Input Credit Mechanism is available to you when you are covered under the GST Act.
Which means if you are a manufacturer, supplier, agent, e-commerce operator, aggregator or any of the persons
registered under GST, You are eligible to claim INPUT CREDIT for tax paid by you on your PURCHASES.
How to claim input credit under GST?
To claim input credit under GST –
- You must have a tax invoice(of purchase) or debit note issued by registered dealer
- You should have received the goods/services
- The tax charged on your purchases has been deposited/paid to the government by the supplier in cash or via claiming input credit
- Supplier has filed GST returns
Therefore, to allow you to claim input credit on Purchases all your suppliers must be GST compliant as well.
Other points you must know to claim Input Credit
- It is possible to have unclaimed input credit. Due to tax on purchases being higher than tax on sale. In such a case, you are allowed to carry forward or claim a refund.
If tax on inputs > tax on output –> carry forward input tax or claim refund
If tax on output > tax on inputs –> pay balance
No interest is paid on input tax balance by the government
- Input tax credit cannot be taken on purchase invoices which are more than one year old. Period is calculated from the date of the tax invoice.
- Since GST is charged on both goods and services, input credit can be availed on both goods and services (except those which are on the exempted/negative list).
- Input tax credit is allowed on capital goods.
- Input tax is not allowed for goods and services for personal use.
- No input tax credit shall be allowed after GST return has been filed for September following the end of the financial year to which such invoice pertains or filing of relevant annual return, whichever is earlier.