Wrong Availment of Input Tax Credit not sustainable?


  • If tax is paid at the time of supply and conditions of Section 16 of Central Goods and Service Tax are fully satisfied then the allegation of the Wrong Availment of Input Tax Credit is not sustainable.
  • Recently, several persons were arrested by the concerned department on the wrong and fraudulent availment of Input Tax Credit and their utilization.
  • The main reason for an allegation of the department is that the Input Tax Credit has been availed without the actual receipt of the goods or
  • ┬áThe goods are procured from non-registered suppliers whereas invoices were generated without the actual receipt of goods from registered suppliers.
  • Provided, the violators shall be liable to penal and other actions prescribed under the provisions Goods and Service Tax Act, 2017.
  • However, the Input Tax Credit is a beneficial piece of legislation and it should be understood and interpreted liberally.
  • In this article, we will learn about the procedure and provisions for availing and utilization of Input Tax Credit and whether the same is satisfied or not.

Legal Perspective

  • While discussing the Input Tax Credit, it is also important to examine provisions prescribed under Section 155 of the Central Goods and Service Tax Act, 2017.
  • Section 155 of the CGST Act states about the Burden of Proof which means that the person who claims to be eligible for input tax credit then the burden of proving such claim shall lie on such person only.
  • It is clear from the aforesaid section that the burden of proof is the eligibility criteria that credit has been cast on the person taking the Input Tax Credit.
  • This also means that he has to prove eligibility for Input Tax Credit in accordance with provisions of Section 16 of the CGST Act, 2017.
  • Section 16 of CGST Act, 2017 prescribes guidelines for eligibility and condition for taking the input tax credit.
  • Under this section, the registered person shall be subject to certain conditions and restrictions in a prescribed manner to be entitled to take credit of Input Tax charged on any supply of goods and services during the course of business and the said amount shall be credited to the credit ledger of such person.

Essential Ingredients in Input Tax Credit

  • In the course of business, the supply of goods or services used or intending to be used.
  • The tax invoices or debit note possession by the registered supplier is required.
  • Goods and Service received by the Supplier.
  • The tax paid with respect to supply.
  • Return under Section 39 of the CGST Act is filed.

Other Aspect

  • It is very clearly said after discussing the parameters as prescribed under section 16 of the CGST Act, 2017.
  • The Input Tax Credit cannot be denied in any circumstances. The said allegation by the concerned department in respect to availment and utilization of Input Tax Credit is not sustainable if the above-mentioned conditions are not fulfilled.
  • The department at its own discretion cannot amend and impose its own rules for eligibility of Input Tax Credit.
  • This shall mean that supplier has discharged the burden put on him under Section 155 of the CGST Act, 2017.
  • After evaluating the examination and eligibility criteria, it shall be important to verify the relevant documents that are necessary for taking Input Tax Credit.
  • Rule 36 (1) of the CGST Rules, 2017 provides for the documentary requirement for claiming the input tax credit.

Requirements and Condition in documentary form for claiming Input Tax Credit

  • The Input Tax Credit (ITC) can be availed by a registered person and Input Service Distributor on the basis of the following documents
  • An invoice is given by the supplier of goods or services
  • Invoice issued in accordance with the provision of clause (f) subject
  • A debit note issued by the supplier
  • Bill of entry or any similar document prescribed under Customs Act, 1962
  • The Credit note of the Input Service Distributor or any other document issued.


  • As per the above discussion, it has been made very clear that the supplier needs to meet the eligibility and requirement as mentioned under Section 16 of the Central Goods and Service Tax Act, 2017 for taking Input Tax Credit.
  • Also, Rule 36 (1) of CGST Rules, 2017 provides with the prescribed documents on the basis of Input Tax Credit can be taken and without it, the credit is not admissible.
  • It can be also stated that payment of taxes at the time of supply of goods can be also referred to as a reversal of tax and natural revenue as there is no loss of revenue in any transaction.

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