Section 16 of CGST Act

Eligibility and conditions for taking input tax credit

 (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.

(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;

(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)

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.

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

(Substituted by CGST Amendment Act 2018)

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

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 added to his output tax liability,

 along with interest thereon,

in such manner as may be prescribed

Provided also that the recipient

shall be entitled to avail of the credit of input tax

on payment made by him of the amount

towards the value of supply of goods or services or both

along with tax payable thereon.

 (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,

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

(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 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

“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.

Thanks

CA Rahul Gupta