Input Tax Credit
Input tax credit: the five mismatches that cause notices
Most ITC notices come from the same handful of reconciliation gaps.
The four conditions
You need a tax invoice; the goods or services must actually have been received; the supplier must have declared the supply so it appears in your GSTR-2B; and the tax must have been paid to the government. In addition, you must pay your supplier within one hundred and eighty days, or the credit is reversed with interest.
Blocked credit #
Section 17(5) blocks credit on motor vehicles below the prescribed seating capacity, food and beverages, club and health-club membership, works contract services for immovable property that you are constructing for yourself, and goods lost, stolen or given away as free samples.
Common and exempt supplies #
Where inputs are used partly for taxable and partly for exempt supplies, credit is apportioned under rules 42 and 43 and the ineligible part is reversed each month, with an annual true-up.
What you will need
- GSTR-2B for each period
- Purchase invoices matched to the 2B entries
- Ageing of creditors for the 180-day rule
- Working for rule 42 and 43 reversals
- List of purchases falling under section 17(5)
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Input Tax Credit
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Input Tax Credit
Input tax credit: the five mismatches that cause notices
Most ITC notices come from the same handful of reconciliation gaps.