Section 16 of the CGST (Central Goods and Services Tax) Act pertains to the eligibility and conditions for taking input tax credit (ITC) under the Act. The section outlines the following key points:
- Eligibility: A registered person is eligible to claim ITC on the taxes paid on inputs or input services used in the course of business.
- Conditions for claiming ITC: The following conditions must be fulfilled for claiming ITC: a. The registered person must possess a tax invoice or a debit note issued by the supplier of goods or services or both. b. The registered person must have received the goods or services. c. The tax charged on the supply must have been paid to the government by the supplier, either in cash or through utilization of ITC. d. The registered person has furnished the required return under Section 39 of the CGST Act.
- Time limit for claiming ITC: The registered person can claim ITC for a given financial year in the following circumstances: a. The due date for filing the annual return for that financial year, which is September 30th of the subsequent financial year. b. The actual date of filing the annual return, whichever is earlier.
- Restrictions on claiming ITC: There are certain restrictions on claiming ITC under Section 16, including: a. ITC cannot be claimed if the goods or services are used for personal consumption. b. ITC cannot be claimed if the goods or services are used for making exempt supplies. c. ITC cannot be claimed if the goods or services are used for making supplies outside India. d. If the recipient of goods or services does not pay the supplier within 180 days, the ITC claimed earlier will be added to the recipient’s output tax liability along with interest.
It is important for businesses to comply with the provisions of Section 16 to ensure proper utilization of input tax credit and adherence to the requirements of the CGST Act.