Conditions for claiming ITC under GST

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Every registered person is allowed to take tax credit for input tax. Input credit helps in determining the correct amount of working capital at any given point of time. This is highly critical information from business liquidity standpoint.

  • Meaning of input tax credit
Input tax in relation to a registered person, means the central tax, state tax, or union territory tax charged on any supply of goods or services or both made to him, for any supply of goods and/or services to him or purchases he makes, which are used or are intended to be used, for the furtherance of his business. it does not include the tax paid under the composition levy.

  • What are the conditions for claiming input tax credit?
Sec 16 of CGST act provides some conditions, input tax credit can only be claimed after fulfilling these conditions: The said goods or services or both are used or intended to be used in the course or in the furtherance of business.

Possession of tax-paying document

Every Registered person is in possession of tax-paying document such as tax invoice or debit note or a bill of entry or such other tax paying documents.

Receipt of goods or services

Registered person has received the goods/services. Goods that have been received by an agent of such person or by any other person on behalf or direction of the registered person, it will also be considered to be receipt of goods.

Furnishing of the GST return in form GSTR-3B

Every registered person has to file GSTR-3B 

Tax charged actually paid to government

The tax charged in respect of such supply has been actually paid to the government by the supplier either in cash or through utilization of input tax credit.   

Payment is not made within a period of 180 days from the date of invoice

If a registered person has not made the payment to the supplier, even in that case tax credit is not allowed.

Goods received in lots or installment

In this case, tax credit shall be allowed only when last installment has been received.

No ITC if depreciation is claimed on tax component of capital asset

If depreciation has been claimed on value of capital assets along with tax components, the input tax credit on said component shall not be allowed and if registered person has taken tax credit of input tax it shall not be added to cost of capital assets.

Furnishing of return

ITC cannot be availed after the due date of filing return for September month of next financial year or on furnishing the relevant annual return whichever is earlier.


  • Items on which credit is not allowed
    1. Motor vehicles and conveyances except the below cases
    2. Such motor vehicles and conveyances are further supplied i.e. sold
    3. Transport of passengers
    4. used for imparting training on driving, flying, navigating such vehicle or conveyances
    5. Transportation of goods
    6. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery
    7. But if the goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available
    8. Example: Mr. Dev purchases cosmetic creams to supply it to a customer, then credit of ITC paid on purchases will be allowed.
    9. Sale of membership in a club, health, fitness centre.
    10. rent-a-cab, health insurance and life insurance except the following:
      1. Government makes it obligatory for employers to provide it to its employees
      2. goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available
      3. Example: Mr. Dev takes the service of rent-a-cab to supply to Mr. Manoj, a customer, then the credit of ITC paid on purchases will be allowed.travel benefits extended to employees on vacation such as leave or home travel concession.
    11. Works contract service for construction of an immovable property (except plant & machinery or for providing a further supply of works contract service)
    12. Goods and/or services for the construction of an immovable property whether to be used for personal or business use
    13. Goods and/or services where tax have been paid under composition scheme
    14. Goods and/or services used for personal use
    15. Goods or services or both received by a non-resident taxable person except for any of the goods imported by him.
    16. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
    17. ITC will not be available in the case of any tax paid due to non-payment or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods. 


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