Section 16 of the Central Goods and Services Tax (CGST) Act, 2017, outlines the eligibility and conditions for taking Input Tax Credit (ITC). Here are the key conditions:

1. Possession of Invoice (Section 16(2)(a))

  • Condition: The taxpayer must have a tax invoice or debit note issued by a registered supplier.

  • Relevant Rule: GST Rule 36 outlines the documentary requirements and conditions for claiming ITC.

2. Receipt of Goods/Services (Section 16(2)(b))

  • Condition: The taxpayer must have received the goods or services.

  • Relevant Rule: GST Rule 37 deals with the reversal of ITC in cases where payment for the supply is not made within the stipulated time.

3. Tax Payment (Section 16(2)(c))

  • Condition: The supplier must have paid the tax charged to the government.

  • Relevant Rule: GST Rule 37 also covers the aspect of ensuring that the tax is paid to the government by the supplier.

4. Filing of Return (Section 16(2)(d))

  • Condition: The taxpayer must have furnished the return under section 39.

  • Relevant Rule: GST Rule 61 specifies the form and manner of furnishing returns.

5. Payment Within 180 Days (Proviso to Section 16(2))

  • Condition: Payment for the supply must be made within 180 days from the date of the invoice. If not, the ITC availed must be added to the output tax liability.

  • Relevant Rule: GST Rule 37 elaborates on the reversal of ITC and re-claiming it once the payment is made.

6. Utilization Restrictions (Section 16(1))

  • Condition: ITC is not available on certain goods and services as specified in the act.

  • Relevant Rule: GST Rule 38 specifies the circumstances under which ITC is restricted or blocked.

7. Depreciation Claim (Section 16(3))

  • Condition: ITC cannot be claimed on the tax component of the cost of capital goods and plant and machinery if depreciation has been claimed on the tax component.

  • Relevant Rule: GST Rule 43 provides the method of computation of ITC on capital goods.

8. Time Limit (Section 16(4))

  • Condition: ITC must be claimed within the due date of furnishing the return for the month of September following the end of the financial year or the date of furnishing the relevant annual return, whichever is earlier.

  • Relevant Rule: GST Rule 61 outlines the due dates and forms for furnishing returns.

These rules and conditions ensure that ITC is claimed accurately and compliantly, supporting the efficient functioning of the GST system.

Eligibility conditions for availing Input Tax Credit