Input Tax Credit (ITC) Rules Under New GST Returns

Input Tax Credit is the main bone of GST compliance for all taxpayers. It is the provision of input tax credit that ensures that taxpayers only need to pay GST on the value added to the goods or services supplied. In the first phase of GST implementation, taxpayers are required to claim input tax credit on a self-assessed basis, as declared in GSTR-3B. In New GST Return filing process input tax credit of each taxpayer will be arrived at based on the invoices uploaded by their suppliers.


Let see in detailed...


Input Tax Credit rules under new GST returns:

As per the input tax credit rules under new GST return filing process, only an invoice uploaded by a supplier and locked by the buyer will be a valid document for claim of ITC by the buyer.

Suppliers must pay the tax liability on supplies made during a month by 20th of the next month. Suppliers will also have the facility to continuously upload invoices for their supplies to the GST portal. These invoices will be shown to the buyers immediately in the GST portal and can be locked by them. Input tax credit for a month will be arrived at based on the invoices uploaded by suppliers until 10th of the following month. Invoices uploaded by suppliers after 10th of the following month will be considered for ITC in the following month, as per the input tax credit rules under new GST returns.


Let us take an example to understand the input tax credit rules under new GST return:


Example: Taxflora Pvt Ltd supplies GST materials to Praveen Consultancy. In April ’19, Taxflora Pvt Ltd makes the following supplies to Praveen Consultancy:


Situation 1:

Date of invoice - 5th April ‘19

Date of invoice upload by Taxflora Pvt Ltd - 25th April ‘19

Return in which Taxflora Pvt Ltd has to pay the liability - April ‘19

Return in which Praveen Consultancy can avail input tax credit - April ‘19


Explanation:For the invoice dated 5th April ’19, Taxflora Pvt Ltd uploads the invoice on 25th April ’19. Taxflora Pvt Ltd has to pay the liability on the supply in the return for April ’19, as the supply has occurred in April ’19.  Praveen Consultancy can also avail input tax credit on the supply in the return for April ’19, as Taxflora Pvt Ltd has uploaded the invoice by 10th May ‘19.


Situation 2:

Date of invoice - 15th April ‘19

Date of invoice upload by Taxflora Pvt Ltd - 9th May ‘19

Return in which Taxflora Pvt Ltd has to pay the liability - April ‘19

Return in which Praveen Consultancy can avail input tax credit - April ‘19


Explanation: For the invoice dated 15th April ’19, Taxflora Pvt Ltd uploads the invoice on 9th May ’19. Taxflora Pvt Ltd has to pay the liability on the supply in the return for April ’19 as the supply has occurred in April ‘19. Praveen Consultancy can also avail input tax credit on the supply in the return for April ’19, as Taxflora Pvt Ltd has uploaded the invoice by 10th May ’19.


Situation 3:

Date of invoice - 30th April ‘19

Date of invoice upload by Taxflora Pvt Ltd - 12th May ‘19

Return in which Taxflora Pvt Ltd has to pay the liability - April ‘19

Return in which Praveen Consultancy can avail input tax credit - May ‘19


Explanation: For the invoice dated 30th April ’19, Taxflora Pvt Ltd uploads the invoice on 12th May ’19. Taxflora Pvt Ltd has to pay the liability on the supply in the return for April ’19 as the supply has occurred in April ‘19. Praveen Consultancy can avail input tax credit on the supply in the return for May ’19, as Taxflora Pvt Ltd has uploaded the invoice after 10th May ’19.


Hence, taxpayers can expect a systematic and simplified process for claiming input tax credit in the next phase of GST implementation. However, the focus on the buyer’s input tax credit being based on the supplier’s invoice remains a key feature in the entire system. Hence, it is important for taxpayers to become aware of the input tax credit rules under new GST returns and choose trusted suppliers carefully.

35 views

Recent Posts

See All

©2020 by taxflora.com.