Documents required to avail input tax credit under GST law

In GST law, Input refers to any goods or services or both used by a registered taxpayer to create the finished product and/or to render services to the consumer. The beauty of input tax credit (ITC) mechanism in GST law is that the registered supplier gets credit for the GST that they have paid while purchasing goods and/or services to supply the final product and/or services. In simple words, input tax credit is a benefit provided in GST to prevent the cascading effect of taxes and ensures that tax is collected in the state in which goods or services or both are consumed.

In order to avail the benefits of input tax credit, one of the conditions is that the registered taxpayer must be in possession of certain documents to claim credit of input tax. Below in this article, we have listed documents that the registered person should obtain to claim input tax credit under GST law.

As per section 16(2) of CGST Act, 2017, a registered person shall be entitled to the credit of input tax in respect of supply of goods and/or services unless 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.

In this regard, rule 36 has prescribed certain documentary requirements and conditions for claiming input tax credit. As per this rule, the input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,-

  • A tax invoice issued by the supplier of goods and/or services in accordance with the provisions of section 31;
  • An invoice issued for payment of Reverse charges,
  • Debit note issued by supplier in accordance with the provisions of section 34;
  • A bill of entry or similar documents prescribed under custom act or rules of assessment of IGST,
  • An Input Service Distributor invoice or Input Service Distributor credit note or any document issued by an Input Service Distributor in accordance with the provisions of sub-rule (1) of rule 54.

What the document must contain to avail ITC

As a registered person to claim input tax credit, you must ensure that all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document, and the relevant information, as contained in the said document, is furnished in FORM GSTR-2 by such person.

If the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person.

This means, documents basis which ITC is being taken should contain at least following details;

Please note, no input tax credit shall be claimed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.

Can input tax credit in GST be taken on the basis of receipt voucher

As per the provisions of section 16(2), no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

  • he is in possession of a tax invoice or debit note issued by a supplier registered under this act or such other tax paying document as may be prescribed;
  • He has received the goods or services or both

This means to get credit of input tax, the goods and/or services must be received by the recipient. In case of advance payment to supplier against a receipt voucher, you are not receiving goods and/or services from the supplier at the time of advance payments, therefore ITC can’t be availed.

In addition to possession of the above documents, you are also required to satisfy certain conditions to claim GST credit. In certain cases, GST law doesn’t allow to take ITC.

Here are certain conditions and useful tips to claim Input tax credit in GST:-

  • Input tax credit can only be claimed by a person who is registered under GST. If you are not registered, the ITC not allowed even though you are in possession of the above documents.
  • Goods on which GST has been charged and input tax credit claimed must have been received by the recipient or any other person on behalf of such recipient.
  • Supplier has paid GST and filed the return.
  • In cases where goods are received in installments, ITC can be claimed only after receiving the final lot.
  • ITC is not allowed if the supplier is registered and tax is paid under composition scheme.
  • GST paid on capital goods can’t be claimed as an input tax credit if recipient has claimed depreciation on the total cost of capital goods including GST component under the income tax act,1961. To claim ITC for the gst component on capital goods, you should not claim depreciation on the GST component charged on capital goods. This means depreciation should be claimed only on cost of capital assets excluding gst.
  • If goods and/or services are not used for business, the ITC not allowed.
  • On certain goods and/or services ITC is not allowed even though it’s used for your business.
  • If capital goods are purchased exclusively to manufacture exempted goods, then ITC is not allowed even if you have not claimed depreciation on GST paid on capital goods.
  • Recipient has to reverse ITC if supplier is not paid within 180 days from the date of invoice.

If you are switching from composition scheme to the normal scheme, as per the GST law, Input tax credit can be claimed for the tax paid on the input held in stock, capital goods, semi-finished and finished goods in stock as on the day preceding the day on which he becomes liable to pay tax as a normal taxpayer. Similar to switching from composition scheme to normal scheme, in case exempted goods or services becomes a taxable supply then the applicant can claim ITC on the input in stock, capital goods, semi-finished or finished goods used for such supply. In this case, you need to keep records for all these inputs on which ITC is claimed and a return in form GST ITC-01 has to be filed with government to claim ITC. GST ITC-01 has to be certified by a practicing chartered accountant or cost accountant if the aggregate ITC of CGST, SGST and IGST exceeds Rs 2,00,000.

In case of capital goods, you have to reduce ITC by 5% per quarter or part thereof from the date of invoice to arrive at the eligible input tax credit on the capital goods. If you have more than one capital goods, then better to maintain date of acquisition and invoice number wise fixed asset register for easy calculation and compliance.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.