Section – 2(55) - "input tax" in relation to a taxable person, means the IGST, including that on

import of goods, CGST and SGST charged on any supply of goods or services to him and includes
the tax payable under sub-section (3) of section 8,
Section – 2(56) - “input tax credit” means credit of ‘input tax’ as defined in sub-section (55)
Availment of ITC- Availment of ITC means a registered taxpayer can claim credit for the tax paid
on purchases (inputs, capital goods, and input services) and use it to offset output tax liability
Utilisation of ITC- The taxpayer can deduct the Input Tax paid from the Output Tax payable and
pay the difference to the government.
Electronic Credit Ledger - This ledger is maintained on the GST portal and reflects the Input Tax
Credit (ITC) that a taxpayer is entitled to claim
Purpose: Used to offset GST liability (output tax) on sales against the available ITC on purchases
Electronic cash ledger-This ledger is also maintained on the GST portal and reflects the cash
deposits made by the taxpayer.
Purpose: Used to pay taxes (output GST, interest, penalty, late fees, etc.) that cannot be paid
through the credit ledger. (CGST,SGST,IGST,UTGST, interest, penalty, fee, and others.)
 Input tax credit
Section – 16 – Eligibility and conditions for taking input tax credit
Section – 17 – Apportionment of credits and blocked credits
Section – 18 – Availability of credit in special circumstances
Section – 19 – Recovery of Input Tax Credit and Interest thereon
Section – 20 – Taking ITC in respect of inputs sent for job-work
Section – 21 – Manner of distribution of credit by Input Service Distributor
 Section 16 Eligibility and conditions for taking ITC
Section (16) Provision details
16(1) - A registered person can claim credit TC is available on tax paid on inputs, capital goods, and input
Eligibility for of tax paid on inward supplies services, except for blocked credits under Section 17(5).
ITC (goods/services) used for business

16(2) - A taxpayer can avail ITC only if: a) Possesses a valid tax invoice, debit note, or other prescribed
Conditions for document.
Availing ITC (b) Has received the goods or services.
(c) Tax has been paid to the government by the supplier.
(d) Has filed GSTR-3B (monthly/quarterly return)

Provided If goods are received in parts, ITC ITC cannot be claimed on partial receipt of goods
can be claimed only after the last lot
is received.
Proviso The recipient must pay the supplier If payment is not made within 180 days, ITC must be reversed
within 180 days from the invoice and can be reclaimed upon payment.
date.
16(3) - No ITC Where the registered person has The ITC on the said tax component shall not
on Tax Paid claimed depreciation on the tax be allowed
Under Certain component of cost of capital goods
Circumstances under IT Act

16(4) - Time ITC must be claimed by the earlier (a) Upto30th November of the following
Limit to Avail of: financial year.
ITC (b) Filing of the annual return (GSTR-9) for
that financial year.
 Section (17
Apportionment Provision Details
and bloked credit)

17(1) - ITC for ITC is available only to the extent of ITC on inputs, input services, and capital goods
Taxable & taxable supplies if a taxpayer deals in used exclusively for exempt supplies is not
Exempt Supplies both taxable and exempt supplies. available.

If a taxpayer uses inputs/input services

17(2) -
for both taxable & exempt supplies,
Apportionment of
ITC must be proportionately reversed
ITC
for exempt supplies.
 (a) Exempted goods/services under Section
2(47).
17(3) - Exempt
(b) Transactions covered under Schedule III
Supplies
"Exempt supplies" include: (e.g., sale of land, building, actionable claims
Definition for
like lottery, betting, etc.).
ITC
(c) Value of securities, sale of land, and building
where completion certificate is received.

(a) Claim full ITC on taxable supplies & reverse

proportionately for exempt supplies.
17(4) - Banking Banks, NBFCs, and financial
(b) Avail only 50% ITC on all inputs & input
& Financial institutions have two options for
services (capital goods excluded). Option once
Institutions ITC ITC availment:
exercised shall not be withdrawn during the
remaining part of the F.Y.
 (a) Motor vehicles (seating capacity not morethan13 including
driver), unless used for taxable supplies (further supply,transport,
training).
(b) Vessels, aircraft, unless used for further supply,transport goods
person, training,
(c) Food, beverages, outdoor catering, beauty treatment, health
services, etc. (except when used for making taxable outward supply).
17(5) - Blocked
ITC is not available for certain (d) Membership fees for clubs, fitness centers, etc.
Credits (ITC Not
goods & services. (e) Rent-a-cab, life insurance, and health insurance (except when
Allowed)
required by law).
(f) Works contract services for immovable property (except for plant
& machinery).
(g) Goods lost, stolen, destroyed, written off, or given as gifts/free
samples.
(i) Any tax paid due to fraud, suppression, misstatement, etc. under
Sections 74, 129, 130.
 Section 18 of CGST Act, 2017 – Availability of ITC in Special Cases
Section Provision Eligibility & Conditions

A person who becomes liable for GST (e.g., turnover exceeds

18(1)(a) - New threshold) can claim ITC on inputs, semi-finished, and finished ✅ Must apply for registration within
Registration goods held in stock on the day immediately preceding the date 30 days from the date of liability.
from which he becomes liable to pay tax

18(1)(b) - A person who voluntarily registers under GST, even if not liable,
✅ No time limit for apply for
Voluntary can claim ITC on inputs, semi-finished, and finished goods in
registration.
Registration stock on the day preceding the date of registration.
 A taxpayer switching from Composition Scheme
✅ ITC on capital goods is also
18(1)(c) - Composition to to Regular Scheme can claim ITC on inputs,
allowed (reduced by 5% per
Regular Scheme semi-finished, and finished goods held in stock
quarter from purchase date).
on the day before the switch.

A person whose exempt supplies become taxable

✅ ITC on capital goods is also
18(1)(d) - Exempt to can claim ITC on inputs, semi-finished, and
allowed (subject to proportionate
Taxable Supply finished goods held in stock on the day before
reduction).
exemption is withdrawn.
18(2) - Time Limit for ITC ITC under Section 18(1) must be claimed ❌ If not claimed within 1 year,
Claim within 1 year from the invoice date. ITC is lost.
A taxpayer shifting to Composition Scheme or
18(3) - ITC Reversal on ✅ ITC on capital goods is
making only exempt supplies must reverse ITC
Conversion to Exempt or reversed based on useful life (5%
on inputs, semi-finished, finished goods, and
Composition Scheme per quarter deduction).
capital goods.

If capital goods were exclusively used for

18(4) - ITC on Capital exempt supplies or composition scheme, and
✅ Only proportionate ITC is
Goods (Exclusive Use for later used for taxable supplies, ITC can be
available.
Exempt or Composition) claimed after reducing 5% per quarter from the
date of purchase.
 If capital goods are sold or disposed of, ITC must ✅ If capital goods are scrapped,
18(5) - ITC on Sale of
be reversed based on the higher of: (a) ITC reduced GST must be paid at the applicable
Capital Goods
by 5% per quarter, rate.

 Filing of Electronic declaration of Stock-Form ITC-01 within 30 days from the day when the registered person
becomes eligible to claim ITC.
• Certification by CA/Cost Accountant- claimed ITC exceeds Rs. 2 lakh needs to be certified.
 Section 19 (Taking ITC i .r.o inputs and capital goods sent for Job work)
Sub-section Provision Key Conditions &
Details

19(1) - ITC on Inputs Sent to Job Worker Principal (manufacturer) ✅ ITC can be
can send inputs to a job claimed.
worker be allowed to
claim ITC.
19(2) - ITC on Inputs Sent direct to Job Worker Principal (manufacturer) ITC can be claimed
can send inputs to a job even if goods are
worker directly allowed to sent directly to the
claim ITC job worker
19(3) - Time Limit for Inputs sent to the job worker must ❌ If not received within 1 year, it shall be
Receiving Inputs Back be received back within 1 year from deemed that such input had been supplied
the date of sending. by the principal to Job worker on the day
when the said input were sent.

19(4) - ITC on Capital Goods The principal can send capital goods ✅ ITC is allowed.
Sent to Job Worker to the job worker and claim ITC.

19(5) - ITC on Capital Goods The principal can send capital goods ✅ ITC is allowed even if goods are sent
Sent to Job Worker direct to the job worker directly to the job worker.
19(6) - Time Limit Capital goods must be received back ❌ If not received within 3 years, it shall be
for Receiving Capital within 3 years from the date of sending. deemed that such input had been supplied by
Goods Back the principal to Job worker on the day when
the said input were sent.

19(7) - Moulds, Jigs, No time limit applies for moulds, jigs,

Fixtures & Tools dies, fixtures, and tools sent to the job
worker.
Section 20 of the CGST Act, 2017 – Manner of Distribution of ITC by Input Service Distributor (ISD)
Eligibility for ITC Distribution:
o The Input Service Distributor (ISD) can distribute Input Tax Credit (ITC) of input services to its
branches/units having the same PAN.
Eligible Credit for Distribution:
o Only ITC related to input services can be distributed (not on inputs or capital goods).
Manner of Distribution:
o ITC must be distributed in proportion to the turnover of recipient units in the previous financial year.
o If a unit is new, current year turnover is considered.
Conditions for Distribution:
o The credit must be distributed through a document containing details of credit allocated to each unit.
o The document should be clearly marked as "ISD Credit Distribution".
The amount of the credit distributed shall not exceed the amount of credit available for distribution
Distribution of IGST, CGST, and SGST:
Section 21 of CGST Act, 2017 – Mismatch of ITC Distributed by ISD

If the Input Service Distributor (ISD) distributes excess ITC or distributes ITC incorrectly to any
branch/unit, then:
1. Excess ITC received by any branch/unit must be recovered under Sections 73 or 74 (dealing
with demand and recovery).
[Link] unit receiving excess credit will be liable to pay back the wrongly availed ITC along with
interest.
3. If ITC is short-distributed, the ISD can adjust it in future distributions