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 IGST charged on the import of goods. But, input tax does not include the tax paid on the composite taxation scheme.
The input tax credit is the tax paid by a business on the purchase and this tax is used to reduce the tax liability when a sale is made. The taxation levy is based on the value that is added at each stage of the supply chain until it reaches the consumer.
The Goods and the Service Tax Act is levied on the goods and the services based on the principle of value addition. To negate the cascading effect of the tax liability that is paid on the procurement of the raw materials, consumables, plants, and machinery, etc. This element of offsetting the tax liability is called the input tax credit.
Every person with a GST registration in the supply chain takes part in control, collects the GST tax, and remitting the amount that is collected. To avoid double taxation and the cascading effect of the tax input credit is provided to set off tax paid on the procurement of the raw materials, consumables, goods, or services that are used in the manufacturing, supply, and sale of goods or services.
The business can achieve neutrality using the input tax credit mechanism in the incidence of tax and ensure that the input tax element is not entering into the cost of production or the cost of supply of goods and services.
The prerequisites for taking the input tax credit are as follows:
Only a person who is registered under GST is entitled to take credit of tax paid on inward supplies, i.e., purchases of goods or services or both used in the course of furtherance of business. Means Unregistered suppliers are not allowed to take input tax credit for the amount of tax paid on inward supplies of goods or services or both.
There are some conditions prescribed under the GST Act for availing the input tax credit. Some of the essential conditions are as under:-
The input tax credit is available to a person who is registered including the input service distributor, based on any of the following documents, namely
The input tax credit shall be available to the registered person only if:-
A registered person cannot avail the ITC until he does not receive the goods. In case of “bill to ship to” model, where the goods are delivered to a third party on the direction of the registered person who purchased the goods from the supplier then it shall be deemed that the person receiving the goods is a registered person.
For availing the input tax credit, the registered person who charged the tax in respect of such supply has been paid to the government. The payment can be made either in cash or through utilizing the input tax credit.
The input tax credit can be reversed certain circumstances which are mentioned below:
A registered person can only claim the credit or refund of ITC through the return, so he has to file the return as per section 39.
If the registered person has claimed depreciation on the cost of capital goods under the provisions of the Income Tax Act, 1961, then the ITC shall not be allowed on the tax component. Thus we can say that the government will not provide you the double benefit on the tax components. As per the government, you cannot claim both the depreciation and ITC as per GST law on tax component at a time. Means either you can claim depreciation on tax component or ITC of such tax paid.
According to Section 16 of the CGST Act, 2017, A registered person is entitled to take the input tax credit for any debit note or invoice for the supply of goods or services or both before:
There are three types of taxes available under GST, i.e., CGST, SGST, IGST. Moreover, the same is available to take the credit on input. Their credit can only be set off for specific purposes. The following are the restriction on utilizing credits of various input taxes available:
The input tax credit concerning inputs or input services, which are being
| Type of Conveyance | Distance | E-way bill |
|---|---|---|
| Other than Over dimensional cargo | Less than 100 km | 1 day |
| For every additional 100 km and thereof | Additional 1 day | |
| For Over dimensional cargo | Up to 20 km | 1 day |
| For every additional 20 km and thereof | Additional 1 day |
Unregistered Transporters will be issued Transporter ID on enrolling on the e-way bill portal after which Eway bills can be generated.
| Who | When | Part | Form |
|---|---|---|---|
| Every Registered person under GST | Before movement of goods | Fill Part A | Form GST EWB-01 |
| Registered person is consignor or consignee (mode of transport may be owned or hired) OR is recipient of goods | Before movement of goods | Fill Part B | Form GST EWB-01 |
| Registered person is consignor or consignee and goods are handed over to transporter of goods | Before movement of goods | Fill Part B | The registered person shall furnish the information relating to the transporter in Part B of FORM GST EWB-01 |
| Transporter of goods | Before movement of goods | Generate e-way bill on basis of information shared by the registered person in Part A of FORM GST EWB-01 | |
| An unregistered person under GST and recipient is registered | Compliance to be done by Recipient as if he is the Supplier. | 1. If the goods are transported for a distance of fifty kilometers or less, within the same State/Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01. 2. If supply is made by air, ship or railways, then the information in Part A of FORM GST EWB-01 has to be filled in by the consignor or the recipient |
In the following cases it is not necessary to generate e-Way Bil:
Inter-State movement of goods has seen rise in numbers of generation of eway bills ever since its implementation began from 1st April 2018. State-wise implementation of e-way bill system has seen a good response with all the States and Union Territories joining the league in the generation of eway bills for movement of goods within the State/UT.
However, reliefs have been provided to people of few States by way of exempting them from eway bill generation in case of monetary limits falling below threshold amount or certain specified items. For Instance, Tamil Nadu has exempted people of its State from the generation of eway bill if the monetary limit of the items falls below Rs. One Lakh. To know more of such reliefs for other States/UTs, visit our page on state-wise e-way bill rules and threshold limits or alternatively check the respective commercial tax websites for each of such States/UTs.
An e-way bill is valid for periods as listed below, which is based on the distance travelled by the goods. Validity is calculated from the date and time of generation of e-way bill-
| Type of conveyance | Distance | Validity of EWB |
|---|---|---|
| Other than Over dimensional cargo | Less Than 200 Kms | 1 Day |
| For every additional 200 Kms or part thereof | additional 1 Day | |
| For Over dimensional cargo | Less Than 20 Kms | 1 Day |
| For every additional 20 Kms or part thereof | additional 1 Day |
When the below-mentioned goods are being transported E-way bill is not required :
In case of Transport of goods from customs port, airport, air cargo complex, and land customs station to an inland container depot or a container freight station for clearance by Customs, E-way bill is not required.
When a non-motorized conveyance is transporting goods, E-way bill generation is not required.
When following goods are being transported, the e-way bill is not required to be generated;