ITC Claim in GST

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.

ITC Claim in GST Checklist

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
[Rule 46 of CGST Rules]

Minimum specific particulars needed in the debit note
[Rule 53(1A) of CGST Rules]

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
[Rule 46 of CGST Rules]

Minimum specific particulars needed in a debit note
[Rule 46 of CGST Rules]

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

ITC claim in GST conditions

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 1Section 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 3Section 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 4Section 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 5Section 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 6Section 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 same

Particulars

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.

CA Poonam Gandhi

About the author

Poonam Gandhi is a Chartered Accountant and a Lawyer. She is a Professional Freelance Content Writer/ Editor and an Educator.

She masters in creating result-oriented as well as Search Engine Oriented Content. Currently, she is associated with some of the topmost leading sites of India.

She holds more than 3 years of experience in the content field. Before entering the content writing field, she possessed a wide practice experience of more than 9 years, specifically, in the field of Indirect Taxation.

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