Understanding Input Tax

“Input tax” means the {CGST and IGST}/{ SGST and IGST} paid on any goods or services which are used or will be used, in the due course or furtherance of the business.

Input Tax Credit for inputs sent for job work

1) As per section 43A of the Act, the principal shall, with respect to such restrictions and conditions as may be prescribed, is allowed to avail credit of input tax on the inputs which has been sent to a job-worker for the purpose of job-work in case where the said inputs, once the job work has been completed, are received by the principal within 180 days from day of dispatching the inputs for job work

However, the principal will be allowed to take credit with respect to input tax on such inputs in case the inputs are sent directly for job-work to the job-worker and is not initially brought principal’s business place. In such as case the said period of 180 days shall be counted from the date of receipt of such inputs by job-worker

(2) The principal should with respect to the restrictions and conditions as prescribed, is allowed to avail input tax credit on capital goods which has been sent to for job-work to the  job-worker if the capital goods, once the job work has been completed, are received by the principal within 2 years of dispatch of the capital goods for job work

However, the principal will be allowed to take credit with respect to input tax on such capital goods in case the capital goods are sent directly for job-work to the job-worker and is not initially brought principal’s business place. In such as case the said period of 2 years shall be counted from the date of receipt of such inputs by job-worker

(3) Where the capital goods or inputs, whatever be the case, principal does not receive back within specified time as per sub-section (1) or under subsection (2), the principal will have to pay an amount which is equivalent to the input tax credit which is availed on the said inputs or capital goods, together with the interest that is specified under section 36 (1)

However, the principal can reclaim interest paid earlier along with the input tax credit as and when the capital goods or inputs, are received by the principal at his business place.