1. .
1CA.N.RAMASWAMY

2.  Input Tax Credit is one of the Key Features of the GST. Input Tax Credit is
available on each inward supply received subject to conditions prescribed. It
is a very important for the registered person to understand how he can claim
input tax credit, when he can claim, which he cannot claim etc.. The wrong
claim of input tax credit may attract penal tax, interest and penalty. The
aspect of claiming “ Correct ITC “ will reduce cost to the company.
 Aspects of availing Input tax credit are summarized in the following heads.
 What is Input Tax Credit, Eligibility and condition for taking input tax credit,
Time period to avail Input Tax Credit Section 16 (4), When Input Tax Credit
shall not be eligible, Items on which ITC is not available, Reversal of Input Tax
Credit, Availability of Input Tax credit in special circumstances, restriction on
input tax credit against which tax invoices not uploaded by the suppliers and
Circulars issued in regard to Input Tax Credit.
CA.N.RAMASWAMY 2

3.  Section 2. In this Act, unless the context otherwise requires,––
 (59) “input” means any goods other than capital goods used or intended to be
used by a supplier in the course or furtherance of business;
 (60) “input service” means any service used or intended to be used by a
supplier in the course or furtherance of business;
 (61) “Input Service Distributor” means an office of the supplier of goods or
services or both which receives tax invoices issued under section 31 towards
the receipt of input services and issues a prescribed document for the
purposes of distributing the credit of central tax, State tax, integrated tax or
Union territory tax paid on the said services to a supplier of taxable goods or
services or both having the same Permanent Account Number as that of the
said office;
 (63) “input tax credit” means the credit of input tax;
 (19) “capital goods” means goods, the value of which is capitalised in the
books of account of the person claiming the input tax credit and which are
used or intended to be used in the course or furtherance of business;
CA.N.RAMASWAMY 3

4.  2. In this Act, unless the context otherwise requires,––
 ( (62) “input tax” in relation to a registered person, means the central tax,
State tax,
 integrated tax or Union territory tax charged on any supply of goods or
services or
 both made to him and includes—
 (a) the integrated goods and services tax charged on import of goods;
 (b) the tax payable under the provisions of sub-sections (3) and (4) of section
9;
 (c) the tax payable under the provisions of sub-section (3) and (4) of section 5
of the Integrated Goods and Services Tax Act;
 (d) the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 9 of the respective State Goods and Services Tax Act; or
 (e) the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 7 of the Union Territory Goods and Services Tax Act, but does
not include the tax paid under the composition levy;
CA.N.RAMASWAMY 4

5.  16. (1) Every registered person shall, subject to such conditions and restrictions as may be
prescribed and in the manner specified in section 49, be entitled to take credit of input tax
charged on any supply of goods or services or both to him which are used or intended to
be used in the course or furtherance of his business and the said amount shall be credited
to the electronic credit ledger of such person.
 Comments :
◦ A registered person is entitled to Input tax charged on any supply of goods or services
or both and such Supply are used or intended to be used in the course or furtherance of
his business.
◦ Input Tax shall be credited to the Electronic Ledger of the person.
◦ Furtherance of business has not been defined . However, “Business” is defined
under Section 2(17) include any trade, commerce, manufacture, profession, vocation
etc. whether or not undertaken for a pecuniary benefit. Business also includes any
activity or transaction which is incidental or ancillary to the aforementioned listed
activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or
any local authority in which they are engaged as public authority shall also be construed
as business. From the above, it could be taken that any activity undertaken included in
the definition for furtherance or promoting of a business could constitute a supply
under GST law Thus any supply which are used or intended to be used in the course of
or furtherance of HIS business ie. Trade, commerce, manufacture, profession, etc is
eligible
◦ Once it is established that the inputs, services, Capital goods are used in the course of
business or intended to be so used or in the furtherance of business , ITC is avilable.
CA.N.RAMASWAMY 5

6.  Conditions:
 16(2) (a) the registered person 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;
 Comments : the following are prescribed documents for taking ITC.
◦ (a) an invoice issued by the supplier of goods or services or both in accordance with the
provisions of section 31;
◦ (b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of
section 31, subject to the payment of tax;
◦ (c) a debit note issued by a supplier in accordance with the provisions of section 34;
◦ (d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or
rules made there under for the assessment of integrated tax on imports;
◦ (e) 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.
(b) he has received the goods or services or both.
Provided. The registered person shall be deemed to be in receipt of goods or services
as the case may be , if the goods are delivered by the supplier to the recipient or to
any other person on the direction of such registered person his direction. ( Like
erstwhile E-1 Sales ). And in the case of Services where the services are provided by the
supplier to any person on the direction of and on account of such registered person
CA.N.RAMASWAMY 6

7.  Conditions: contd.
(c) The tax charged in respect of such supply has been actually paid to the Government, either
in cash or through utilisation of input tax credit admissible in respect of the said supply.
(d) he has furnished the return under section 39:
(e) When goods are received in different Lots or installments then the registered person is
entitled to take credit up on receipts of last installment.
(f) Where a recipient fails to pay to the supplier of goods or services or both, the amount
towards the value of supply along with tax , within a period of one hundred and eighty
days from the date of issue of invoice by the supplier, an amount equal to the input tax
credit availed by the recipient shall be added to his output tax liability, along with interest
thereon.
(g) Re-avail Input Tax Credit as reversed according to above stated in para 4 Section 16 (2)
with rule 37 (4) on payment made by him of the amount towards supply of goods/ services
plus tax thereon . There is no time limit for this and Refund of interest paid will not be
allowed.
Deemed Payments ( Rule 37 ) :a) The value of supplies made without
consideration as specified in Schedule I of the said Act shall be deemed to have
been paid.
b) Any amount that the supplier is liable to pay in relation to such supply but
which has been incurred by the recipient of the supply and not included in the
price actually paid or payable for the goods or services or both.
CA.N.RAMASWAMY 7

8.  Conditions: contd.
 Time period to avail Input Tax Credit Section 16 (4): –A registered person shall
not be entitled to take input tax credit in respect of any invoice or debit note
for supply of goods or services or both after
◦ a) Due date of furnishing of the return under section 39 for the month of
September following the end of financial year to which the invoice related
◦ b) furnishing of the relevant annual return, whichever is earlier
CBIC has extended the due due for the Financial year 2017-18 till 31-03-2019
Input Tax Credit shall not be eligible:
 1.Input Tax pertaining to supply of goods or services or both and such supply
have been used for non-business activities.
 2. Input Tax pertaining to supply of goods or services or both and such supply
have been used for making exempt supply.
 3. Where the registered person has claimed depreciation on the tax component
of the cost of capital goods and plant and machinery under the provisions of
the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax
component shall not be allowed. Section – 16 (3) of the CGST Act.
CA.N.RAMASWAMY 8

9.  Under section 17
 (1) If goods or services or both are used partly for business and partly
for other purposes then credit is restricted to attributable to business
purposes.
 (2) If partly for taxable supply(including zero rated supply) and partly
for exempted supply then credit is restricted to attributable to the
taxable supply(including zero rated supply).
 (3) Exempt supply includes non taxable supply. It also includes
supplies taxable under reverse charge, transaction in securities, sale
of land and sale of building.
 Banks and NBFC have the option to take proportionate credit as
discussed above or can take upto 50% credit. This restriction is not
applicable with respect to tax paid on supplies made within same PAN
and option once taken can not be withdrawn during the financial year.
 Manner of reversal of Input Tax credit on inputs & input services is
dealt with in rule 42 and reversal in respect of Capital goods are
dealt with in Rule 43 of the Goods and service atx rules 2017.
CA.N.RAMASWAMY 9

10.  17(5) ITC is not available on the following.
 a) Motor Vehicle and other conveyances.
◦ Credit is allowed if used for transport of passengers, transportation of
goods, supply of motor vehicle/other conveyances or imparting training
how to drive, navigate or fly them.
 , (b) the following supply of goods or services or both:— (i) food and
beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery except where an inward supply of goods or services or both
of a particular category is used by a registered person for making an outward
taxable supply of the same category of goods or services or both or as an
element of a taxable composite or mixed supply;
 II) membership of a club, health and fitness centre and
 (iii) travel benefits extended to employees on vacation such as leave or home
travel concession:
 Provided that the input tax credit in respect of such goods or services or
both shall be available, where it is obligatory for an employer to provide the
same to its employees under any law for the time being in force.
CA.N.RAMASWAMY 10

11.  ((c) works contract services when supplied for construction of an immovable
property (other than plant and machinery) except where it is an input service
for further supply of works contract service;
 (d) goods or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business
 Explanation.––For the purposes of clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or alterations
or repairs, to the extent of capitalization, to the said immovable property;
Comments:- 1. Works contract supplied for construction of immovable
property which gets capitalized as Building alone is not eligible .This
means Works contract service for supply refection of plant & Machinery
will be eligible.
2. Works contract services used in upgrading office premises in the form of
consultancy, partition of office space, installation of Furniture & fittings
supply, fitting installation of Air conditions etc, when capitalized as such
as Furniture and fittings , Electrical equipments are eligible, and as long
as they are not classified as building in the books of Accounts.
CA.N.RAMASWAMY 11

12.  (e) goods or services or both on which tax has been paid under section 10;(
Supplies from Registraents who have opted Composition schemes.
 (f) goods or services received by a non-resident taxable person except on
goods imported by him;
 (g) goods or services or both used for personal consumption;
 (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or
free samples; and
 (i) any tax paid in accordance with the provisions of sections 74, 129 and 130
 (6) The Government may prescribe the manner in which the credit referred to in
subsections
 (1) and (2) may be attributed.
 Explanation.–– For the purposes of this Chapter and Chapter VI, the expression
“plant and machinery” means apparatus, equipment, and machinery fixed to
earth by foundation or structural support that are used for making outward
supply of goods or services or both and includes such foundation and
structural supports but excludes—
 (i) land, building or any other civil structures;
 (ii) telecommunication towers; and
 (iii) pipelines laid outside the factory premises
CA.N.RAMASWAMY 12

13.  (e) goods or services or both on which tax has been paid under section 10;(
Supplies from Registrants who have opted Composition schemes.
 (f) goods or services received by a non-resident taxable person except on
goods imported by him;
 (g) goods or services or both used for personal consumption;
 (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or
free samples; and
 (i) any tax paid in accordance with the provisions of sections 74, 129 and 130
 (6) The Government may prescribe the manner in which the credit referred to
in subsections (1) and (2) may be attributed.
 Explanation.–– For the purposes of this Chapter and Chapter VI, the expression
“plant and machinery” means apparatus, equipment, and machinery fixed to
earth by foundation or structural support that are used for making outward
supply of goods or services or both and includes such foundation and
structural supports but excludes—
 (i) land, building or any other civil structures;
 (ii) telecommunication towers; and
 (iii) pipelines laid outside the factory premises
CA.N.RAMASWAMY 13

14.  [(4) Input tax credit to be availed by a registered person in respect of invoices
or debit notes, the details of which have not been uploaded by the suppliers
under sub-section (1) of section 37, shall not exceed 20 per cent. of the
eligible credit available in respect of invoices or debit notes the details of
which have been uploaded by the suppliers under sub-section (1) of section
37.]40
 The said sub-rule provides restriction in availment of input tax credit (ITC) in
respect of invoices or debit notes, the details of which have not been uploaded
by the suppliers under sub-section (1) of section 37of the Central Goods and
Services Tax Act, 2017 (hereinafter referred to as the CGST Act). Effective from
19-10-2019. To clarify and ensure uniform practices, CBIC has issued a
Board circular 123/42/2019– GST, the 11th November, 2019.
 Further, Restriction 20% as stated above was amended to 10% with effect
from01-01-2020 vide notification no.75/2019 dated 26-12-2020
 In view of COVID -19, the restriction will not apply during the period Till Aug
2020, to be effective as to allow cumulative application of the condition in rule
36(4) for the months of February, 2020 to August, 2020 in the return for Tax
period Sept 2020 vide circular no 136/06/2020-GST dated 3-4-2020.
CA.N.RAMASWAMY 14

15. No. of the Rule Particulars
Rule 36 Documentary requirements and conditions for Claiming Input Tax
Credit
Rule 37 Reversal of input tax credit in case of non-payment of consideration
Rule 38 Claim of credit by banking company or a financial institution
Rule 39 Procedure for distribution of input tax credit by Input Service
Distributor (ISD)
Rule 40 Manner of claiming credit in special circumstances (Registrations,
ceases to composite dealer, supplies becomes taxable etc.)
Rule 41 Transfer of credit on sale, merger, amalgamation, lease or transfer
of a business
Rule 41 Transfer of credit on obtaining separate registration for multiple
places of business within a State or Union territory

16. No. of the
Rule
Particulars
Rule 42 Manner of determination of input tax credit in certain
cases and reversal thereof (exempt/ non-business
supplies )
Rule 43 Manner of determination of input tax credit in respect
of capital goods and reversal thereof in certain cases
Rule 44 Manner of reversal of credit under special
circumstances
Rule 44 A Manner of reversal of credit of Additional duty of
Customs in respect of Gold dore bar.-
Rule 45 Conditions and restriction in respect of inputs and
capital goods sent to the job worker

17. Particulars Description Remarks.
Goods supplied for
manufacture
Input- Goods being in the Course of
Business of manufacture of goods
ITC Eligible
Goods supplied as additives Input- goods used as additives in the
manufacture of goods
ITC Eligible
Goods like surfactants Input goods used cleaning shop floor,
or goods themselves
ITC Eligible
Goods supplied as
consumables
Inputs- Goods consumed in the process ITC Eligible
Lube Oil used in the
Machinery for manufacture
Input – Consumable goods used in the
factory to aid production.
ITC Eligible
Gunny bags, HDPF bags,
Containers of plastics etc
Input – Goods used as packing materials ITC Eligible
LDPE used in DG Sets Input – Goods used in the manufacture
of electricity used in manufacture
ITC Eligible
CA.N.RAMASWAMY 17

18. Sr.No Particulars Exceptions
1 Motor Vehicles Extended supply of such vehicles
or conveyances
Transportation of passengers
2 Other Conveyances Providing training on driving,
navigating such vehicles
Conveyances for transportation of
goods
3 Foods, Outdoor Catering, Beauty
Treatment, Health Services Cosmetic,
Plastic Surgery
Except where such inward supply
is consumed for making outward
supply of the same category or as
an element of taxable composite
supply
4 Membership of a Club, -
5 Membership of a Health Centre -
6 Membership of a Fitness Centre; -
CA.N.RAMASWAMY 18

19. Sr.No Particulars Exceptions
7 Rent-a-cab, Life Insurance,
Health Insurance,
Except where such inward supply
is consumed for making outward
supply of the same category or as
an element of taxable composite
supply
Provided that the input tax credit
in respect of such goods or
services or both shall be available,
where it is obligatory for an
employer to provide the same to
its employees under any law for
the time being in force
8 Travel benefits extended to
employees on vacation such as
leave
-
9 Travel benefits on home travel
concession
-
CA.N.RAMASWAMY 19

20. Sr.No Particulars Exceptions
10 Works contract services when
supplied for construction of an
immovable property,
Except where it is an input service
for extended supply of works
contract service and plant and
machinery
11 Goods or services or both
received by a taxable person for
construction of an immovable
property
Except goods or services
received on his own account
including when such goods or
services or both are used in
the course or furtherance of
business and plant and
machinery
12 Goods or services or both on
which tax has been paid under
section 10;
-
13 Goods or services or both
received by a non-resident
taxable person
Except on goods imported by
him
CA.N.RAMASWAMY 20

21. Sr.No Particulars Exceptions
14 Goods or services or both used
for personal consumption
-
15 Goods lost -
16 Goods written off -
17 Goods destroyed -
18 Goods stolen -
19 Goods disposed of by way of gift
or free
samples
-
20 Any tax paid in accordance with
the provisions of sections 74,
129 and 130.
No credit since it is due to
fraud or any wilfull-
misstatement or suppression
of facts to evade tax.
CA.N.RAMASWAMY 21

22. Sr.No Particulars of Service Remarks
1 Works contract Service of supply and
installation services of computer
networking in the factory
ITC eligible as the supply is in the
course of or furtherance of
Business – Computer essential for
business needs.
2 Goods transport agency service on
Forward Charge basis for inward
supply of materials.
ITC eligible as GTA service is to
deliver the inputs being in the
course of business.
3 Goods transport agency service on
Forward Charge basis for outward
supply of goods
ITC eligible as GTA service is to
deliver the finished with out
which business is not complete.
being in the course or furtherance
of of business
4 Maintenance of garden in the vicinity
of Factory premises.
Factory license will not be granted
or renewed unless greenery is in
place as per pollution control
rule. ITC eligible being in the
course of business.
CA.N.RAMASWAMY 22

23. Sr.No Particulars of Service Remarks
5 Works contract Service of supply and
installation services of Work stations
in the office premises( supply of
Furniture& fittings, networking,
supply of computer Electrical fittings
etc – composite supply fo work
stations)
ITC eligible as the supply is in the
course of or furtherance of
Business – furniture & fittings,
Computer, electrical fittings
essential in the office for
business needs.
6 premium to Deposit Insurance and
Credit Guarantee Corporation (DICGC)
it is statutorily required for the
bank to obtain insurance of
deposit, which has only been
accepted by it in the course of its
business or furtherance of
business. ITC is allowable under
Section 17(4) of CGST Act, 2017.
7 Supply erection of Water Slides, in
an amusement park- an apparatus,
equipment and machinery.
Water Slides fall within the
meaning of the term apparatus,
equipment and machinery and
shall be eligible for claim of ITC
23

24. Sr.No Particulars of Service Remarks
8 Consultancy Charges for obtaining
license under Pollution Control
ITC eligible as the supply is in the
course of or furtherance of
Business a Factory can not
operate with out approval from
Pollution control.
9 Certification Services of Various
Nature
ITC eligible as the supply is in
furtherance of business
10 Operation and maintenance services
of DG Sets- Specialized Machineries
ITC eligible as the supply is in
course of or furtherance of
business.
11 Supply, installation and maintenance
of software services of all kinds
ITC eligible as the supply is in
course of or furtherance of
business.
24

25. CA.N.RAMASWAMY 25
Disclaimer:
The contents of this document are solely for informational purpose
and It does not constitute professional advice. It has been prepared
on the basis of Law as existing . While due care has been taken in
preparing this document, the same cannot be taken as law. For
Complete understanding of the law, it is recommended to refer to
The Act, Rules and notification as published in the Gazettes from
time to time. No part of this document should be distributed or
copied without express written permission of the author.

26. Thank You
N.Ramaswamy B.Com, F.C.A.
Shri Abhisekavalli Flats
163-164, Rangarajapuran main Raod
 Kodambakkam, chennai 600024
 PH- 04443512423
 MOBILE: 9840446412
 EMAIL: nryrams@gmail.com
 Happy Reading
CA.N.RAMASWAMY 26