Essential Documents for GST ITC Claims

Your input tax credit is only as strong as the documents backing it. This guide lists the essential documents required to claim GST input tax credit and keep it audit-proof.

This article outlines the specific forms and documents mandated by the Indian Government’s most recent GST law draft for claiming Input Tax Credit (ITC). Previously, we discussed the fundamental aspects of input tax credit and its claim process.

Key Updates
February 1, 2022
Budget 2022 brought several changes:
1. ITC is no longer claimable if it is restricted within GSTR-2B under Section 38.
2. The deadline for claiming ITC on invoices or debit notes for a financial year has been adjusted to the earlier of two dates: November 30 of the subsequent year or the annual return filing date.
3. Section 38, now titled ‘Communication of details of inward supplies and input tax credit’, has been fully revised to align with Form GSTR-2B. It specifies the procedure, timing, conditions, and restrictions for ITC claims, eliminating the two-way communication system of the suspended GSTR-2 form. Taxpayers will also receive information regarding their eligible and ineligible ITC for claims.
4. Section 41 has been updated to remove references to provisional ITC claims, instead outlining conditions for self-assessed ITC claims.
5. Sections 42, 43, and 43A, which covered provisional ITC claim processes, matching, and reversals, have been removed.

December 29, 2021
CGST Rule 36(4) was amended, removing the provision for an additional 5% ITC beyond what appears in GSTR-2B. As of January 1, 2022, businesses can only claim ITC if it is reported by the supplier in GSTR-1/IFF and is visible in their GSTR-2B.

December 21, 2021
From January 1, 2022, ITC claims are exclusively permitted if they are reflected in GSTR-2B. Consequently, taxpayers can no longer claim the 5% provisional ITC under CGST Rule 36(4), making it imperative that all claimed ITC values are accurately mirrored in GSTR-2B.

Required Documents and Forms for Claiming Input Tax Credit under GST

To claim ITC under GST, applicants need the following documents:

• A supplier-issued invoice for goods, services, or both, compliant with GST regulations.
• The qualifying ITC must be accurately displayed in the recipient’s GSTR-2B.
• A debit note issued by the supplier to the recipient if the invoice states a lower taxable value or tax payable than the actual supply.
• A bill of entry.
• An invoice issued under specific conditions, such as a bill of supply for amounts less than Rs 200 or when reverse charge mechanisms apply under GST.
• An invoice or credit note from an Input Service Distributor (ISD), adhering to GST invoice rules.
• A bill of supply provided by the supplier of goods, services, or both, in line with GST invoice regulations.

These documents are crucial for the ITC claim process. It’s important to note that ITC cannot be claimed on tax amounts arising from demand orders due to fraud, willful misstatement, or fact suppression. The process for claiming ITC has evolved, with GSTR-2 being suspended and GSTR-2B becoming the primary reference for eligible ITC.

Input Tax Credit Claims for Banking and Financial Institutions

Under GST rules, an applicant seeking ITC for goods and services used partially for taxable supplies (including zero-rated goods) and partially for exempted supplies can only claim ITC proportionate to the taxable supplies. Banking companies and financial institutions have two options for claiming ITC on deposits, loans, or advances: they can either adhere to the aforementioned proportional rule or claim 50% of their total available ITC each month, with the remaining portion lapsing. Details for opting for the 50% ITC claim must be entered in Form GSTR-2.

For instance, if Bank of Baroda has a total ITC of Rs 5 crore, with Rs 2 crore specifically for taxable (including zero-rated) supplies, the bank would benefit more by choosing the 50% ITC claim option, which amounts to Rs 2.5 crore, rather than claiming only Rs 2 crore for taxable supplies.

Procedures for Claiming ITC in Unique Scenarios

Specific steps must be followed for claiming ITC in the following special circumstances:

• Switching from Composition Scheme to Normal Taxpayer: An applicant transitioning from the composition scheme to a normal GST taxpayer can claim ITC on inputs held in stock, capital goods, semi-finished goods, and finished goods in stock on the day before becoming liable to pay tax as a normal taxpayer.
• Exempt Supply Becomes Taxable: If an exempt good or service becomes taxable, the applicant can claim ITC on inputs in stock, capital goods, semi-finished, or finished goods used for such supply.

For capital goods, the ITC must be reduced by 5% per quarter (or part thereof) from the date of the invoice or other document indicating when the capital goods were received by the taxable person. For example, if Ajay switched from the composition scheme to a normal taxpayer and became liable from September 20, 2017, he could claim ITC on inputs up to September 19, 2017.

Individuals registered under these special circumstances must file Form GST ITC-01 on the common portal within 15 days of becoming eligible for ITC. If the aggregate ITC for CGST, SGST, and IGST exceeds Rs 2 lakh, the details provided in Form GST ITC-01 require certification by a chartered accountant or cost accountant.

Frequently Asked Questions

What documents are needed to claim GST ITC?

You need a valid tax invoice or debit note from a registered supplier, evidence that the goods or services were received, proof the tax was paid to the government, and the supply reflected in your GSTR-2B.

Can I claim ITC without a tax invoice?

No. A valid tax invoice or prescribed document is mandatory; in limited cases a bill of entry for imports or an ISD invoice serves as the document, but some document is always required.

Why is GSTR-2B important for ITC?

GSTR-2B is the auto-drafted statement of eligible credit based on suppliers’ filings; ITC is generally restricted to what appears there, so reconciling your purchases with GSTR-2B is essential.