Eligibility and Conditions for Taking Input Tax Credit  

What does the law say –

“(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, 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.”

Explanation – In general, subject to certain conditions, input credit of all input supplies shall be available, subject to it being used or intended to be used in course of or in furtherance of  business.

Section 16  – Points Worth Noting

• A valid Tax Invoice/Debit note is mandatory for claiming input tax credit
• Good and or services should actually be received or deemed to be received in cases of transfer of documents of title
• Tax Charged should actually be paid to the government
• Prescribed returns should be duly filed by both the recipient and supplier
• Recipient of goods/services should pay to the supplier (Including Taxes), within 180 days from the date of issue of invoice, else the Input Credit shall be reversed
• Input tax credit on capital goods shall not be available if depreciation has been claimed on the tax component
• Input credit can be claimed latest before due date of return filing for the Month of September of the subsequent year in which the invoice is being raised.

Input Not Available

1.In case of motor vehicles and other conveyances except when they are used-

(i)  for making the following taxable supplies, namely-

(A) further supply of such vehicles or conveyances; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

2.(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

     (ii) membership of a club, health and fitness centre

(iii) rent-a-cab, life insurance and health insurance except where-

     (A) the Government notifies the services which are obligatory for an

     employer to provide to its employees under any law for the time being in

     force; or

     (B) such inward supply of goods or services or both of a particular

     category is used by a registered person for making an outward taxable

     supply of the same category of goods or services or both or as part of a

     taxable composite or mixed supply; and

     (C) travel benefits extended to employees on vacation such as leave or

     home travel concession;

3.works contract services when supplied for construction of immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

4.Goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including such goods or services or both are used in course of furtherance of business;

5.goods or services or both on which tax has been paid under Section 10 (Composition scheme);

6.goods or services or both received by a non resident taxable person except on goods imported by him;

7.goods or services or both used for personal consumption;

8.goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

9.any tax paid in accordance with the provisions of Section 74, 129 and 130

Section 74 provides for the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of fact;

Section 129 deals with the detention, seizure and release of goods and conveyances in transit and the tax paid in this procedure;

Section 130 deals with the confiscation of goods or conveyances and levy of penalty.

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