Section 18 of the Central Goods and Services Tax Act, 2017 (CGST Act) deals with the availability of credit in special circumstances. It specifies situations where a registered person can claim input tax credit (ITC) even though they might not ful fill the general conditions for claiming ITC as per Section 16 of the CGST Act (GST) Act, 2017.

Here are the key points to understand about the availability of credit in special circumstances under the GST Act:

Conditions for claiming ITC under Section 18:

• Subject to such conditions and restrictions as may be prescribed by the government.
• The credit can be claimed on:
  • Inputs held in stock: These are goods that have been purchased but not yet used in the production or supply of taxable goods or services (GST) Act, 2017.
  • Inputs contained in semi-finished or finished goods held in stock: These are goods that have been partially or fully manufactured but not yet sold.
  • Capital goods: These are goods used for more than one tax period and are essential for the business(GST) Act, 2017. However, the credit on capital goods is reduced by a prescribed percentage.

Specific circumstances covered under Section 18:

• Registration within 30 days: A person who applies for registration under the GST Act within 30 days of becoming liable to register and is granted such registration can claim ITC on inputs(GST) Act, 2017 held in stock on the day before they become liable to pay tax.
• Registration under section 25(3): A person who takes registration under section 25(3) (which deals with special cases of registration) can claim ITC on inputs held in stock on the day before the date of grant of registration (GST) Act, 2017.
• Cessation of tax payment under section 10: If a registered person ceases to pay tax under section 10 (which deals with opting out of the composition scheme), they can claim ITC on inputs, semi-finished/finished goods, and capital goods (GST) Act, 2017 held in stock on the day before they become liable to pay tax under section 9 (which deals with the normal tax scheme).
• Exempt supply becoming taxable: If an exempt supply of goods or services (or both) by a registered person becomes a taxable supply, they can claim ITC on inputs held in stock relatable to such exempt supply.

Additional points to note:

• The government may prescribe specific conditions and restrictions for claiming ITC under different situations mentioned in Section 18.
• The value of ITC claimed should be properly documented and supported by valid invoices and other relevant documents (GST) Act, 2017.
• The claim for ITC must be filed within the specified time limit.

EXAMPLE

1. New Registrations:

• A person who registers for GST within 30 days of becoming liable to register can claim ITC on inputs held in stock and inputs contained in semi-finished or finished goods under (GST) Act, 2017 on the day before registration.

2. Cessation of Tax Payment under Composition Scheme:

• If a registered person under the composition scheme opts out and starts paying regular GST (GST) Act, 2017, they can claim ITC on inputs, semi-finished/finished goods, and capital goods held in stock on the day before the change.

3. Exempt Supply becoming Taxable:

• When an exempt supply of goods or services becomes taxable, the registered person can claim ITC on inputs, semi-finished/finished goods, and capital goods used for that supply on the day before it becomes taxable (GST) Act, 2017.

4. Transfer of Business:

• If a registered person transfers their business as a whole or part to another registered person (GST) Act, 2017, the transferee can claim ITC on the inputs, semi-finished/finished goods, and capital goods held in stock on the transfer date.

5. Input Services used for Both Taxable and Exempt Supplies:

• If a registered person uses input services for both taxable and exempt supplies, they can claim ITC on a proportionate basis based on the use for taxable supplies under (GST) Act, 2017.

6. Capital Goods:

• ITC on capital goods can be claimed in full or proportionate to their use for taxable supplies. However, there are specific conditions and time limitations for claiming ITC on capital goods under (GST) Act, 2017.

7. Inputs Destroyed, Lost, or Discarded:

• ITC can be claimed on inputs destroyed, lost, or discarded due to natural calamities or accidental fire/theft.

Specific State Example:

State: Maharashtra

Scenario: A registered person in Maharashtra, who was previously under the composition scheme, opted out on 1st October 2023 and started paying regular GST. They have inputs and semi-finished goods worth Rs. 10,000 in stock on 30th September 2023, the day before opting out.

ITC Availability: The registered person can claim ITC of Rs. 1,800 on the inputs and semi-finished goods in stock (assuming the applicable GST rate is 18%).

Note: These are just a few examples of special circumstances where ITC can be claimed under the GST Act 2017. For specific details and eligibility criteria, please refer to the relevant sections of the Act and Rules.

FAQ QUESTIONS

Q1. What are the special circumstances in which input tax credit (ITC) can be claimed?

A1. Section 18 of the CGST Act 2017 outlines special circumstances where ITC can be claimed. These include:

• Transition from earlier tax regime: A registered person can claim ITC on inputs held in stock on the day immediately preceding the date of registration under the GST Act.
• Input services used for exempted goods: ITC can be claimed on input services used for exempt goods to the extent they are used for making taxable supplies under (GST) Act, 2017.
• Goods lost, stolen, destroyed, written off, or used for personal consumption: ITC can be claimed on such goods if they are used for authorized purposes or disposed of in a manner prescribed by the rules.
• Goods returned: ITC can be claimed on returned goods if the tax has been paid on such goods under (GST) Act, 2017.
• Tax paid under sections 74, 129, and 130: ITC can be claimed on tax paid under these sections (GST) Act, 2017, which deal with situations like late filing of returns or revision of assessment.
• Exempted goods or services by special order: The government can exempt any goods or services from GST by a special order, and in such cases, ITC may be available depending on the specific order.

Q2. What are the time limits for claiming ITC?

A2. Generally, ITC must be claimed within one year from the date of the tax invoice. However, for goods held in stock on the date of registration under (GST) Act, 2017 the ITC can be claimed within six months from such date.

Q3. What are the conditions for claiming ITC in special circumstances?

A3. The specific conditions for claiming ITC vary depending on the special circumstance. However, some general conditions include:

• The input tax credit must be admissible under the GST Act.
• The registered person must have furnished all the returns required under the law.
• The ITC should not relate to any exempted goods or services unless specifically allowed by the Act(GST) Act, 2017.
• Proper records and documents must be maintained to support the claim of ITC.

Q4. Where can I find more information about the availability of ITC in special circumstances?

A4. You can find more information about the availability of ITC in special circumstances in the following resources

CASE LAWS

The availability of credit in special circumstances under the Goods and Services Tax (GST) Act, 2017 is governed by Section 18 of the Act. This section outlines situations where a registered person can claim input tax credit (ITC) on certain goods and services under (GST) Act, 2017, even if they don’t meet the usual requirements.

Several case laws have interpreted and clarified the provisions of Section 18 in various scenarios. Here are some of the key cases:

1. Commissioner of CGST & Central Excise vs. M/s. Jindal Steel & Power Ltd. (2021)

This case dealt with the interpretation of “inputs held in stock” under Section 18(1)(a). The court held that the term “inputs” should be interpreted liberally to include goods that are not physically present in the registered person’s premises but are under (GST) Act, 2017  his control and are intended for use in his business.

2. M/s. Hindustan Petroleum Corporation Ltd. vs. Union of India (2020)

This case addressed the issue of claiming ITC on inputs used for exempt supplies. The court ruled that a registered person can claim ITC on inputs used for exempt supplies only if they are relatable to such supplies under (GST) Act, 2017. The court also clarified that the onus of proving the relation between inputs and exempt supplies lies with the registered person.

3. M/s. S.K. Builders Pvt. Ltd. vs. Commissioner of Central Tax (2020)

This case involved the interpretation of Section 18(1)(d), which deals with the availability of ITC on capital goods used for exempt supplies. The court held that a registered person can claim ITC on capital goods used for exempt supplies only if such goods under (GST) Act, 2017 are exclusively used for such supplies.

4. M/s. VKC Foils Ltd. vs. Assistant Commissioner, CGST & Central Excise (2020)

This case dealt with the time limit for claiming ITC under Section 18(1)(b). The court held that the 30-day time limit for claiming ITC under this provision starts from the date of grant of registration under (GST) Act, 2017, not the date of application for registration.

5. M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. vs. Commissioner of CGST & Central Excise (2019)

This case addressed the issue of claiming ITC on inputs used in job work. The court held that a registered person can claim ITC on inputs used in job work only if such inputs are returned to him in the same form under (GST) Act, 2017.

These are just a few examples of case laws that have interpreted the provisions of Section 18 of the GST Act. It is important to note that the interpretation of this section is constantly evolving under (GST) Act, 2017 and new case laws may emerge in the future.