To curb the cascading effect of indirect taxes in the country, the government introduced the Goods and Service Tax^@ in 2017. The new tax regime of GST^@ replaced several indirect taxes* such as service tax*, value-added tax*, excise duty, etc. This article discusses the Input Tax* Credit under the GST^@, which has multiple implications.

 

Find out what Input Tax* Credit is and how can you make ITC claims.

 

What is Input Tax* Credit?

 

An Input tax* credit is a credit that a manufacturer or provider of service receives for paying taxes on the inputs of the goods and services while paying taxes* on the final output.

 

 

ITC Claim Rules

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An individual subject to paying GST^@ can seek the benefit of an input tax credit. But there are some conditions to be fulfilled. They are as follows:

• Only registered taxpayers are eligible to receive an input tax* credit.
• The charged tax* is paid to the government.
• Proof of receipt of goods or services.
• You must have filed the return.
• You must possess an invoice given by the supplier of inputs. It may include a self-invoice, debit note or Bill of entry.
• The supply of goods and services is used for business activity.
• The payment is made within 180 days of the issue of an invoice.
• When you receive goods in instalments, ITC is claimed when the final instalment is received.
• The output supply should not be a zero-rated or non-taxable supply.
• You and the supplier of the goods or service must have filed the valid GSTR-1 & GSTR-3B (paid self-assessment tax*)
• For capital goods, you have the choice to claim for depreciation on the tax paid under the Income Tax* Act, or you can claim ITC under the GST^@ act. But you must have used the goods until their life. If you sell capital goods, tax* is levied according to section 18(6).
• For taxes* paid on the re-assessment or fraud, you cannot claim an ITC.
• According to rule 86b, there is a limit on using input tax* credit in an electronic credit ledger for paying output tax* liability. If the turnover of the registered taxpayer exceeds INR 50 Lakh per month, the person cannot use ITC over 99 per cent of output tax* liability subject to certain clauses mentioned in the act and proviso issued from time to time by the governing body.
• The goods and services received should not belong to the negative list of supply. 
  
  

 

How Do I Claim ITC?

 

ITC claims are essential when the business has to file for GST^@ returns. So, you must track the ITC flow from the beginning. For claiming the ITC, the registered taxpayers must provide at least one of the documents to support the claim:

 

• Invoice of the goods and services provided by the supplier.
• Invoice by the receiver with proof of payment of tax*.
• A debit note issued by the supplier.
• A bill of entry or other similar documents in case of imports.
• Issued documents by the Input Service Distributor.

 

The document should furnish the information about:

 

• Description of goods and services received.
• Applicable particulars.
• The total value of the goods and services received.
• Value of tax* charged.
• Location of supply of the goods or services.
• GSTIN^@ of the supplier and the receiver.

 

Note that you cannot claim ITC if the goods or services are not received. Also, in the case of the “bill to ship to” model where the goods are received through a third party on orders of the registered person, the third person receiving the goods is considered as the registered person.

 

When Can I Claim ITC?

 

As per the Section 16 of the CGST^@ Act,2017, a registered taxpayer can claim the input tax* credit for the invoice or debit note of sale of goods and services before the due date of filing a return under section 39 of the CGST^@ Act, for the month of September followed by the end of the fiscal year or filing of annual return.

 

 

ITC on Insurance Premium

 

The end-user of the life insurance is not eligible for insurance GST input claim under the GST^@ Act. But the employers providing insurance to the employees can claim ITC on insurance on the premiums.

 

You can claim the entire amount paid on life insurance premiums, including GST^@ under Section 80C of the Income Tax* Act. Health insurance premiums are also eligible for deduction under Section 80 D of the act.

 

So, you cannot claim ITC for individual life, and health insurance plans except you are providing a particular service of which insurance is a part.

 

 

Conditions Where ITC Tax Cannot be Claimed

 

• Motor vehicle or conveyance bought except for supplying such vehicles, imparting driving training, transportation of passengers or goods.
• Aircraft and vessels.
• Rent a cab, Life and health insurance plans except when offered by the employer to the employees.
• Health services, food beverages, outdoor catering, cosmetic or plastic surgery, and beauty treatments, except when the outward and inward supply is exactly the same, or the component is a part of the composite or mixed supply under the Indian tax* regime.
• Goods and services bought for personal consumption.
• Goods and services purchased by a non-resident taxable individual.
• Stolen, written off, destroyed or distributed goods as gifts or free samples.
• The suppliers and receivers under the composite scheme.
• Travel benefits to employees.
• Membership in a health or fitness club.
• Construction of immovable property, including renovation, reconstruction, repairs, etc. and the goods and services used for construction for business activity.
• Works contract services to construct immovable property apart from the input service.

 

 

Conclusion

 

Now you know about the input tax* credit and how you can claim it. Remember that ITC is not available for individual health and insurance plans. But you get many other tax* benefits by saving in insurance policies. Health plans and insurance plans are eligible for tax* deductions under Sections 80D and 80C of the Income Tax* Act. So, consider buying the right insurance policy and enjoy the tax* benefits available along with long term financial planning.

 

You can buy Tata AIA Life insurance policies that are designed to suit your needs. The tailor-made life insurance policies give a protective financial shield to your loved ones and takes care of them in your absence. Buying an insurance plan is now hassle-free as you can buy life insurance online with a few clicks. So, do not delay and start your life’s financial planning with Tata AIA.

 

L&C/Advt/2022/Jul/1732