GST Jamku AICHAPTER V
INPUT TAX CREDIT
Eligibility and conditions for taking input tax credit.
Section 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.
In order to avail input tax credit, registered individuals must adhere to specific eligibility criteria and comply with prescribed conditions. This article delves into Section 16(1), outlining the entitlement to input tax credit and the associated regulations.
Entitlement to Input Tax Credit
According to Section 16(1), every registered person has the right to claim input tax credit, provided they meet certain conditions and adhere to prescribed restrictions. The manner in which this credit can be claimed is specified in Section 49. This entitlement applies to the input tax charged on any supply of goods or services, or both, that are either used or intended to be used in the course or furtherance of the person's business. The credited amount is then transferred to the electronic credit ledger of the respective individual.
Understanding the Provision
This provision essentially grants registered individuals the opportunity to offset the input tax paid on supplies related to their business activities. To avail this benefit, one must carefully follow the conditions and restrictions outlined in the regulations. Failure to comply with these stipulations may affect the eligibility of the individual to claim input tax credit.
Electronic Credit Ledger
Upon successfully meeting the conditions and adhering to the prescribed procedures, the credited amount is directed to the electronic credit ledger. This ledger serves as a digital record of the input tax credit, providing transparency and accountability in the utilization of such credits.
Conclusion
In conclusion, Section 16(1) serves as a crucial aspect of the input tax credit framework, ensuring that registered individuals can offset the tax paid on inputs used in their business operations. By understanding and adhering to the specified conditions, businesses can effectively leverage input tax credit to manage and optimize their tax liabilities.
Section 16(2)
Notwithstanding anything contained in this section, 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,—
(a) 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;
(aa) the details of the invoice or debit note referred to in clause (a) has 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;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services—
(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.
(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;
(c) subject to the provisions of section 41 , 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; and
(d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon 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 [paid by him along with interest payable under section 50], in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him [to the supplier] of the amount towards the value of supply of goods or services or both along with tax payable thereon.
In this section, it says that if you buy goods or services and want to get a tax credit for it, you need to follow some rules.
Getting Tax Credit
First, you must have a proper document from the seller, like a tax invoice or debit note. This document should show that the seller is registered under the tax law. Also, the seller must tell the government about this sale in their records, and you should know about it.
You should have actually received the goods or services. If the goods are on the way to you, or the services are being done for you, you are considered to have received them.
Conditions for Tax Credit
The details of the tax credit for this purchase should not be limited, and the tax mentioned in the document must be paid to the government. You also need to file your tax return.
Important Points to Remember
If the goods are delivered in parts, you can claim the tax credit only after receiving the last part.
If you don't pay the seller within 180 days, you have to pay back the tax credit with interest. However, if you pay the seller later, you can still get the tax credit.
Conclusion
This section explains the rules for getting a tax credit when you buy something. Make sure you have the right documents, the details are recorded, and the tax is paid to the government. If you delay the payment to the seller, there are some consequences, but you can still get the tax credit if you pay later.
Section 16(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.
In certain situations, when a registered individual has availed depreciation on the tax component of the cost related to capital goods and plant and machinery as per the Income-tax Act, 1961 (43 of 1961), they will not be eligible for input tax credit on this specific tax component.
This restriction comes into play under Section 16(3), which outlines the conditions where claiming depreciation impacts the availability of input tax credit. The focus here is on the tax component associated with capital goods and machinery.
Implications for Registered Persons
For registered persons, it's crucial to be aware of this provision. If depreciation has been claimed under the Income-tax Act, 1961, it directly affects the eligibility for input tax credit related to the tax component of capital goods and plant and machinery.
Balancing Tax Benefits and Credits
While the Income-tax Act provides certain benefits in terms of depreciation, it's important for businesses and individuals to weigh these advantages against the potential limitations on input tax credit as outlined in Section 16(3). This balance is essential for optimizing tax strategies and ensuring compliance with the regulations.
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 the [thirtieth day of November] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier:
Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.
In the world of taxation, there's a specific rule known as Section 16(4). This rule lays down conditions regarding when a registered person can claim input tax credit in relation to invoices or debit notes for the supply of goods or services.
Time Limit for Input Tax Credit
According to Section 16(4), a registered person cannot claim input tax credit for any invoice or debit note after the thirtieth day of November following the end of the financial year to which the invoice or debit note pertains. This is also applicable until the relevant annual return is furnished, whichever comes first.
Special Provision for Certain Period
However, there's an exception mentioned in the rule. The registered person is allowed to claim input tax credit after the due date of furnishing the return under Section 39 for the month of September 2018, until the due date of furnishing the return under the same section for the month of March 2019. This exception applies to invoices or debit notes related to the supply of goods or services made during the financial year 2017-18.
Conditions for Exception
To avail of this exception, the details of such invoices or debit notes must have been uploaded by the supplier under sub-section (1) of Section 37. This should be done until the due date for furnishing the details under sub-section (1) of the same section for the month of March 2019.
In summary, while Section 16(4) sets a general time limit for claiming input tax credit, there's a specific period mentioned for certain cases, allowing registered persons to benefit from this credit under defined conditions.