Input Tax Credit is defined u/s. 2(63) of the CGST Act as the credit of input tax. Input tax is the tax paid by the registered person on purchase of Inputs used in the course or furtherance of business. The eligibility and conditions in order to claim ITC is enumerated u/s. 16 of the CGST Act.

The registered person claiming credit should have received the goods and / or services and he should be in possession of the invoice issued for the said purchase. It should also be seen that the tax has already been paid to the Government and the returns regarding the same has been furnished. Section 17 of the CGST Act enumerates the situations where ITC cannot be availed by the registered person. It also mentions how the credit is to be apportioned. Besides this, there have been restrictions placed by the Government vide some Notifications as well where registered persons dealing in certain commodities or providing certain services are not allowed to claim ITC on their supply. There are certain difficulties being faced by a couple of sectors in respect of reversing credit when the services supplied are partly taxable and partly exempt or when the services are bundled in a way where credit is allowable on one service but is restricted for the other service. For instance the Construction Services’ Sector is facing issues when it comes to apportioning credit when flats are sold before and after receipt of completion certificate. Even the Hotel & restaurant industry is not being able to ascertain as to what extent they can take ITC. The proportionate reversal of credit seems to be a solution but then it is a complicated one. In future lot of complications may arise due to wrong claims of ITC. Caution therefore, is a pre-condition for claiming of ITC.