obligatory to provide such service by employer to employee or where same category of goods or services is used for making outward supply or an element of mixed or composite supply.
• LTC or HTC i.e. travel benefits extended to employees on vacation such as leave or home travel concession.
• Works contract services when supplied for construction (including re-construction, renovation additions or alterations or repairs) of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service.
• Goods or services or both received by a taxable person for construction (including reconstruction, renovation, additions or alterations or repairs) of an immovable property (other than plant or machinery) even if used for furtherance of business.
• Goods or services on which supplier has paid tax under composition scheme.
• Goods or services or both used for personal consumption.
• Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
• Plant and machinery includes foundation and structural support but does not includes (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premise. In other words credit is also not admissible for these.

GENERAL RESTRICTIONS IN INPUT TAX CREDIT UNDER GST ACT

• If tax has been paid in pursuance of any order where any demand on account of non-levy, short levy or excess refund or excess ITC utilization has been raised on account of any fraud, wilful misstatement or suppression of facts, recipient cannot avail credit.
• Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
• Where the goods or services or both are used by the registered person partly for effecting taxable supplies and partly for effecting exempted supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies. The value of exempted supply shall be calculated in terms of formula prescribed in Rules and shall include supplies on which the recipient is liable to pay tax on Reverse Charge basis, transactions in securities, sale of land and sale of building.
• A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse.
• Payment for supplies received has to be made within a maximum period of 180 days, otherwise ITC already claimed will be added, with interest to output tax liability.
• If depreciation on Capital goods has been claimed then ITC to that extent is not admissible.
• ITC would also not be permissible if invoice or debit note is received after due date of filing return for September of next financial year or filing annual return whichever is later

INPUT TAX CREDIT (ITC), BASIC CONDITIONS FOR TAKING CREDIT AND DOCUMENTS REQUIRED UNDER GOODS AND SERVICES ACT, 2017 (GST ACT)

Every GST registered person, with some exceptions, is entitled to take credit of input tax (ITC) charged by his supplier on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business of such registered person.


Exception with regard to person, are that a registered person working under composition scheme cannot take Input Tax Credit (TC) even when he has received goods or services which are used in furtherance of his business.

Another exception is that a non-resident taxable person is also not eligible for credit of input tax (ITC) on receipt of goods and services except on goods imported by him.

Self-assessed credit has to be taken in the electronic credit register provisionally after filing monthly return prescribed for this purpose.

Credit cannot be taken after the expiry of one year from the date of issue of tax invoice relating to such supply.

Basic Conditions for taking credit

Possession of Taxpaying documents such as tax invoice, debit note etc.

Goods/services should have actually been received/deemed to be received by the taxable person.

Tax charged on the invoice should have been paid to the credit of government.

Return should have been furnished by the taxpayer.

Credit for goods against an invoice received in lots /instalments can be availed only on receipt of last lot in instalment.

Documents for availing credit

An invoice issued by the supplier of goods or services or both,

A debit note issued by a supplier

A bill of entry

An invoice issued under Reverse Charge; and

A document issued by an Input Service Distributor (ISD)