Provisions of section 2(63) of the Central Goods and Services Tax Act, 2017 cover the definition of ‘input tax credit’. Accordingly, ‘input tax credit’ means the credit of input tax. It is worth making a note here that except simple definition, each and every thing is complicated when it comes to availment of input tax credit. The present article tries to cover 5 ways, clearing which, the recipient can maximize its ITC claim in GST.
The poor recipient of goods or services or both has to go through so many pains-taking control check points to reach its destination of availment of input tax credit which is completely contradictory to its legal right.
Check the Validity of Invoice
The recipient is eligible to avail of input tax credit against appropriate tax invoice or debit note or any other tax paying document issued by the supplier.
Here, the GST law prescribes minimum specific particulars which the tax invoice or debit note should contain. Only then the said document will be a valid document so as to avail input tax credit on the same.
The following table provides a checklist of both tax invoices and debit notes for ready reference of the recipient
Minimum specific particulars needed in a tax invoice | Minimum specific particulars needed in the debit note |
|---|---|
Name, address and GSTIN of the supplier; | Name, address and GSTIN of the supplier; |
A consecutive serial number; | Nature of the document; |
Date of issue of tax invoice; | A consecutive serial number; |
Name, address and GSTIN of the recipient (if registered); | Date of issue of the document; |
Name, address, delivery address, state name and state code of the recipient (if unregistered); | Name, address and GSTIN of the recipient (if registered); |
HSN for goods/ SAC for services; | Name, address, delivery address, state name and state code of the recipient (if unregistered); |
Description of goods or services; | Number and date of corresponding tax invoice/ bill of supply; |
Quantity and units (in case of goods); | Taxable value of supply of goods or services; |
Total value of supply of goods or services; | Amount of tax; |
Taxable value of supply of goods or services; | Signature/ digital signature. |
Tax rate; | Cell |
Amount of tax; | Cell |
Place of supply; | Cell |
Signature/ digital signature; | Cell |
QR Code along with IRN (Invoice Reference Number) [only in case when e-invoice is mandatory]. | Cell |
Minimum specific particulars needed in a tax invoice | Minimum specific particulars needed in a debit note |
|---|---|
Total value of supply of goods or services; | Tax rate; |
Taxable value of supply of goods or services; | Amount of tax; |
Tax rate; | Signature/ digital signature. |
Signature/ digital signature; | Cell |
Quantity and units (in case of goods); | Taxable value of supply of goods or services; |
QR Code along with IRN (Invoice Reference Number) [only in case when e-invoice is mandatory]. | Cell |
Place of supply; | Cell |
Name, address, delivery address, state name and state code of the recipient (if unregistered); | Name, address and GSTIN of the recipient (if registered); |
Name, address and GSTIN of the supplier; | Name, address and GSTIN of the supplier; |
Name, address and GSTIN of the recipient (if registered); | Date of issue of the document; |
HSN for goods/ SAC for services; | Name, address, delivery address, state name and state code of the recipient (if unregistered); |
Description of goods or services; | Number and date of corresponding tax invoice/ bill of supply; |
Date of issue of tax invoice; | A consecutive serial number; |
Amount of tax; | Cell |
A consecutive serial number; | Nature of the document; |
Check the IRN and QR code of the invoice
The recipient should take a note here that, as per the latest notification no. 1/2022- Central Tax dated 24th February 2022, any supplier, having an aggregate turnover exceeding INR 20 Crores, is e invoicing mandatory required in case of B2B (i.e., Business to Business) transactions along with Quick Response Code (i.e. QR Code).
Notably as per rule 48(5), in case such supplier issues a normal tax invoice, instead of e-invoice, the same will not be treated as an invoice and accordingly input tax credit will not be available to the recipient.ITC Claim in GST : Conditions to Claim ITC
Provisions of section 16(2) lay down stringent conditions that the recipient needs to satisfy prior to availment of an input tax credit. Stage-wise introduction of the conditions and its explanation thereof is covered hereunder –
Following four conditions were introduced at the time of implementation of GST law i.e. 1st July 2017 –
- Condition 1 – Section 16(2)(a) of the Central Goods and Services Tax Act, 2017 The recipient should possess the tax invoice/ debit note/ any other tax paying document as issued by the supplier.
- Condition 2 – Section 16(2)(b) of the Central Goods and Services Tax Act, 2017 The recipient should have received the relevant goods or services or both.
- Condition 3 – Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 The recipient has to verify that the supplier should have duly paid the tax to the Government.
- Condition 4 – Section 16(2)(d) of the Central Goods and Services Tax Act, 2017 The recipient has to verify that the supplier should have furnished a return in Form GSTR-3B for the relevant supply.
Following fifth condition was introduced vide the Finance Act, 2021 but was made effective from 1st January 2022 –
- Condition 5 – Section 16(2)(aa) of the Central Goods and Services Tax Act, 2017 –
The recipient has to verify that the supplier has furnished the details of the relevant tax invoice/ debit note in its Form GSTR-1. Additionally, the recipient needs to also verify that the said details are also communicated to them in Form GSTR-2B.
Following sixth condition is introduced vide the Finance Act, 2022, however, the effective date of the same is yet to be notified –
- Condition 6 – Section 16(2)(ba) of the Central Goods and Services Tax Act, 2017
Now, the recipient will have to additionally verify that, even if the input tax credit is reflected in GSTR2B return, the same should not have been restricted as per provisions of section 38.
In nut-shell, till now, prior to availment of input tax credit, the recipient needs to verify, for each and every supply, whether the input tax credit satisfies the first five conditions. However, once the sixth condition is notified, the recipient will have to satisfy all the six conditions.
ICT Claim in GST Provisions: Check the Genuineness of the Supplier
Yes, shockingly, the recipient, for ICT claim in GST, is required to not only investigate but also regularly keep a check on the genuineness of the supplier.
Let us go through the provisions governing the sameParticulars | Governing provisions |
|---|---|
Provisions based on which the recipient is required to investigate the GST return filing compliance of the supplier | Interpreting condition, stated under section 16(2)(aa) and also as per provisions of rule 36(4), for availing input tax credit, the supplier should have furnished the outward supplies in GST in Form GSTR-1; Interpreting condition, stated under section 16(2)(d), the recipient can avail of input tax credit only if the supplier has furnished the return in Form GSTR-3B. |
Provisions based on which the recipient is required to investigate the tax payment compliance of the supplier | As we know, any output tax is payable in GSTR3B return filing . Accordingly, as per the condition stated under section 16(2)(d), the recipient can avail of input tax credit only if the supplier has duly paid his output tax liability. |
Provisions based on which the recipient is required to investigate the specific compliance of the supplier as laid down under section 38(2)(b) | As per provisions laid down under section 38, the recipient will have to investigate all the following points – The supplier should not have obtained GST registration within the prescribed time limit; The supplier should not have defaulted in payment of tax for the continuous prescribed period; The supplier should not have paid less output tax as compared to output tax payable by prescribed limit; |
Payment to the Supplier is done Within the Time Limit
Combine reading of rule 37 of the CGST Rules and the second proviso to section 16(2) of the CGST Act, it is mandatory for the recipient to make payment of the value of supply to the supplier within a period of 180 days.
In case of failure, the recipient will have to reverse the input tax credit availed on the same.
We have a complete guide regarding Reversal of ITC Provisions in our previous article, go through to understand each and every section.
Thus, if the recipient has not made payment to the supplier and has availed of input tax credit. He has to keep a track of non-payment and pay the same before completion of 180 days.
Short Summary of Checklist
- The recipient should possess appropriate tax invoice/ e-invoice/ debit note;
- The recipient should satisfy, currently five (shortly the same will be six), conditions for availing input tax credit;
- The payment should have been made to the supplier within a period of 180 days;
- The supplier should have filed Form GSTR-1 return and correspondingly entry should be reflected in Form GSTR-2B;
- The supplier should have duly made payment of tax via GSTR 3B filing;
- The supplier should not be falling under the restricted list prescribed under section 38(2)(b) of the Central Goods and Services Tax Act, 2017.