Page 7 - Ch_10 ITC

2nd Proviso to Sec 16(2) read with Rule 37:- Payment for an invoice to be made within 180 days

CCP 10.02.07.00
Answer the following questions:
1) Can a person take ITC without payment of consideration for the supply along with tax? [Study Mat]
2) If part payment of consideration is made by the recipient to the supplier, then whether full amount of
tax can be adjusted first? If no, then whether it has to be calculated proportionately?

3) A registered person must pay to the supplier, the value of the goods and/or services along with the
tax within 180 days from the date of issue of invoice. State the exceptions to said rule. [CA Inter MTP
Mar 23]
Answer :-

1) Ü Yes, the recipient can take full ITC.
Ü However, proviso to section 16(2) read with rule 37 states that recipient is required to pay the
full consideration along with tax within 180 days from the date of issue of invoice. This condition is
not applicable where tax is payable on reverse charge basis.

2) ÜIf recipient fails to do so, then corresponding credits availed in respect of such supply,
proportionate to the amount not paid to the supplier, by him will be added to his output tax
liability or it shall be reversed along with interest.
Ü If part payment is made against an invoice, then proportionate ITC is available for the tax

involved & thus, full amount of tax cannot be adjusted first against the part payment made.
3) The condition of payment of value of supply plus tax within 180 days does not apply in the
following situations:
a) Supplies on which tax is payable under reverse charge.
b) Deemed supplies without consideration.

c) Additions made to the value of supplies on account of supplier's liability, in relation to such
supplies, being incurred by the recipient of the supply.

Sec 16(3):- If depreciation is claimed on tax component, ITC is not allowed
CCP 10.02.08.00
Whether the registered person can avail the benefits of input tax credit and depreciation on the tax
component of capital goods and plant and machinery simultaneously?

Answer:
Ü No, the benefits of input tax credit and depreciation on tax component of capital goods and plant and
machinery cannot be availed simultaneously.
Ü Section 16(3) of CGST Act states that input tax credit will not be allowed on tax component of cost of

capital goods and plant and machinery, if depreciation is claimed on the same under Income Tax Act, 1961
by registered person.
Ü It means that either depreciation on tax component can be claimed under Income Tax Act or ITC of such tax
paid can be availed under GST laws.

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