GST Input Credit

Budget updates - February 1st, 2022

1. If ITC is prohibited in GSTR-2B, accessible under Section 38, it cannot be claimed.

2. The deadline for claiming ITC on invoices or debit notes issued during a fiscal year is moved to the sooner of two dates. First, the 30th of November of the following year, or the date of filing annual returns.

3. Section 38 has been totally renamed 'Communication of details of inward supplies and input tax credit' in accordance with Form GSTR-2B. It specifies the method, time, conditions, and limitations for ITC claims and has eliminated the two-way communication process in GST return filing on the suspended return in Form GSTR-2. It also indicates that taxpayers will be given information on which ITCs are eligible and which are not.

4. Section 41 has also been revised to remove references to provisional ITC claims and replace them with self-assessed ITC claims subject to conditions.

5. Sections 42, 43, and 43A, which deal with the provisional ITC claim process, matching, and reversal, are repealed.

December 29, 2021

CGST Rule 36(4) is revised to remove the 5% additional ITC over and above the ITC shown in GSTR-2B. Starting 1st of January 2022, businesses can claim ITC only if the supplier reports it in GSTR-1/IFF and it appears in their GSTR-2B.

December 21, 2021

ITC claims will be allowed only if they show in GSTR-2B as of January 1, 2022. As a result, taxpayers no longer have the option of claiming a 5% provisional ITC under CGST Rule 36(4) and ensuring that every ITC amount claimed is represented in GSTR-2B.

Invoice Matching Mandatory To Claim Input Tax Credit

Under the Goods and Services Tax (GST) regime, the Finance Ministry has set January 1, 2022 as the deadline for implementing rules that make 100% invoice matching necessary. This means that an assessee will only receive input tax credit (ITC) for invoices that are matched.

The system generates ITC for each assessee based on returns filed by their supplier. These measures reduce the risk of overstating ITC and receiving more benefits than are due. Earlier laws permitted assessees to claim a 10% higher ITC without providing supporting invoices, however this was later lowered to 5%. From January 1, this provision will no longer be in effect, and 100% invoice matching will be implemented.

Eligibility And Conditions To Claim Input Tax Credit

There are four conditions that must be met for ITC to be credited to an assessee in relation to a supply. First, he should obtain a tax invoice or debit note from a registered supplier, as well as any other tax-paying documentation. Second, he has either received the goods or the services, or both. Third, tax on the supply has been paid. Fourth, a tax return has been filed.

After the first condition, a new clause is added that states, "the details of the invoice or debit note referred to in clause (a) have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under Section 37."

How To Apply For Input Tax Credit?

In the case of IGST, CGST, SGST, and UTGST, the tax paid while the items are on hand, goods are ordered, services are received, goods are imported into the market, and capital goods are purchased can be claimed as input tax credits while the output tax is calculated.

Note:

It should be noted that in the first instance, ITC in IGST must be completely used before ITC in CGST/SGST can be used.

In the case of CGST liability, the CGST credit must be used first, followed by the IGST credit. However, it should be noted that no IGST credit is pending.

In the case of SGST liability, SGST credit must be obtained first, followed by IGST credit. However, it should be noted that no IGST credit is pending.

CGST credit cannot be used to cover SGST liability, nor can SGST credit be used to offset CGST liability.

When calculating an input tax credit against tax liabilities, the primary purpose is to collect a specified amount of tax after all of the Act's provisions have been met.

What Are The Forms Used To Apply For Input Tax Credit?

There are 4 different ITC Forms;

2. ITC 02 – Transfer of ITC in case of sale/merger etc.

3. ITC 03 – Reversal of ITC

4. ITC 04 – ITC on goods sent to Job Worker

Time Limits To Apply For Input Tax Credit

• Due date for filing GST returns for the month of September of the next fiscal year
• Date of submission of the current fiscal year's annual return

Documents On Which Input Tax Credit May Be Applied For –

• Tax invoices issued by authorized suppliers
• A debit note has been issued in relation to the prior tax invoice issued by the registered supplier.
• Invoice issued by a recipient of goods or services who has paid tax using the reverse charge system.
• In the case of import, a bill of entry or equivalent paper. A receipt or credit note issued by the Input Service Distributor.

FAQs