12 Cases where Input Tax credit (ITC) is not available

Guide on Input Tax Credit under GST Regime and how to Claim it

Goods and Services Tax(GST) is considered as the biggest reforms of the Indian indirect Tax credit is
one of its key features which will help in eliminating cascading effect of taxes. This guide will help
you about Input Tax Credit, time limit to avail ITC, how to calculate Input Tax Credit, how to claim ITC.

What is Input Tax Credit (ITC)?

Input tax credit means that when a manufacturer purchase in order to manufacture his product or
services which is his output. When any supply of services or goods is supplied to a taxable
person, the GST charged is known as Input Tax.
The Input Tax credit concept is not entirely new it already existed under the pre-GST indirect
taxes regime (service tax, VAT and excise duty).
Input Tax credit means the tax producer was able to reduce while paying his tax on output.
Input tax credit means, when a manufacturer pays the tax on his output, he can deduct the tax he
previously paid on the input he purchased. Here, while paying the tax on his output, he can
deduct or take credit for the tax he paid while purchasing inputs.


Suppose that a readymade garment firm buys polyester (input) from a supplier (of input) at Rs
100 and a CGST of Rs 10 also have to be paid (CGST rate of 10%). The price of polyester input
will be Rs 110.
Now the garment manufacturer sells the product at Rs 200 plus tax (means his value addition is
Rs 100). Imagine that the GST rate of the readymade shirt is 12%.

Here, the manufacturer must pay a tax of Rs 24. But he has previously paid a tax of Rs 10 while purchasing the input of polyester. Hence, he can claim this Rs 10 and has to pay only the remaining Rs 14 (of the total Rs 24).

The Rs 10 that the manufacturer claimed is the input tax credit.

Who can claim ITC?

ITC can be claimed by a person who is registered under GST only if he fulfills ALL the conditions
as prescribed Below.
1. The dealer should be in possession of tax invoice

2. Goods/services have been received
3. Returns have been filed.
4. The tax charged has been paid to the government by the supplier.

5. When goods are received in installments ITC can be claimed only when the last lot is
6. No ITC will be allowed if depreciation has been claimed on tax component of a capital
How input tax can be claimed?
Claiming of ITC is to be made in the proper way according to the GST rules, taxes paid on inputs
cannot be deducted or credited between CGST and SGST. This means that input tax paid on
CGST can be availed to pay SGST. Similarly, an input tax paid on SGST cannot be used to pay
CGST. Following are the rules for claiming the ITC.
Table: calming the ITC under GST


Input tax credit from



CGST 1st NA 2nd
SGST NA 1st 2nd
IGST 2nd 3rd 1st


How is Input Tax Credit Issued?

  A. When ITC is received from CGST

1. It should first be used to pay CGST.
2. The remaining amount should be used to pay IGST.
3. Note that you cannot use ITC of CGST to pay SGST.

B. When ITC is received from SGST

1. It should be used to pay SGST first.
2. After that remaining amount should be used to pay IGST.
3. Note that you cannot use ITC of SGST to pay CGST

 C. When ITC is received from IGST

1. It should be used to pay IGST first.
2. After that remaining amount should be used to pay CGST.
3. The last priority should be given to payment of SGST.

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