GST Input Tax Credit Reconciliation

What is input tax credit?

The input tax credit is the central tax (CGST), state tax (SGST), integrated tax (IGST), or cess that is paid by a person and has a GST registration on the supply of goods or services. GST input tax includes the tax that is paid on a reverse charge basis and the GST charged on the import of goods. But input tax does not include the tax paid on the composite motor scheme.

The input tax credit is the tax paid by a business on the purchase and this is used to reduce the liability when a sale is made. The involuntary loss is based on the services that are availed on the basis of the supply chain until it reaches the consumer.

Every person with a GST registration in the supply chain (other than part in control), collects the GST tax, claims the input tax credit on purchases. It would double taxation and increase the cost of goods or services. This mechanism is provided to set off tax paid on purchases (inputs) against the tax collected on sales (output). Input tax credit is used in the manufacturing, supply, and sale of goods or services.

Eligibility criteria for Input tax credit

Who can claim input tax credit?

The input tax credit can be claimed by a person who is registered under GST only if he is meeting the conditions that are mentioned below:

1. The input tax credit can be claimed only by a person that has a GST registration and has filed the GST returns.
2. The dealer should possess the tax invoice or the debit note that is issued by the supplier of the goods or the input services.
3. Goods and supplied goods or services on both should be received.
4. The supplier has made the GST payment that is charged to the government concerning such supply.
5. In case the goods are received in installments the input tax credit can be claimed only when the last lot is received.
6. No input tax credit is allowed if depreciation has been claimed on the tax component of a capital good.

Documents required for claiming GST Input tax credit

What documents are required for claiming the GST input tax credit?

As a registered taxable person the input tax credit can be claimed on basis of the following documents:

1. An invoice that is issued by the supplier of goods or services.
2. A debit note that has been issued by the recipient of the goods and services supplied by an unregistered dealer. Such supply cannot be made under an invoice mechanism. This mechanism is used in case of tax payment by an unregistered person in a registered person.
3. A bill of entry that is issued by the supplier of the tax or fee charged in lieu from the payable consisting of customs authorities.
4. A supply of services invoice that is issued by an input distributor as per the rules under the GST Act.
5. A supply bill by a dealer that is opting for a composition scheme as an exporter or a supplier of the non-goods goods.