• ITC can be claimed of any goods/services which are used or intended to be used for furtherance of business.

• Even if goods/service are purchased is used in business or intended to be used in business but still you have to comply the following conditions to claim ITC:-
• (i) You must have Tax Invoice or debit note. (This Tax Invoice or debit note should be filed by supplier in his GSTR-1).
• (ii) Goods/Service should be received to person.

• (iii) Tax Charged/added into invoices must be paid by supplier to the Government either through Input Tax Credit ( ITC) or through Cash (ensure supplier is genuine person and has filed GSTR-3B and paid the taxes to Government)

• (iv) Person has filed the GSTR-3B.

Along with above condition If you have purchased goods/services and have not made payment to your supplier with-in 180 days from the Invoice date then you have to reverse ITC in GSTR-3B along with Interest liability. And after that whenever you make payment to that supplier, then you are eligible to reclaim ITC again in GSTR-3B.  

if any ITC left to claim in GSTR-3B of current financial year then Input Tax Credit (ITC) can be claimed up to 30^th November of next year or before filing of GST Annual Return.

Common Input Tax Credit reversal

Note-1: If you have purchased goods which are used for personal and for business purpose then Input tax credit would be allowed only to the ratio of business purpose used.

Note-2: If any goods/services purchased and ITC claimed and this item it is used partly for sale of Taxable items goods supply and partly for exempted supply then ITC amount would be allowed proportionate to the taxable item supply only.

Exempted supply would cover with respect to above:-

• Supply of goods/services where recipient of goods/service will pay the taxes.
• Transaction in Securities
• Sale of Land
• subject to clause (b) of paragraph 5 of Schedule II,
• Sale of building

Blocked Credit( ITC of following goods/services would not be allowed or allowed with restriction):–

Even if items would be used for purpose of business or intended to be used for business still ITC will not be allowed on following goods as per the GST law introduced, so even if these ITC is reflecting in GSTR-2A/2B, you still not be allowed to take these credit:-

• Motor Vehicle for transportation of person  whose seating capacity is up-to 13 person.( Like CAR, Bike, Sooty,  etc. purchased for business but still ITC would not be allowed)

Note: ITC would be allowed if this Motor Vehicle is

Purchased by motor vehicle dealer or

Used for Transportation of passengers or

Purchased by Motor driving school

• Vessels and aircraft

Note-1: ITC on vessels or aircraft allowed to only if this is used for making following Taxable supplies

• Purchased by dealer who deals in vessel & aircraft business
• Used for transportation of passengers
• Used for imparting training on navigating such vessels; or
• Used for Imparting training on flying such aircraft;

Used for transportation of goods;

ITC would not be allowed for following services related to motor vehicle

• General Insurance
• Servicing
• Repair & Maintenance  

Allowed only if this is used by respective businesses owners as discussed in Note-1 above

• Food and beverages

Outdoor catering

Beauty Treatment

Health Services

Cosmetic & plastic Surgery

Leasing

Renting and hiring of motor vehicles

Vessels or aircrafts

Life Insurance

Health Insurance

In above cases ITC not allowed to a normal GST registered owner but would be allowed to person who is dealing in business of same nature or category of business.

(i) Membership of a club, Health and fitness centre; and

(ii) Travel benefits extended to employees on vacation such as leave or home travel concession

Note: ITC on above is allowed only these services provided to employee is under obligation of employment.  

• works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

• Goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation.- For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10( composition dealers are not allowed to take ITC);

(f) goods or services or both received by a non-resident taxable person except on goods imported by him;

(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013);]

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

(i) any tax paid in accordance with the provisions of sections 74, 129 and 130. (6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.

Explanation.- For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-

• land, building or any other civil structures;
• telecommunication towers; and
• pipelines laid outside the factory premises.

This post is for educational purpose and readers should take decision at their own understanding.

Author

CA. Shobhit Kesharwani

Which details should be in Tax Invoice:

Sellers details
Seller Name
Address, Logo
GST Number
Mobile number

Buyers details
Buyers Name
Buyers Address with Pin code
Mobile number
GST Number if available

Other details like

Details of Item Sold or services provided
HSN Code column for goods or SAC code for services
Quantity of item sold
Quantity measure units like pcs/numbers/kg
Taxable Value (Total Value before Tax)
GST Rate and Tax Amount
Total Invoice Value (Final Value)
Invoice number and date
Vehicle number if goods transported through vehicle
Signature of supplier
Payment condition If any
If registered in MSME, then MSME Registration Number

Few Important points to be consider while issuing invoice:

1.If goods are delivered to some other place which is different from buyer address, then Invoice should contain details of ship to address, in which place & person details should be mentioned where goods are actually delivered.

2.Invoice Serial number should be unique in every financial year..every year from 1st April, Invoice number should be start with no. 1 along with prefix or suffix so that anyone after seeing Invoice, anyone may know that this invoice belongs to this financial year. Prefix or suffixe may be 2024-25 or 24-25 or etc.

3.Invoice should be issued when goods are sold or services are deliverered.

4. An exempted dealer who are dealing in GST exempted goods would not issue Tax Invoice, he will issue Bill of Supply.

5.Invoice should be consecutively serially numbered and it can be issued in multiple series.

6.Tax Invoice should be issued in 3 copies/triplicate.
First copy should be issued to buyer
Second copy should be for transporter who will deliver goods to customer place
Third copy would be with supplier
If there is no transporter then it must be issued in 2 copies.

Author

CA.Shobhit Kesharwani