Section 16 of CGST Act

Section 16 of CGST Act

Eligibility and conditions for taking input tax credit

 

Section 16(1)

 

Every registered person shall,

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.

 

Section 16(2)

 

Notwithstanding anything contained in this section,

no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless: -

 

(a) he is in possession of a tax invoice or

debit note issued by a supplier registered under this Act,

or such other tax paying documents as may be prescribed;

 

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;

{Inserted by the Finance Act, 2021 w.e.f 1-1-2022.}

 

(b) he has received the goods or services or both.

 

Explanation: -

For the purposes of this clause,

 it shall be deemed that the

registered person has received the goods

where the goods are delivered by the supplier

to a recipient

or any other person on the direction of such registered person,

whether acting as an agent or otherwise,

before or during movement of goods,

either by way of transfer of documents of title to goods or otherwise;

(Explanation has been Substituted by CGST Amendment Act 2018, w.e.f. 1-2-2019)

 

New Explanation

 

Explanation:-

For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services:-

 

(i) where the goods are delivered

by the supplier to a recipient or any other person

on the direction of such registered person,

whether acting as an agent or otherwise,

before or during movement of goods,

either by way of transfer of documents of title to goods or otherwise;

 

(ii) where the services are provided

by the supplier

to any person

on the direction of and on account of such registered person.

 

(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;

{Inserted by Finance Act, 2022, w.e.f. 1-10-2022}

 

(c) subject to the provisions of section 41 or Section 43A

the tax charged in respect of such supply has been actually paid to the Government,

either in cash or through utilisation of input tax credit

admissible in respect of the said supply; and

 

(d) he has furnished the return under section 39

(Substituted for “Section 41” by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. a date yet to be notify.

Word “or section 43A” Omitted by Finance Act, 2022, w.e.f. 1-10-2022)

 

Provided that where the goods against an invoice are received in lots or instalments,

the registered person shall be entitled to take credit

upon receipt of the last lot or instalment

 

Provided further that where a recipient fails to pay to the supplier of goods or services or both,

other than the supplies on which tax is payable on reverse charge basis,

the amount towards the

value of supply along with tax payable thereon

within a period of one hundred and eighty days

from the date of issue of invoice by the supplier,

an amount equal to the input tax credit availed by the recipient

shall be paid by him along with interest payable under section 50 “added to his output tax liability, along with interest thereon” in such manner as may be prescribed

{Substituted for “added to his output tax liability, along with interest thereon” by the Finance Act, 2023, w.e.f. 1-10-2023}

 

Provided also that the recipient

shall be entitled to avail of the credit of input tax

on payment made by him to the supplier of the amount

towards the value of supply of goods or services or both

along with tax payable thereon.

{Words “to the supplier” inserted by the Finance Act, 2023, w.e.f. 1-10-2023.}

 

 Section 16(3)

 

Where the registered person has claimed depreciation

on the tax component of the cost of capital goods and plant and machinery

under the provisions of the Income-tax Act, 1961 (43 of 1961),

the input tax credit on the said tax component shall not be allowed.

 

Section 16(4)

 

A registered person

shall not be entitled to take input tax credit in respect of any

invoice or

debit note

for supply of goods or services or both

after the thirtieth day of November [“due date of furnishing of the return under section 39 for the month of September”]

following the end of financial year to which such invoice or invoice relating to such debit note pertains

or furnishing of the relevant annual return,

whichever is earlier:

{Substituted for “due date of furnishing of the return under section 39 for the month of September” by the Finance Act, 2022, w.e.f. 1-10-2022

Words “invoice relating to such” omitted by the Finance Act, 2020, w.e.f. 1-1-2021}

 

“Provided that the registered person

shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September 2018

till the due date of furnishing of the return under the said section for the month of March 2019

in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18,

the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March 2019.”

 

[Inserted by CGST (Second Removal of Difficulties) Order 2018, w.e.f. 31-12-2018].

 

Section 16(5)

 

Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November 2021.

 

Section 16(6)

 

Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,-

 

(i) filed upto thirtieth day of November following the financial year to which such invoice or

debit note pertains or furnishing of the relevant annual return,

whichever is earlier; or

 

(ii) for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be,

till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration,

whichever is later.

{Sub-section (5) and (6) inserted by the Finance (No. 2) Act, 2024, w.r.e.f. 1-7-2017. [However, Notification No. 17/2017-Central Tax, dated 27-9-2024 appoints 27-9-2024 as the date of enforcement}.