Amended and updated notes on section 16 of CGST Act, 2017. Detail discussion on provisions and rules related to eligibility and conditions for taking input tax credit.
Chapter V (Sections 16–21) of the Central Goods and Services Tax Act, 2017 deals with the provisions related to input tax credit. Section 16 of CGST 2017 provides for eligibility and conditions for taking input tax credit.
Recently, we have discussed in detail section 15 (Value of Taxable Supply) of CGST Act 2017. Today, we learn the provisions of section 16 of Central GST Act 2017 as amended by the Finance Act 2022.
Section 16 of the Central Goods and Services Tax Act, 2017 has been notified by the Ministry of Finance vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. This notification was come into force from 1st July, 2017 i.e. the commencement date of section 16 is 1-7-2017.
| Name of Act | The Central Goods and Services Tax Act 2017 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Central Board of Indirect Taxes & Customs |
| Governing body | GST Council |
| Number of Chapters | 21 |
| Number of Sections | 174 |
| You are reading: | |
| Chapter No. | V |
| Chapter Name | Input Tax Credit |
| Section No. | 16 |
| Section Name | Eligibility and conditions for taking input tax credit |
| Updated 2024 Edition | GST Law Book PDF |
Relevant Rules and Forms for GST Section 16:
- Rule 36: Documentary requirements and conditions for claiming input tax credit
- Rule 37: Reversal of input tax credit in the case of non-payment of consideration
Section 16 of Central GST – Eligibility and conditions for taking input tax credit1
Section 16 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017.
Section 16(1) of CGST Act
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) of CGST Act
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; [Section 16(2)(aa) has been newly inserted w.e.f. 1st January, 2022 vide the Finance Act 2021 read with Notification No. 39/2021-Central Tax, S.O. 5328(E), dated 21.12.2021.]
- (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 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; [Section 16(2)(ba) has been amendments (inserted) by the Finance Act, 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 [Amendments (omitted) of Section 16(2)(c) are made by the Finance Act, 2022] - (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.
Section 16(3) of CGST Act
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, the input tax credit on the said tax component shall not be allowed.
Section 16(4) of CGST Act
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] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. [Amendments (substituted) of Section 16(4) are made by the Finance Act, 2022]
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. [Vide Order No. 02/2018-Central Tax, S.O. 6428(E) dated 31-12-2018.]
- Section 16 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. ↩︎