Written by : Rajiv Singh

A Chartered Accountant in UK with 15+ years of experience in FinTech Consulting, Accounting & International Taxation. I enjoy being a Social, Foodie and Father of two young children, reachable at linktr.ee/RajivSingh.

Input Credit Under GST

Rajiv Singh
Rajiv Singh, CA, FAIA

Dec 7, 2021 15:13

GST Input Credit

GST is an unavoidable tax regime that you pay when you purchase any goods in India. But, if you are reimbursing the same amount of money during reselling the goods as tax, then it means you are running under a limited profit. Nevertheless, GST input credit can be at your aid. This benefit allows you to save the cascading of taxes by diverting and reducing it significantly.

Now, let’s take a sneak peek into the what’s and how’s of GST input credit.


Considering the changing tax laws in the country, it is vital to understand the Input tax credit (ITC) framework to crack the benefit. GST input credit allows you to reduce the tax that you have paid on the input while selling the output. For instance, if you bought goods worth Rs 10,000 and paid 10% as GST, and sold it for 25,000 and added 15% of GST; then you do not have to pay the entire amount; instead, the ITC allows you to pay just the additional 5%, as you have already paid 10% of it during purchase. Hence, the benefit can be unlocked at each stage of the supply chain and you can save a huge sum of money.

Who can benefit from GST input credit?

This tax relief mainly targets;

  • Manufactures
  • Suppliers
  • Agents
  • E-commerce operators
  • Aggregator
  • Any person mentioned under GST Act

What are the different taxes under GST to claim ITC?

You can claim GST input credit to the following taxes

  • Integrated GST (IGST) – inter state movement of goods
  • Central GST (CGST)- intra state movement of goods
  • State GST (SGST)- intra state movement of goods
  • Union Territory GST (UTGST) – intra state movement of goods
  • GST composition cess – notified goods

What are the rules for claiming GST input credit?

Now, take a look at the rules that you need to comply with to claim GST input credit;

  1. The purchaser should have proof of his purchase; For instance hold on to your tax invoice, debit note, or other prescribed document given at the time of purchase.
  2. The goods must be collected and should be in the possession of the buyer. If you are paying in instalments then the GST input credit can be claimed against the tax bill for your last instalment.
  3. From wherever you have purchased, the supplier also should have paid the tax to the government in cash or by claiming the input tax credit.
  4. The supplier should also have to file GST returns. As, per the new regulations, the government is ensuring GST compliance from all parts of the supply chain. Thus, it is vital to assure that the supplier fulfils the GST requirement along with the purchaser.
  5. To claim the tax, you have to make the full payments of the goods within 180 days from the date of issuing the invoice to the supplier. If you are unable to cope with this date, then it will be added to your output tax liability. Despite this, in cases of partial payments, you are only allowed to avail credits proportionate to what you have paid.

What are the eligibility criteria to avail of the credit?

If you own a regular business, then the following are the parameters you need to comply with to become qualified for GST input tax credit;

  1. All GST registered individuals are eligible, except those who pay tax under the composition scheme.
  2. If you have only applied for registration within 30 days from the last date of filing, then you can claim ITC only on the goods that you possess prior to this date. Also, you cannot claim the credit on purchases made for exempted supplies.
  3. On the other hand, if you have voluntarily registered then GST input tax credit is allowed to claim on the day before the date of issuing the registration. Similar to the former case, GST input tax credit cannot be claimed for exempted supplies.
  4. If you are charged tax under the composition scheme, then you can avail the credit for the inputs held in stock, and the inputs contained in semi-finished or finished goods in stock on the day before you make your tax payments under the composition scheme. In this case, also you will not be able to claim the ITC on exempted goods.
  5. However, when your exempted supply becomes taxable supply, you can take advantage of the situation and claim the benefit preceding the day it becomes taxable. This time it is extended to inputs held in stock, semi-furnished and fully-furnished goods in stock and on capital goods similar to the exempt supply.

Importers can claim GST input tax credit and compensation cess. In spite of this, you cannot claim ITC on the Basic Customs Duty. If you are looking to avail of the offer on import goods, then you become eligible if;

1. You declare GSTIN in the Bill of Entry compulsorily.

2. You incorporate the customs EDI system with the GST portal to ensure the authentication of ITC.

Who cannot claim GST input tax credit?

  • Composition dealers
  • Non-business capital goods/
  • Exempted goods
  • Blocked credits under Section 17 (5)

What are the documents required for claiming the benefit?

  • Invoice document provided by the supplier at the time of purchase
  • If your amount is less than Rs.200 or reverse charge is pertinent on the purchase, then an invoice that is issued similar to a Bill of Supply is necessary for requesting the allowance.
  • The debit note provided by the supplier (not obligatory).
  • Bill of Entry or any other documents provided by the Customs Department.
  • Bill of Supply given by the supplier
  • Any credentials like an invoice or credit note provided by the ISD.

What are the latest amendments issued on claiming the GST input credit?

  1. From January 2021 onwards, provincial credit is limited to 5%.
  2. As per Rule 86B under GST, if the taxable supply goes beyond the threshold of 50 lakhs in a month, then you cannot avail of the credit amount if the output tax exceeds 99% of tax liability.
  3. GST input tax credit will be auto-populated from GSTR 1 through GSTR 2B. Besides, it will be only available for monthly filers from 1 January 2020 and for quarterly filers from 1 April 2020.
  4. If you want to make possible the auto population of tax liability, then it is compulsory to fill GSTR1 before GSTR 3B.

What are the forms necessary to file ITC?

There are mainly 4 forms that you should know about before filing for GST input tax credit.

  1. ITC 01 – for new GST input tax credit registration
  2. ITC 02 – in case of transfer or merger of ITC and so on
  3. ITC 03 – in case of reversal of ITC
  4. ITC 04 – for the goods dispatched to a job worker

File your GST Input Tax Credit without hassles with GoTaxfile!

As the GST rules are constantly altering in recent years, it is pivotal to stay updated about the different tax scenarios. Maximizing the benefit and minimizing the cost is the ultimate goal of any buyer. Adhering to this, GoTaxfile will back you with the necessary guidance that will boost your chance to avail of the offer. Our professionals file the GST input tax credit at the right time and easily comply with the complex rules to fetch the maximum amount. If you are struggling to cut short your additional expenses then contact GoTaxfile to unwrap credits that you deserve.

Rajiv Singh
Rajiv Singh, CA, FAIA

Dec 7, 2021 15:13

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