Required Conditions to Claim Input Tax Credit

The enrolled individual will be qualified for ITC on a supply in particular if ALL the accompanying four conditions are satisfied:

1. Ownership of tax paying document [Section 16(2)(a) read with rule 36 of the CGST Rules]

ITC can be benefited based on any of the accompanying documents:

I) Invoice given by a provider of goods or services benefits

ii) Invoice gave by beneficiary (getting goods and services benefits from unregistered provider) alongside confirmation of payment of tax (in case of reverse charge)

iii)A debit note given by provider

iv) Bill of entry or comparative document given under Customs Act

v) Revised invoice

vi) Document given by Input Service Distributor

The docs premise which ITC is being taken ought to contain at least the accompanying details:

  • Measure of tax charged
  • Details of goods or services
  • All estimation of stock of goods as well as services
  • GSTIN of the provider and beneficiary
  • Place of supply if there should arise an occurrence of inter state supply

No ITC of tax paid towards requests including fraud[Rule 36(3)]: Tax paid in compatibility of any order where any request has been affirmed by virtue of any fraud, willful error or concealment of facts can’t be benefited as ITC

2. Receipt of the goods and/or services [Section 16(2)(b)]

The enrolled individual taking the ITC must have received the goods and/or services.

“Bill to Ship to” Model even included: Under this model, the products are delivered to a third party on the direction of the client (enlisted individual) who buys the goods from the seller (provider) i.e., the customer (enrolled individual) who buys such products doesn’t get the said products.

In any case, in such a situation, section 16(2)(b) considers that the enlisted individual (customer) has received the products. As it were, delivery of products to someone else on the direction of the enrolled individual by method for transfer of docs of title to goods or generally either before or during the movement of goods, is regarded to be the receipt of products by the enlisted individual. Along these lines, ITC will be accessible to the enrolled individual on whose request the products are delivered to a third individual.

Example– A will be a dealer who submits an order on B for a consignment of soda ash. A gets a purchasing request from C for a similar amount of soda ash. A educates B to deliver the goods to C, and thus he raises an invoice on C. In spite of the fact that the products are not physically received at the premises of A, section 16(2)(b) permits ITC of the goods to A.

3. Tax leviable on supply really paid to Government [Section 16(2)(c)]

Tax ought to really have been paid, with money or through use of ITC, on the goods and/or services for which ITC is being taken.

4. Filing of return [Section 16(2)(d)]

The enrolled individual taking the ITC probably filed his return under section 39.

Enquire with Certicom Consulting in case of any further queries.