Restriction to avail ITC under CGST

Restriction to avail ITC under CGST

Restriction to avail ITC under CGST includes Capital goods,Works contract service,Motor Vehicles,Outdoor catering and certain other services.

SECTION 16(2) (aa)-RESTRICTION TO AVAIL ITC UNDER CGST

Section 16 of The Central Goods and Services Tax, Act, 2017 (“CGST Act, 2017”) provides that subject to such conditions and restrictions as may be prescribed and, in the manner, specified in section 49, be entitled to take credit of input tax charged,

on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

Input Tax Credit (ITC) forms the backbone of GST. It is imperative to streamline seamless flow of credit and any impending issues under ITC must be resolved at the earliest for making GST a Good and Simple Tax.

Entire GST law is based upon seamless ITC but in practice it is totally diverse scenario. Any action of denying ITC would lead to cascading effect and kills the soul of GST.

Though, availing of ITC forms one of the most critical activity for every business to settle its tax liability, however, claiming ITC is a mammoth task.

What is Input Tax Credit in GST?

Manufacturer, E-commerce operator, supplier, agent, and any other legal entity who is involved in the input credit mechanism, will eligible for claiming input credit for the tax paid by  the payer on a purchase.

In simple terms input credit in GST means the tax payer can claim for Input Tax Credit for the amount they paid at the time of purchase.

ITC rules under GST

  • Suppliers can only claim for the input credit based on last lot, in case of inputs are received in lots.
  • Suppliers need to provide documents related to the bill of entry or any similar documents for availing Input Tax Credit.
  • Must pay the supplier the value of the products or services, plus tax, within 3 months of the invoice’s date of issue, or the sum would be forfeited. The amount of credit available to the recipient would be added to it.

Conditions for availing ITC:

Section 16(2) of CGST Act, 2017 provides that no registered person shall be entitled to input tax credit in respect of any supply of goods or services or both to him unless,–

  • he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed;
  • he has received the goods or services or both;
  • the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of ITC admissible in respect of the said supply.
  • he has furnished the return.

The CBIC vide Notification No. 39/2021–Central Tax dated December 21, 2021 notified the below mentioned amendments made vide Section 109 of the Finance Act, 2021 w.e.f. January 01, 2022:

It is pertinent to mention that the aforesaid is one more condition regarding entitlement of ITC. It provides an additional condition to claim ITC based on GSTR-2A and newly introduced GSTR-2B, i.e.,

ITC on invoice or debit note can be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies (FORM GSTR-1) as specified in Section 37 of the CGST Act, 2017 and such details have been communicated to the recipient of such invoice or debit note.

Hence, w.e.f. January 01,2022, following 5 (five) conditions need to be satisfied under Section 16(2) of the CGST Act, 2017 for availing GST ITC on inward supplies of goods or services or both:

  • The recipient is in possession of tax invoice or debit note issued by supplier;
  • The details of above-mentioned invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient in the manner specified under section 37 of the CGST Act, 2017;
  • The recipient has received goods or services or both;
  • The tax charge in respect of such supply has been actually paid to the Government; and
  • The recipient has furnished the return under section 39 of the CGST Act, 2017.

Rule 36(4): No relevance of restriction mentioned in Rule 36(4) of the CGST Act, 2017

W.e.f. 01st January, 2022 there is no relevance of restriction on availment of ITC under Rule 36(4).

Don't forget to share this article :-

Stay Updated With Our Blogs!

Explore more of our blogs to have better clarity and understanding
of the latest corporate & business updates.

Why People Choose Our Services ?

Free Legal Advice

We provide free of cost consultation and legal advice to our clients.

Tech Driven Platform

All our services are online no need you to travel from your place to get our services.

Grow your business

Experts Team

We are a team of more than 15+ professionals with 11 years of experience.

Transparent pricing

There are no hidden & extra charges* other than the quote/invoice we provide.

100 % Client Satisfaction

We aim that all our customers are fully satisfied with our services.

On-Time Delivery

We value your time and we promise all our services are delivered on time.

Why Trust legal Suvidha?

People Who loved our services and what they feel.

In this Journey of the past 10+ years, we had gained the trust of many startups, businesses, and professionals in India and stand with a 4.9/5 rating in google reviews.

Rajesh Srivastava
Rajesh Srivastava
Startup CEO
Read More
Great services and expertise. Highly recommended, Quick work and provided good support for the entire process. Made things very easier for us and I got my first ever Trademark for my product in just no time. I recommend their services to all the Startups for a hassle-free registration and other services. Again Thank You So Much Team Legal Suvidha... Good work...
Vijaya
Vijaya
Employee
Read More
Excellent service and has been very timely in response. They are very patient too and guided us with the right steps even though we approached them with very few days left before the deadline. I highly recommend them to other startups who need legal advice and do all the paperwork at the year-end. And we would approach them for all our future requirements as well.
Krish Mundarath
Krish Mundarath
Businessman
Read More
We highly recommend them. Best in class services. Thank you for helping me through the process and for prompt replies. All the Best in your Endeavors. We highly recommend them. Best in class services. Thank you for helping me through the process and for prompt replies. All the Best in your Endeavors. I will surely consider them for future work.
Inamul Hashmi
Inamul Hashmi
Businessman
Read More
Legal Suvidha filed my GST, Income Tax Returns for my business Happy by their service. They are Excellent, cost effective, efficient, co-operative & Genuine service providers keep up the good work in the future. Thank you for shaping my business in the right direction. I would suggest others to take up their services they are better than other competitions present in the market.
Previous
Next

Our Partnerships & Collaborations

Contact us and grow your business

Legal Suvidha App

Now all Professional Services in a Single Click !

Now get all the services required for your business in a single app.

Subscribe to our newsletter & grow your business

Subscribe To Our Newsletter .

Sign up to receive email updates on new product announcements, special promotions, sales & more.