Provisions under Section 16 of the Central Goods and Services Tax (CGST) Act, 2017 relating to “Eligibility and Conditions for taking Input Tax Credit (ITC)”, are as under:
Section 16 of CGST Act 2017: Eligibility and Conditions for taking Input Tax Credit (CHAPTER V – INPUT TAX CREDIT)
(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.
(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; [Refer Note 4]
(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 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; [Refer Note 2(a)]
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.
(c) subject to the provisions of
section 41 section 41 or section 43A, 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 [Refer Note 2(b)]
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment:
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 added to his output tax liability, along with interest thereon, 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 of the amount towards the value of supply of goods or services or both along with tax payable thereon.
(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, the input tax credit on the said tax component shall not be allowed.
(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 due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or
invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. [Refer Note 3]
1. CBEC notifies 01/07/2017 as the Commencement date for Section 16 of the CGST Act 2017, vide Central Tax Notification 9/2017 dt. 28/06/2017.
2. Amendments made vide Section 8 of the CGST (Amendment) Act, 2018 (GOI Notification dt. 29/08/2018), followed with Central Tax Notification 2/2019 dt. 29/01/2019 on commencement date of 01/02/2019 (except for clause (b) below for which effective date will be separately notified later):
a) Explanation to clause (b) of sub-section (2) substituted; and
b) In clause (c) of sub-section (2), the text ‘section 41 or section 43A’ substituted for the text “section 41”.
3. In sub-section (4), the text “invoice relating to such” omitted vide Section 120 of the Finance Act 2020: GOI Notification dt. 27/03/2020, followed with Central Tax Notification 92/2020 dt. 22/12/2020 on commencement date of 01/01/2021.
4. Clause (aa) has been inserted in sub section (2), vide Section 109 of the Finance Act 2021: GOI Notification dt. 28/03/2021. Subsequently, CBIC notifies 01/01/2022 as the commencement date vide Central Tax Notification 39/2021.
Note: The CGST Act, 2017 has been notified vide GOI Notification dt. 12/04/2017, which has subsequently been amended through CGST (Extension to J&K) Act 2017, Finance Act 2018, CGST Amendment Act 2018, Finance (No. 2) Act 2019, Finance Act 2020, Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020, Finance Act 2021, including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective CGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of Amendments made by all such Notifications, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.
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