Input Tax Credit FAQs

Q1. What is ITC (Input Tax Credit)?

Ans. In simple words, ITC means that when a manufacturer pays the tax on his output, he can deduct the tax he recently paid on the input he bought.

Input tax credit won’t be accessible for goods or services or both solely utilized for personal use, exempt supplies, and supplies for which ITC is explicitly not accessible.

Q2. In case a person obtains registration on 15th August 2017 however he became liable to pay tax on 1st August 2017. Such a person is eligible for the input tax credit on inputs held in stock as on?

Ans. In case a person obtains registration on 15th August 2017 however he became liable to pay tax on 1st August 2017. Such a person is eligible for the input tax credit on inputs held in stock as of 31st July 2017.

Q3. What are pre-requisites to claim ITC?

Ans. Here are the pre-requisites to claim ITC as per Section 16(2) of the GST Act:

(i) The receiver has a tax invoice or debit note or any other similar type of documents (ii) Goods and or services have been received by the recipient. (iii) Output tax liability has been paid by the supplier to the appropriate government. (iv) The monthly return is timely furnished by the receiver.

Q4. If ITC can be claimed in one installment for capital goods?

Ans. Yes, ITC can be claimed in one installment for capital goods except Pipelines and telecommunication towers fixed to the earth.

Q5. What is the time period within which the recipient needs to pay the taxable value to the supplier of service to claim the input tax credit?

Ans. 3 months is the maximum time limit within which the recipient needs to pay the taxable value to the supplier of service to claim the input tax credit.

Q6. Whether the taxpayer can claim the ITC and depreciation benefits on the capital goods tax component?

Ans. No, as per section 16(3) of the Income Tax Act, If depreciation on the tax component of the capital goods is availed, ITC cannot be claimed on the same.

Q7. Whether input tax credit can be claimed on the goods sent free as gifts etc. for sales promotion?

Ans. No, as per section 17(4)(g) of the GST Act, the input tax credit cannot be claimed on the goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples.

Q8. Can we claim ITC on scrap and waste inputs?

Ans. No, as per section 17(4)(g) of the GST Act, the input tax credit cannot be claimed on the goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples. Therefore, ITC on scrap and waste inputs cannot be claimed.

Q9. If ITC can be availed for the health and life insurance of employees?

Ans. Yes, ITC can be availed on rent a cab, life insurance, health insurance. It shall be noted that the Government notifies such services as compulsory for an employer under any law.

Q10. Can a person who has taken GST registration voluntarily claim ITC on inputs in stock?

Ans. Yes, as per section 18(2), a person who has taken GST registration voluntarily claim ITC on inputs in stock held on the day immediately after the date of registration.

Q11. I want to know if the principal can avail ITC on inputs sent to the job worker?

Ans. Yes, as per section 20(1) the principal can avail ITC on inputs sent to a job worker for job work.

Q12. I want to know if the principal needs to reverse the ITC on inputs if they are not received back from the job worker within one year?

Ans. Yes, in case if the job worker does not gives back the inputs within the prescribed time limit, the principal has to reverse the credit along with interest on inputs. Howsoever, he can claim the ITC on receipt of inputs.

Q13. Do we include zero-rated supplies at the time of computation of taxable supplies for the purpose of availing ITC?

Ans. Yes, Zero-rated supplies at the time of computation of taxable supplies for the purpose of availing Input Tax Credit.