Input Tax Credit FAQs — GST ITC Questions Answered
8 expert answers on Input Tax Credit under GST (Sections 16 & 17) under GST — eligibility, restrictions, reversals, and recent legal positions.
These questions are drawn from real GST compliance scenarios, litigation, and common queries from practitioners. Answers reflect the law as amended up to Finance Act 2024.
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All four of the following must be satisfied simultaneously: (1) the taxpayer must possess a tax invoice or debit note issued by the supplier; (2) the taxpayer must have actually received the goods or services; (3) the tax charged on the supply must have been actually paid to the government by the supplier (verified via GSTR-2B); and (4) the taxpayer must have furnished the return under Section 39 (GSTR-3B). Failure of any single condition results in ITC being unavailable.
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Yes. Section 16(2)(c) requires that the tax charged by the supplier must have been actually deposited with the government. Rule 37A further requires reversal of ITC where the supplier has not filed GSTR-3B for the relevant period. However, several High Courts have held that a bona-fide recipient who had no means to verify supplier default at the time of purchase cannot be denied ITC solely on that ground — particularly where the credit appeared in GSTR-2A. The constitutional validity of Section 16(2)(c) read with Rule 37A is under challenge in multiple High Courts.
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Section 17(5) of the CGST Act lists categories of inward supplies on which ITC is absolutely blocked: (a) motor vehicles for personal use (with exceptions for dealers, transporters, and those providing training); (b) food, beverages, beauty treatment, health services, cosmetic surgery; (c) club memberships; (d) travel benefits to employees; (e) works contract services for construction of immovable property; (f) goods/services for construction of immovable property (with the 'plant and machinery' exception); (g) goods or services received by a non-resident taxable person; and (h) goods or services used for personal consumption.
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ITC for a financial year must be claimed by the earlier of: (a) the due date for filing GSTR-3B for the month of November of the following financial year; or (b) the date of filing the annual return. For FY 2023-24, this generally means by 30 November 2024 (GSTR-3B due date). Finance Act 2024 inserted Sections 16(5) and 16(6) to provide retrospective relief for ITC claimed in GSTR-3Bs filed between 1 July 2017 and 30 November 2021, protecting taxpayers from demands raised on time-barred ITC claims.
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Section 16(2)(b) provides that where goods are received in lots or instalments, ITC may be availed only upon receipt of the last lot or instalment. Therefore, a taxpayer cannot claim ITC on the first instalment alone — the full credit becomes available only when the last instalment has been received, even if the invoice was issued earlier.
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Yes. Section 16(3) of the CGST Act requires that ITC availed must be reversed (added back to output tax liability with interest) if the recipient fails to pay the consideration to the supplier within 180 days of the date of issue of the invoice. The reversed ITC can be re-claimed once the payment is actually made. This provision does not apply where the value of supply is nil (e.g., related-party zero-value supplies).
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Yes, but only proportionately. Section 17(1) and (2) read with Rule 43 CGST Rules provide the formula for proportionate ITC on capital goods used partly for exempt supplies or personal use. The credit attributable to exempt supplies must be reversed monthly on a straight-line basis over a 5-year (60-month) useful life of the capital good.
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No. A taxpayer opting for the GST Composition Scheme under Section 10 of the CGST Act is not entitled to claim Input Tax Credit. The scheme offers a simplified flat-rate tax in lieu of regular GST compliance, but ITC is explicitly excluded as a trade-off for the lower compliance burden.