GST: Input Tax Credit, Registration and Tax Invoices
Conditions for ITC
Section 16(2) requires possession of a tax invoice, receipt of the goods or services, tax actually paid to the government and filing of the return. The supplier's invoice must also be communicated in GSTR-1. Section 16(4) sets the outer time limit: 30 November following the financial year, or the annual return date, whichever is earlier.
Blocked and apportioned credits
- Section 17(5) blocks motor vehicles with up to 13 seats (with exceptions for dealers and transport operators), food and beverages, club membership, health insurance, works contract services for immovable property, and goods lost or stolen.
- Section 17(1) and 17(2) require apportionment of common credit between taxable and exempt supplies; banks may opt for 50%.
Registration and invoices
- Section 22 thresholds: Rs.40 lakh for goods and Rs.20 lakh for services, reduced to Rs.20 lakh and Rs.10 lakh in special category states.
- Section 24 lists compulsory registration cases, including casual taxable persons, reverse charge taxpayers, e-commerce operators and input service distributors.
- Section 31 prescribes invoice contents and time limits; Section 34 covers credit notes.
Worked example
An invoice dated 15 February 2024 is received in March 2024, and the March 2024 return is filed in April 2024. ITC is claimed in the September 2024 return. The limit is 30 November 2024, so the claim is within time.
Traps
- Claiming ITC on a motor vehicle without checking the furtherance-of-business exception.
- Computing 16(4) from the date of receipt instead of the end of the financial year.
- Missing that the supplier must report the invoice in GSTR-1.
- Assuming a credit note reduces output tax even when the recipient does not reverse ITC.