Persons Eligible to take Input Tax Credit (ITC) under Special Circumstances [Section 18(1)]

Subject to such conditions and restrictions as may be prescribed, the following persons are  eligible to take input credit—

1.  Person already doing  business before  introduction of GST  who requires  mandatory registration  under GST [Section  18(1)(a)]

The case of fresh registration, covered by section 18(1)(a), is as follows –

1. A person has applied for GST registration within 30 days from the date on which he becomes liable to registration.

2. On his uploading registration request, registration has been granted.

3. If the above two conditions are satisfied, he is entitled to take credit of input tax in respect of –

   • inputs held in stock;

   • inputs contained in semi-finished goods, and

   • inputs contained in finished goods.

Input tax credit is available in respect of these held in stock on the day immediately preceding the date from which he becomes liable to pay tax. However, a registered person shall not be entitled to take input tax credit in respect of any supply of goods/services to him after the expiry of 1 year from the date of issue of tax invoice relating to such supply.

2. Person who is although  not required to have  registration but goes for  Voluntary Registration  [Section 18(1)(b)]

The case of voluntary registration, covered by section 18(1)(b), is as follows –

1. A person has applied for GST registration (his turnover is less than Rs. 20 lakh, law does not require him to get registration, even than he has applied for registration).

2. On his uploading registration request, registration has been granted.

3. If the above two conditions are satisfied, he is entitled to take credit of input tax in respect of –

   • inputs held in stock;

   • inputs contained in semi-finished goods, and

   • inputs contained in finished goods.

Input tax credit is available in respect of these held in stock on the day immediately preceding the date of grant of registration. However, a registered person shall not be entitled to take input tax credit in respect of any supply of goods/services to him after the expiry of 1 year from the date of issue of tax invoice relating to such supply.

3. Person who ceases to  pay tax under  Composition Scheme and  shifts to Regular Scheme  [Section 18(1)(c)]

Section 18(1)(c) covers the case when a Composition Scheme dealer ceases to pay tax under Composition Scheme. This section is applicable as follows –

1. A person has opted for Composition Scheme [see para 512].

2. During the year, he ceases to pay tax under Composition Scheme (as his turnover exceeds the specified limit).

3. If the above two conditions are satisfied, he is entitled to take credit of input tax in respect of –

   • inputs held in stock;

   • inputs contained in semi-finished goods;

   • inputs contained in finished goods, and

   • capital goods.

Input tax credit is available in respect of these held on the day immediately preceding the date from which he becomes liable to pay GST under normal provisions. However, a registered person shall not be entitled to take input tax credit in respect of any supply of goods/services to him after the expiry of 1 year from the date of issue of tax invoice relating to such supply.

4. Person whose Exempt  Supply becomes a  Taxable Supply [Section  18(1)(d)]

Section 18(1)(d) covers the case when an exempt supply of goods/services by a registered person becomes a taxable supply. Such person shall be entitled to take credit of input tax in respect of –

a. inputs held in stock;

b. inputs contained in semi-finished goods;

c. inputs contained in finished goods, and

d. capital goods.

Input tax credit in respect of these goods (held in stock relatable to such exempt supply) and on capital goods (exclusively used for such exempt supply) shall be available on the day immediately preceding the date from which such supply becomes taxable. However, a registered person shall not be entitled to take input tax credit in respect of any supply of goods/services to him after the expiry of 1 year from the date of issue of tax invoice relating to such supply.

5. Input Tax Credit in case of change in the Constitution of Registered Person - Section 18(3)

This Section covers the case when there is a change in constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of business with the provision of transfer of liabilities. In such a case, the registered person is allowed to transfer input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business as follows –

1. The registered person shall, in the event of sale, merger, etc., furnish the details of sale, merger, demerger, amalgamation, lease or transfer of business, in Form GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee.

2. In the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

3. The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant/cost accountant certifying that the sale, merger, demerger, etc., has been done with a specific provision for the transfer of liabilities.

4. The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the unutilized credit specified in Form GST ITC-02 shall be credited to his electronic credit ledger.

5. The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.

Time limit for taking Input Tax Credit (ITC) by a person covered under section 18(1) [Section 18(2)]