One of the fundamental features of GST is the seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country. In this section, let’s discuss about various conditions laid down by law to avail GST input tax credit on supply of goods or services.
All of the following conditions need to be satisfied to avail GST Input credit:
- The dealer should be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act.
- The said goods/services have been received.
- Returns (GSTR-3) have been filed.
- The tax charged has been paid to the government by the supplier.
What do these conditions imply?
Once Form GSTR-1 (Outward supply details) is filed by the supplier, the recipient has a visibility of the purchase through the auto-populated Form GSTR-2A (Inward supplies details). After necessary modification, additions (if any) and acceptance in Form GSTR-2, the Input credit will be credited to the recipient’s electronic credit ledger on a provisional basis.
The addition and modification done by the recipient in Form GSTR-2 will be made available to supplier in Form GSTR- 1A for his acceptance.
Input credit will be available only when the Monthly returns (Form GSTR-3) are filed by the supplier along with payment tax. The final acceptance of Input Tax credit will be communicated in Form GST ITC-1.
Let us understand this with an example
Super Cars Ltd, a manufacturer of cars purchased 30 tons of steel from Ratna Steels. Ratna Steels supplied steel and issued tax invoice on 5th April with GST of 2, 40,000.
With this example, let us examine the process to understand the flow of availing input credit.
GSTR-1: Furnish all outward supply details on or before 10th of the Subsequent month.
GSTR-2A: Auto-populated by System on 11th of subsequent month. This includes all inward supplies details
GSTR-3: Monthly Return auto-populated by the system on 20th of subsequent month