GST Input Tax Credit

The Constitution Amendment Bill for Goods and Services Tax (GST) has been approved by The President of India post its passage in the Parliament (Rajya Sabha on 3 August 2016 and Lok Sabha on 8 August 2016) and ratification by more than 50 percent of state legislatures. The Government of India is committed to replace all the indirect taxes levied on goods and services by the Centre and States and implement GST by April 2017. As per the update given by the Government the GST will likely to take effect from 1st July, 2017, the successfull implementation of GST will be a game changer in Indian Economy.
We are going to look into some points regarding the input credit under GST;
A registered taxable assessee under GST can avail and claim the input credit paid by him on inward supplies recieved or to be recieved by him in the course of business if he satisfies the following conditions;

- He must have a tax invoice or debit note
- He must have received goods or services
- The input tax must have been paid to the Government
- He must have furnished the return

The Government has fixed limits for claiming the input tax credit for taxable persons carrying on the business of telecommunication towers and pipelines which needs to be fixed to earth, the input credit in these cases shall not exceed;
1. One third of the total input tax in the relevant financial year in which the goods are received
2. In the second year - two third of the total input tax inclusive of credit availed in the first year
3. Balance in the subsequent financial year

In case, the goods are recieved in installments or parts, (against single invoice) the credit will be available when the last installment or part is received.

Where a service recipient fails to pay the amount due on invoice inclusive of the tax payable thereon within a period of three months from the date of invoice, he shall be liable to pay the amount of input tax as his output liability with interest.

Where the capital goods are purchased, the taxable person can either clai input tax credit or depreciation for the tax paid. Both benefits will not be available.

The tax payer need to avail the credit of the input tax paid till September months return filing of the next year or annual return filing whichever is earlir, otherwise the credit shall lapse.

Division of Input Tax Credit

Where a taxable person uses the goods or services partly for the business purpose and partly for non taxable business or for personal use, he shall be allowed to claim the input credit in such ration in which the goods are use for the purpose of taxable business.

A banking company shall have the option to either comply with the above mentioned provisions or to avail 50% of the eligible input tax credit every month. The option once selected will remain the same for rest of the year.

Negative list of Input Tax Credit- Input Tax Credit Shall not be available in respect of;-

1. Motor Vehicles and other Conveyances except when they are used for the following purposes;

a) For making taxable supplies namely;
- Futher Supply
- Transporatation of Passengers
- Drivers training, flying, navigating
b) For goods transportation

2. Supply of following goods or services

a) Food and beverages and outdoor catering etc.
b) Club membership, health and fitness centre
c) Rent a cab, life insurance and health insurance
d) Travel benefits given to employees on vacation

3. Work Contract Services when the supply of goods will be made for the purpose of construction of immovable property other than plant and machinery (except where it is an input service for further supply of work contract)

4. When a taxable person receives goods or services on his own account for the construction of immovable property other than plant and machinery, even if it used for expansion of business.

Conclusion : At the end we can conclude that after the implementation of the GST in India, the indirect taxation regime will be much simplier than the present different types of taxes.

By: Pooja Jagdish

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Submitted On Mar 20, 2017. Viewed 41 times.

CA Pooja Madhan has over 5 years of experience in the field of Taxation, Accounting, Auditing, Company Law Consultancy, VAT & Sales Tax, Service Tax, International Taxation and Transfer Pricing. IF you interested to register your private firm then contact to CA Sanchar for GST Registration in Delhi. If you any doubt related to your GST Registration, please contact us at

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