ITC Computation: What Is It?
The provisions of the GST Act and Rules, which have also evolved over time, are applicable to ITC computation. In order to calculate ITC and submit it in GST filings, taxpayers must abide by all the requirements set forth in the GST Law. Since the introduction of GST, the fundamental concepts of ITC claim and computation have largely stayed the same. However, several new laws have been adopted that have an impact on the amount, periodicity, and disclosure of ITC. The aforementioned elements require special attention with regard to ITC computation.
Documents that may be used to claim an input tax credit include
The following documents are required for an input tax credit claim by a licenced dealer:
● A tax invoice from an authorized supplier
● A debit note provided by the registered supplier in relation to a previously issued tax invoice.
● An invoice produced by the party who paid the tax under the reverse charge system and who received the goods or services
● In the case of imports, a bill of entry or comparable document.
● A credit note or invoice sent by an input service distributor.
Basic Conditions / Requirements for Claimants of Input Tax Credit (ITC)
● A GST Law registration is required.
● a tax invoice or debit note generated by the registered supplier that details the tax amount
● Receiving of goods or services is required.
● Where items are received in portions or in full, the supplier should have filed returns and made the necessary tax payments to the government.
● When receiving items in lots or installments, ITC may be claimed when receiving the final lot or installment.
● No input tax credit is permitted in cases where the cost of capital goods includes the input tax credit and the tax is depreciated.
● If the input tax credit is not claimed within the allotted time period, it will not be granted.
Limitation on when to claim an input tax credit (ITC)
● Depending on which date is earlier, input tax credit may be claimed against an invoice, debit note or credit note.
● The month of September of the next fiscal year is the deadline for filing GST returns
● Date on which the fiscal year’s annual return was due.
● Any such credit, however, will expire and cannot be claimed even through the GSTR 9 annual return if it has not been claimed by the filing deadline.
● As a result, it is clear that if an input tax credit has not already been claimed through another GST return, it cannot be claimed through GSTR 9 annual return.
Additional Considerations for the GST Input Tax Credit
● A registered person may only use the input tax credit if the invoice contains all the information required by the invoice rules.
● The ITC can be carried forward or used as a refund if the tax paid on inputs is more than the tax paid on output.
● After claiming the input tax credit, the remaining tax must be remitted with the government by the 20th of the following month in GSTR 3.
● ITC claims cannot be made after September of the fiscal year to which the invoice relates or until the earlier of the date on which the annual return is filed.
● In relation to items kept in stock on the day immediately before the date from which he becomes liable to pay tax, an individual who has applied for GST Registration within 30 days after being liable for Registration is eligible to claim ITC.
● A person who switches from the composition scheme to the normal scheme under Section 10 is entitled to an ITC for stock and capital goods held on the day before he becomes obliged to pay tax as a regular taxpayer.
● The person making the exempt supply of goods or services, or both, shall be entitled to claim ITC in respect of goods kept in stock related to the exempt supplies. Additionally, he will be permitted to claim credit for capital items utilized solely for such an exempt supply.
● The unused ITC may be transferred in the event that a registered person’s constitution changes due to a sale, merger, demerger, etc.
● The transferee shall be permitted to receive the unused ITC.
● You can also claim an input tax credit for the GST you paid via the reverse charge mechanism.
● GST paid on Capital Goods is also eligible for the Input Tax Credit.
● If depreciation has been claimed on the tax component of the capital goods, no ITC will be granted.
● The GSTR 2 will automatically be filled in with information about the GST paid on inputs. The information regarding GST paid on Inputs on a Reverse Charge basis would not, however, be automatically filled in. The GSTR 2 will need to manually contain the information of GST paid on the Reverse Charge Basis.