Input tax credit was allowed under Cenvat Credit Scheme and the same was allowed for utilisation for payment of duty / service tax on final product / output services. The credit was allowed on Inputs, Capital Goods and Input Services used for manufacture of goods or for providing output service.
Eligibility criteria -(I) As per Rule 2(k) of the Cenvat Credit Rules inputs eligible for credit were –
- i) Services used by a provider of output service for providing an output service; or
- ii) Used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearances of final products upto the place of removal and includes ............ but excludes ................
- (III) Rule 2(a) of Cenvat Credit Rules defines capital goods and the credit was allowed on goods covered under Chapter 82, 84, 85, 90, 6805, 6804. It also covered goods like Pollution Control Equipments, Spares parts of machinery, Water Tank, Jigs and Fixtures etc. Specified motor vehicles were also covered provided they were used for specified purposes only.
- i) Input credit was restricted to the inputs used in the factory of production.
- ii) Capital goods credit was allowed mainly in respect of specified goods covered under chapter 82, 84, 85 and 90 and parts of such goods. Credit was not allowed in respect of office equipments, office furniture and other assets.
- iii) Capital goods was allowed 50% in the first year and 50% in the next financial year.
- iv) In respect of services, credit was restricted on services like catering, rent a cab, health services, health insurance etc (even if provided to own employees).
Input tax Credit in GST :a) Section 2(59) of the CGST Act defines Inputs means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business
Additional conditions for eligibility of credit -In GST, Section 16 of the CGST Act provides for availing Input tax credit, subject to fulfillment of following conditions –
- a) The material or services are received by the recipient.
- b) The supply is accompanied by a valid tax invoice or such other prescribed document.
- c) The supplier has paid the taxes to the government account.
- d) The supplier has filed a valid return.