16. Eligibility and conditions for taking input tax credit.—(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;
1
[(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the
supplier in the statement of outward supplies and such details have been communicated to the
recipient of such invoice or debit note in the manner specified under section 37.]
(b) he has received the goods or services or both.
2
[Explanation.—For the purposes of this clause, it shall be deemed that the registered person has
received the goods or, as the case may be, services––
(i) 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;
(ii) where the services are provided by the supplier to any person on the direction of and on account of
such registered person.]
3
[(ba) the details of input tax credit in respect of the said supply communicated to such registered
person under section 38 has not been restricted;]
(c) subject to the provisions of 4
[section 41 5***], 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:
1. Ins. by Act 13 of 2021, s. 109 (w.e.f. 1-1-2022).
2. The Explanation subs. by Act 31 of 2018, s. 8 (w.e.f. 1-2-2019).
3. Ins. by Act 6 of 2022, s. 100 (w.e.f. 1-10-2022).
4. Subs. by Act 31 of 2018, s. 8, for “section 41” (w.e.f. 1-2-2019).
5. The words, figures and letter “or section 43A” omitted by Act 6 of 2022, s. 100 (w.e.f. 1-10-2022).
28
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 1
[paid by him
along with interest payable under section 50], 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 2
[to the supplier] 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(43 of 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 3
[thirtieth day of November] following the end of financial
year to which such invoice or 4*** debit note pertains or furnishing of the relevant annual return, whichever
is earlier.
5
[Provided that the registered person shall be entitled to take input tax credit after the due date of
furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing
of the return under the said section for the month of March, 2019 in respect of any invoice or invoice
relating to such debit note for supply of goods or services or both made during the financial year 2017-18,
the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due
date for furnishing the details under sub-section (1) of said section for the month of March, 2019.]
6
[(5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for
supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and
2020-21, the registered person shall be entitled to take input tax credit in any return under section 39
which is filed up to the thirtieth day of November, 2021.
(6) Where registration of a registered person is cancelled under section 29 and subsequently the
cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made
by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in
respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of
cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such
invoice or debit note for supply of goods or services or both, in a return under section 39,––
(i) filed up to thirtieth day of November following the financial year to which such invoice or
debit note pertains or furnishing of the relevant annual return, whichever is earlier; or
(ii) for the period from the date of cancellation of registration or the effective date of cancellation
of registration, as the case may be, till the date of order of revocation of cancellation of registration,
where such return is filed within thirty days from the date of order of revocation of cancellation of
registration,
whichever is later.]
17. Apportionment of credit and blocked credits.—(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.
1. Subs. by Act 8 of 2023, s. 138, for “added to his output tax liability, along with interest thereon” (w.e.f. 1-10-2023).
2. Ins. by s. 138, ibid. (w.e.f. 1-10-2023).
3. Subs. by Act 6 of 2022, s. 100, for “due date of furnishing of the return under section 39 for the month of September”
(w.e.f. 1-10-2022).
4. The words “invoice relation to such” omitted by Act 12 of 2020, s. 120 (w.e.f. 1-01-2021).
5. Ins. by Order No. 02/2018-Central Tax dated 31-12-2018.
6. Ins. by Act 15 of 2024, s. 118 (w.e.f. 1-07-2017).
29
(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.
1
[Explanation.—For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall
not include the value of activities or transactions specified in Schedule III, 2
[except,—
(i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and.
(ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of
paragraph 8 of the said Schedule.]]
(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:—
3
[(a) motor vehicles for transportation of persons having approved seating capacity of not more
than thirteen persons (including the driver), except when they are used for making the following
taxable supplies, namely:—
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods;
(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to
motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available—
(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are
used for the purposes specified therein;
(ii) where received by a taxable person engaged—
1. The Explanation ins. by Act 31 of 2018, s. 9 (w.e.f. 1-2-2019).
2. Subs. by Act 8 of 2023, s. 139, for “except those specified in paragraph 5 of the said Schedule” (w.e.f. 1-10-2023).
3. Subs. by Act 31 of 2018, s. 9, for clauses (a) and (b) (w.e.f. 1-2-2019).
30
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
(II) in the supply of general insurance services in respect of such motor vehicles, vessels
or aircraft insured by him;
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in
clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and
health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be
available where an inward supply of such goods or services or both 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; and
(iii) travel benefits extended to employees on vacation such as leave or home travel
concession:
Provided that the input tax credit in respect of such goods or services or both shall be
available, where it is obligatory for an employer to provide the same to its employees under any
law for the time being in force.]
(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;
1
[(fa) goods or services or both received by a taxable person, which are used or intended to be
used for activities relating to his obligations under corporate social responsibility referred to in
section 135 of the Companies Act, 2013 (18 of 2013);]
(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.]
1. Ins. by Act 8 of 2023, s. 139 (w.e.f. 1-10-2023).
31
18. Availability of credit in special circumstances.—(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.
32
19. Taking input tax credit in respect of inputs and capital goods sent for job work.—(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.
20. Manner of distribution of credit by Input Service Distributor.—(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
33
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 1
[under entries 84 and 92A] of List I of the Seventh Schedule to the
Constitution and entries 51 and 54 of List II of the said Schedule.
21. Manner of recovery of credit distributed in excess.—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.