Saturday, 7 January 2017

Section-16. Eligibility and conditions for taking input tax credit

                 Section-16.                             Eligibility and conditions for taking input tax credit


(1) Every registered taxable person shall, subject to such conditions and restrictions
as may be prescribed and within the time and manner specified in section 44, be
entitled to take credit of input tax charged on any supply of goods or services to
him which are used or intended to be used in the course or furtherance of his
business and the said amount shall be credited to the electronic credit ledger of
such person:

PROVIDED that credit of input tax in respect of pipelines and telecommunication
tower fixed to earth by foundation or structural support including foundation and
structural support thereto shall not exceed—

(a) one-third of the total input tax in the financial year in which the said goods
are received,

(b) two-third of the total input tax, including the credit availed in the first
financial year, in the financial year immediately succeeding the year referred
to in clause (a) in which the said goods are received, and

(c) the balance of the amount of credit in any subsequent financial year.

(2) Notwithstanding anything contained in this section, but subject to the provisions
of section 36, no registered taxable person shall be entitled to the credit of any
input tax in respect of any supply of goods and/or services to him unless,-

(a) he is in possession of a tax invoice or debit note issued by a supplier
registered under this Act, or such other taxpaying document(s) as may be
prescribed;

(b) he has received the goods and/or services;

(c) the tax charged in respect of such supply has been actually paid to the
account of the appropriate Government, either in cash or through utilization
of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 34:

PROVIDED that where the goods against an invoice are received in lots or
installments, the registered taxable person shall be entitled to take credit upon
receipt of the last lot or installment:

PROVIDED FURTHER that where a recipient fails to pay to the supplier of services,
the amount towards the value of supply of services along with tax payable thereon
within a period of three months from the date of issue of invoice by the supplier, an
amount equal to the input tax credit availed by the recipient shall be added to his
output tax liability, along with interest thereon, in the manner as may be prescribed.

Explanation.—For the purpose of clause (b), it shall be deemed that the taxable
person has received the goods where the goods are delivered by the supplier to a
recipient or any other person on the direction of such taxable person, whether acting
as an agent or otherwise, before or during movement of goods, either by way of
transfer of documents of title to goods or otherwise.

(3) Where the registered taxable person has claimed depreciation on the tax
component of the cost of capital goods under the provisions of the Income Tax
Act, 1961(43 of 1961), the input tax credit shall not be allowed on the said tax
component.

(4) A taxable person shall not be entitled to take input tax credit in respect of any
invoice or debit note for supply of goods or services after furnishing of the return
under section 34 for the month of September following the end of financial year
to which such invoice or invoice relating to such debit note pertains or furnishing
of the relevant annual return, whichever is earlier.

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