Section 16 of CGST Act 2017 specifies the basic conditions for availing of input tax credit:
- He is in possession of a tax invoice or debit note issued by a supplier registered under this Act or such other tax paying documents as may be prescribed
- He has received the goods or services or both
- The tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply;
- He has furnished the return under section 39 Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment.
Availability of ITC - Depends on payment of tax by supplier:
- When recipient fails to pay to the supplier of goods or services or both, the amount towards the value of supply - no credit would be available, till the time tax collected by the supplier is deposited to the Government.
- When recipient fails to pay the amount of supply along with tax payable within 3 months from the date of issue of invoice - recipient will be liable to pay along with the output tax liability an amount equal to the input tax credit availed & interest thereon.
Input Tax Credit available Tax Liability IGST –Rs 1000 IGST – Rs 500 CGST- Rs 200 CGST –Rs 250 SGST – Rs 200 SGST – Rs 250
Particulars IGST Liability CGST Liability SGST Liability Output Liability 500 250 250 ITC Adjustment CGST (Rs. 200) SGST – Rs 250 SGST (Rs. 200) 200 IGST (Rs. 1000) 500 50 50 Total ITC Utilized 500 250 250 Net Output Liability Nil Nil Nil