Understanding Eligibility and Conditions for Taking
Input Tax Credit (Section 16)
Who Can Claim Input Tax Credit?
1.
Registered Business Owners: If you have a registered business, you can claim
credit for the input tax (tax paid on purchases) on goods or services used for
your business. This credit will be added to your electronic credit ledger.
Conditions to Claim Input Tax Credit
2.
Essential Requirements:
·
Valid Documents:
You must have a tax invoice or a debit note from the supplier who is registered
under the law. Other valid tax documents may also be acceptable.
·
Supplier’s Statement: The supplier must have reported these invoices or
debit notes in their outward supplies statement. You should be notified of
these details.
·
Receipt of Goods/Services: You must have received the goods or services. If
the goods are delivered to someone else on your behalf, or services are
provided to someone else on your direction, it counts as received by you.
·
No Restrictions:
The input tax credit details should not be restricted under section 38.
·
Tax Payment:
The tax charged on the supply must be paid to the government by the supplier,
either in cash or through input tax credit.
·
Filing Returns:
You must have filed your tax returns under section 39.
Special Situations
3.
Goods in Installments: If you receive goods in lots or installments, you
can claim credit only when you get the last lot or installment.
4.
Delayed Payments:
If you don’t pay the supplier within 180 days from the invoice date, you must
pay back the input tax credit amount with interest. You can reclaim the credit
once you make the payment.
Depreciation on Capital Goods
5.
Depreciation Claimed: If you have claimed depreciation on the tax
component of capital goods (like machinery) under the Income Tax Act, you
cannot claim input tax credit on that tax component.
Time Limits
6.
Claim Deadline:
You cannot claim input tax credit for any invoice or debit note after November
30th following the end of the financial year to which it belongs, or after
filing the annual return, whichever comes first.
Exceptions for Previous Years
7.
Extended Deadline for Specific Period: For the financial year 2017-18, you could claim
input tax credit up to the return filing deadline for March 2019, for invoices
or debit notes reported by the supplier by March 2019.
This simplified guide helps you understand who can
claim input tax credit, the conditions to fulfill, special situations to
consider, and the deadlines to meet.
