Input Tax Credit, Registration, Invoicing, Accounts and E-Way Bill
This domain tests the conditions for taking ITC, the blocked and apportioned credits, registration thresholds and compulsory registration, invoice content, record retention and e-way bill mechanics.
ITC conditions
Section 16 requires possession of a tax invoice or debit note, receipt of goods or services, actual payment of tax to the government, and furnishing of the return. The second proviso requires payment to the supplier within 180 days for supplies other than reverse charge; otherwise the credit is reversed and can be re-availed on payment. Section 17(5) blocks credits on motor vehicles with seating up to 13 persons (unless used for resale or passenger transport), food and beverages, club and health services, employee benefits, works contract services for immovable property, goods lost or free samples, and tax paid under sections 74, 129 and 130. Common credits are apportioned under section 17(2) and Rules 42 and 43 in the ratio of taxable to total turnover.
Registration
Section 22 sets thresholds of ₹20 lakh (₹10 lakh for special category States) for goods and services, with higher thresholds for specified special category States. Section 24 mandates registration for inter-State suppliers, casual taxable persons, persons liable under reverse charge, and e-commerce operators required to collect tax. Section 25 covers procedure and section 27 covers non-resident taxable persons.
Invoicing and accounts
Section 31 prescribes invoice timing and contents; section 34 governs credit and debit notes; section 35 requires accounts and records, generally retained for 72 months from the due date of the annual return.
E-way bill
Rule 138 applies to movement of goods exceeding ₹50,000. Part A contains invoice details; Part B contains vehicle details. Validity is one day for every 200 km or part thereof.
Worked example
A company has ₹1,00,000 common ITC, 60% taxable turnover and 40% exempt turnover. Rule 42 allows ₹60,000 as eligible credit and requires ₹40,000 reversal, with the calculation repeated annually.
Traps
- Claiming ITC on goods received in instalments without proportionate receipt.
- Forgetting the 180-day reversal.
- Issuing an e-way bill without Part B for a vehicle change.