CGST §16 — Eligibility and conditions for Input Tax Credit (ITC)

ITC can be claimed ONLY if FIVE conditions are met: (1) possession of tax invoice / debit note, (2) goods or services actually received, (3) tax has been paid by supplier to Government, (4) recipient has filed GSTR-3B, (5) invoice appears in GSTR-2B. Time limit: earlier of 30-Nov of next FY OR filing of annual return. Supplier must be paid within 180 days else ITC is reversed.

Key points

• §16(1) entitles every registered person to take CREDIT of input tax charged on any supply of goods or services USED OR INTENDED TO BE USED in the course or furtherance of business.
• §16(2) imposes FIVE conditions, ALL of which must be satisfied: (a) possession of a TAX INVOICE or debit note issued by registered supplier;
• (b) the registered person has actually RECEIVED the goods or services or both — receipt of goods through bill-to-ship-to model is permitted;
• (c) subject to §41 / §43A, the TAX charged in respect of such supply has been ACTUALLY PAID to the Government either in cash or through utilization of admissible ITC by the supplier;
• (d) the recipient has FURNISHED THE RETURN under §39 (i.e. GSTR-3B);
• (e) NEW [Finance Act 2021 → Notification 39/2021-CT effective 1-Jan-2022]: the details of invoice / debit note have been FURNISHED BY THE SUPPLIER in his statement of outward supplies (GSTR-1) and SUCH DETAILS HAVE BEEN COMMUNICATED to the recipient (i.e. appear in GSTR-2B).
• §16(2) SECOND PROVISO: where the recipient fails to pay the SUPPLIER the amount towards the value of supply PLUS tax within 180 DAYS from the date of issue of invoice, the ITC availed must be added back to output tax liability along with interest under §50.
• Once paid, ITC can be re-availed (no time limit on re-availment per Notification 38/2023-CT effective 1-Oct-2023).
• §16(4) [Finance Act 2022 amended;
• FA 2024 further amended w.r.t.
• revocation cases]: ITC cannot be availed AFTER 30-NOVEMBER of the following financial year, or furnishing of the annual return, WHICHEVER IS EARLIER.
• Special relief for FY 17-18, 18-19, 19-20, 20-21 via §16(5) inserted by FA 2024 — deadline extended to 30-Nov-2021 for those years.

Reference: §16 CGST Act 2017