THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec 16- Eligibility and conditions for taking input tax credit
16.(1) Every registered person shall, subject to such conditions and restrictions as
may be prescribed and in the manner specified in section 49, be entitled to take
credit of input tax charged on any supply of goods or services or both 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.
(2) Notwithstanding anything contained in this section, no registered person shall
be entitled to the credit of any input tax in respect of any supply of goods or
services or both 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 tax paying documents as may be
prescribed;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, it shall be deemed that the
registered 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 registered
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;
(c) subject to the provisions of section 41, the tax charged in respect of such
supply has been actually paid to the Government, either in cash or through
utilisation of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in lots or
instalments, the registered person shall be entitled to take credit upon receipt of the
last lot or instalment:
Provided further that where a recipient fails to pay to the
supplier of goods or services or both, other than the supplies on which tax is
payable on reverse charge basis, the amount towards the value of supply along
with tax payable thereon within a period of one hundred and eighty days 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 such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of
input tax on payment made by him of the amount towards the value of supply of
goods or services or both along with tax payable thereon
.

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

(4) A registered person shall not be entitled to take input tax credit in respect of
any invoice or debit note for supply of goods or services or both after the due date
of furnishing of the return under section 39 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.
 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec 17- Apportionment of credit and blocked credits

17.(1) Where the goods or services or both are used by the registered person partly
for the purpose of any business and partly for other purposes, the amount of credit
shall be restricted to so much of the input tax as is attributable to the purposes of
his business.

(2) Where the goods or services or both are used by the registered person partly for
effecting taxable supplies including zero-rated supplies under this Act or under the
Integrated Goods and Services Tax Act and partly for effecting exempt supplies
under the said Acts, the amount of credit shall be restricted to so much of the input
tax as is attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be
prescribed, and shall include supplies on which the recipient is liable to pay tax on
reverse charge basis, transactions in securities, sale of land and, subject to clause
(b) of paragraph 5 of Schedule II, sale of building.

(4) A banking company or a financial institution including a non-banking financial

company, engaged in supplying services by way of accepting deposits, extending
loans or advances shall have the option to either comply with the provisions of
sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the
eligible input tax credit on inputs, capital goods and input services in that month
and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn during the
remaining part of the financial year:

Provided further that the restriction of fifty per cent. shall not apply to the tax paid
on supplies made by one registered person to another registered person having the
same Permanent Account Number.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-

section (1) of section 18, input tax credit shall not be available in respect of the
following, namely:—

(a) motor vehicles and other conveyances except when they are used–– (i) for
making the following taxable supplies, namely:—

(A) further supply of such vehicles or conveyances ; or

 (B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or

conveyances;

(ii) for transportation of goods;

(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health

services, cosmetic and plastic surgery except where an inward supply of goods or
services or both of a particular category is used by a registered person for making
an outward taxable supply of the same category of goods or services or both or as
an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre;

(iii) rent-a-cab, life insurance and health insurance except where––

(A) the Government notifies the services which are obligatory for an
employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular

category is used by a registered person for making an outward taxable supply of
the same category of goods or services or both or as part of a taxable composite or
mixed supply; and

(iv) travel benefits extended to employees on vacation such as leave or

home travel concession;

(c) works contract services when supplied for construction of an immovable

property (other than plant and machinery) except where it is an input service for
further supply of works contract service;

(d) goods or services or both received by a taxable person for construction of

an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or furtherance
of business.
Explanation.––For the purposes of clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or alterations or
repairs, to the extent of capitalisation, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10;

(f) goods or services or both received by a non-resident taxable person except

on goods imported by him;

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or
free samples; and

(i) any tax paid in accordance with the provisions of sections 74, 129 and
130.

(6) The Government may prescribe the manner in which the credit referred to in
sub-sections (1) and (2) may be attributed.

Explanation.––For the purposes of this Chapter and Chapter VI, the expression
“plant and machinery” means apparatus, equipment, and machinery fixed to earth
by foundation or structural support that are used for making outward supply of
goods or services or both and includes such foundation and structural supports but
excludes—

(i) land, building or any other civil structures;

(ii) telecommunication towers; and

(iii) pipelines laid outside the factory premises.

 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec 18- Availability of credit in special circumstances.

18.(1) Subject to such conditions and restrictions as may be prescribed—
(a) a person who has applied for registration under this Act within thirty days
from the date on which he becomes liable to registration and has been granted such
registration shall be entitled to take credit of input tax in respect of inputs held in
stock and inputs contained in semi-finished or finished goods held in stock on the
day immediately preceding the date from which he becomes liable to pay tax under
the provisions of this Act;
(b) a person who takes registration under sub-section (3) of section 25 shall be
entitled to take credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock on the day immediately
preceding the date of grant of registration;
(c) where any registered person ceases to pay tax under section 10, he shall be
entitled to take credit of input tax in respect of inputs held in stock, inputs
contained in semi-finished or finished goods held in stock and on capital goods on
the day immediately preceding the date from which he becomes liable to pay tax
under section 9:

Provided that the credit on capital goods shall be reduced by such

percentage points as may be prescribed
(d) where an exempt supply of goods or services or both by a registered person
becomes a taxable supply, such person shall be entitled to take credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock relatable to such exempt supply and on capital goods
exclusively used for such exempt supply on the day immediately preceding the
date from which such supply becomes taxable:

Provided that the credit on capital goods shall be reduced by such percentage
points as may be prescribed.

(2) A registered person shall not be entitled to take input tax credit under sub-
section (1) in respect of any supply of goods or services or both to him after the
expiry of one year from the date of issue of tax invoice relating to such supply.

(3) Where there is a change in the constitution of a registered person on account of

sale, merger, demerger, amalgamation, lease or transfer of the business with the
specific provisions for transfer of liabilities, the said registered person shall be
allowed to transfer the input tax credit which remains unutilised in his electronic
credit ledger to such sold, merged, demerged, amalgamated, leased or transferred
business in such manner as may be prescribed.

(4) Where any registered person who has availed of input tax credit opts to pay tax
under section 10 or, where the goods or services or both supplied by him become
wholly exempt, he shall pay an amount, by way of debit in the electronic credit
ledger or electronic cash ledger, equivalent to the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in
stock and on capital goods, reduced by such percentage points as may be
prescribed, on the day immediately preceding the date of exercising of such option
or, as the case may be, the date of such exemption:
Provided that after payment of such amount, the balance of input tax
credit, if any, lying in his electronic credit ledger shall lapse.

(5) The amount of credit under sub-section (1) and the amount payable under sub-
section (4) shall be calculated in such manner as may be prescribed.

(6) In case of supply of capital goods or plant and machinery, on which input tax
credit has been taken, the registered person shall pay an amount equal to the input
tax credit taken on the said capital goods or plant and machinery reduced by such
percentage points as may be prescribed or the tax on the transaction value of such
capital goods or plant and machinery determined under section 15, whichever is
higher:

Provided that where refractory bricks, moulds and dies, jigs and fixtures are
supplied as scrap, the taxable person may pay tax on the transaction value of such
goods determined under section 15.
 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec 19- Taking input tax credit in respect of inputs and capital
goods sent for job work.
19.(1) The principal shall, subject to such conditions and restrictions as may be
prescribed, be allowed input tax credit on inputs sent to a job worker for job work.
(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section
16, the principal shall be entitled to take credit of input tax on inputs even if the
inputs are directly sent to a job worker for job work without being first brought to
his place of business.
(3) Where the inputs sent for job work are not received back by the principal after
completion of job work or otherwise or are not supplied from the place of business
of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of
section 143 within one year of being sent out, it shall be deemed that such inputs
had been supplied by the principal to the job worker on the day when the said
inputs were sent out:
Provided that where the inputs are sent directly to a job worker, the
period of one year shall be counted from the date of receipt of inputs by
the job worker.
(4) The principal shall, subject to such conditions and restrictions as may be
prescribed, be allowed input tax credit on capital goods sent to a job worker for job
work.
(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section
16, the principal shall be entitled to take credit of input tax on capital goods even if
the capital goods are directly sent to a job worker for job work without being first
brought to his place of business.
(6) Where the capital goods sent for job work are not received back by the
principal within a period of three years of being sent out, it shall be deemed that
such capital goods had been supplied by the principal to the job worker on the day
when the said capital goods were sent out:
Provided that where the capital goods are sent directly to a job worker,
the period of three years shall be counted from the date of receipt of capital
goods by the job worker.
(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds
and dies, jigs and fixtures, or tools sent out to a job worker for job work.
Explanation.––For the purpose of this section, “principal” means the
person referred to in section 143.
 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec20-Manner of distribution of credit by Input Service Distributor.

20.(1) The Input Service Distributor shall distribute the credit of central tax as
central tax or integrated tax and integrated tax as integrated tax or central tax, by
way of issue of a document containing the amount of input tax credit being
distributed in such manner as may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following
conditions, namely:––

(a) the credit can be distributed to the recipients of credit against a document
containing such details as may be prescribed;

(b) the amount of the credit distributed shall not exceed the amount of credit
available for distribution;

(c) the credit of tax paid on input services attributable to a recipient of credit
shall be distributed only to that recipient;

(d) the credit of tax paid on input services attributable to more than one recipient
of credit shall be distributed amongst such recipients to whom the input service is
attributable and such distribution shall be pro rata on the basis of the turnover in a
State or turnover in a Union territory of such recipient, during the relevant period,
to the aggregate of the turnover of all such recipients to whom such input service is
attributable and which are operational in the current year, during the said relevant
period;
(e) the credit of tax paid on input services attributable to all recipients of credit
shall be distributed amongst such recipients and such distribution shall be pro rata
on the basis of the turnover in a State or turnover in a Union territory of such
recipient, during the relevant period, to the aggregate of the turnover of all
recipients and which are operational in the current year, during the said relevant
period.

Explanation.––For the purposes of this section,––

 (a) the “relevant period” shall be––

(i) if the recipients of credit have turnover in their States or Union territories in
the financial year preceding the year during which credit is to be distributed, the
said financial year; or

(ii) if some or all recipients of the credit do not have any turnover in their
States or Union territories in the financial year preceding the year during which the
credit is to be distributed, the last quarter for which details of such turnover of all
the recipients are available, previous to the month during which credit is to be
distributed;

(b) the expression “recipient of credit” means the supplier of goods or services
or both having the same Permanent Account Number as that of the Input Service
Distributor;

(c) the term ‘‘turnover’’, in relation to any registered person engaged in the
supply of taxable goods as well as goods not taxable under this Act, means the
value of turnover, reduced by the amount of any duty or tax levied under entry 84
of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List
II of the said Schedule.
 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Sec -21 Manner of recovery of credit distributed in excess.

21.Where the Input Service Distributor distributes the credit in contravention of the
provisions contained in section 20 resulting in excess distribution of credit to one
or more recipients of credit, the excess credit so distributed shall be recovered from
such recipients along with interest, and the provisions of section 73 or section 74,
as the case may be, shall, mutatis mutandis, apply for determination of amount to
be recovered.