Input Credit Mechanism is available under the GST Act to the manufacturer, supplier, agent, e-commerce operator, aggregator, or any vendors registered under the GST regime.

You are always eligible to claim INPUT CREDIT for taxes paid on your PURCHASES from the Registered GST Vendor.

How can one claim an input tax credit under the GST regime?

To claim an input tax credit under the GST regime –

• It would be better if you had a proper tax invoice (of purchase) or debit note issued by a GST registered dealer

Note: Where goods are received in certain lots or instalments, credit for inputs will be available against the tax invoice upon receipt of the final/last lot or instalment.

• You should have received the goods or services.

Note: Where the recipient of ITC does not pay the value of service or tax thereon within three months of issue of invoice after availing input tax credit based on the tax invoice, the said input credit will be added to his output tax liability along with applicable interest.

• The tax charged on purchases has been deposited/paid in cash or by claiming the input tax credit.
• The supplier has filed the GST returns.
• Possibly the most path-breaking reform of Goods & Service Tax is that input tax credit is ONLY allowed if your supplier/vendor has deposited the tax that he collected from you. So every input tax credit which the assessee is claiming shall be matched and validated before he can claim it. Therefore, to claim the input tax credit on Purchases, all your suppliers must be GST compliant as well.

There’s some more info you should know about GST input credit.

It is always possible to have unclaimed GST input credit because of tax on purchases being higher than a tax on the sale. In such a scenario, you are allowed to carry forward or claim a refund for the balance.

If tax on inputs/inward supplies > tax on outputs/outward supplies –> carry forward input tax or claim refund.

If tax on outputs/outward supplies > tax on inputs/input supplies –> pay balance.

No interest is given on the input tax balance by the government.

• The input tax credit cannot be availed on purchase invoices more than one-year-old from the tax invoice date.
• Since GST is always charged on both goods and services, input credit can be available on both of them, except those on the exempted or negative list.
• The input tax credit (ITC) is also allowed on capital goods.
• Input tax is not allowed for supplies bought for personal consumption or use.
• No input tax credit (ITC) shall be allowed after the GST return filed for September month in the following year. Such invoice pertains or filing of relevant annual return, whichever is earlier.