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CGST Section 16 in 80 questions: how we test input tax credit eligibility
Section 16 decides whether input tax credit can be taken at all. We break it into 80 questions, each tied to the exact words of the Act, so every condition is answered from evidence or left visibly open.
By IndiaAuditLens Editorial Team · Updated 2026-10-20
Why we break a section into questions
Our knowledge base keeps one record per statutory provision. The record for Section 16 of the CGST Act, 2017 was built from the text served by the CBIC tax information portal on 17 September 2026, including the portal’s own amendment footnotes, and its 80 questions were reviewed by Prashant Prakash on 22 September 2026 before the record was used. The CBIC portal is a convenient copy; the Act as published in the Gazette of India remains the legal source.
Section 16 is a chain: an entitlement in sub-section (1), six conditions in sub-section (2), three provisos, a bar for depreciation, an outer date, and two later sub-sections that reach back years. Read as prose, it is easy to write “ITC eligible” while one link in the chain is still unknown. Broken into small questions, each tied to the exact words it rests on, every condition can be answered from evidence, or left open where the evidence is not on file.
This article explains how the record is organised. For the section itself and a short map of its conditions, see the Law Library page for Section 16 linked alongside.
Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-
Amendment history: eleven footnotes
The CBIC text carries eleven amendment footnotes. Each changes what an auditor has to test for a given period, so the record dates every one of them. The dates below are as the source’s own footnotes give them.
| Footnote | What changed | Instrument | Effective from |
|---|---|---|---|
| 1 | Clause (aa) inserted: supplier must furnish the invoice or debit note details and they must be communicated to the recipient | s.109, Finance Act, 2021 | 1 January 2022 (Notification No. 39/2021-C.T., 21 December 2021) |
| 2 | Explanation to clause (b) substituted, extending the deemed receipt to services | s.8, CGST (Amendment) Act, 2018 | 1 February 2019 |
| 3 | Clause (ba) inserted: credit communicated under section 38 must not have been restricted | s.100, Finance Act, 2022 | 1 October 2022 (Notification No. 18/2022-CT, 28 September 2022) |
| 4 | “section 41” substituted in clause (c) | s.8, CGST (Amendment) Act, 2018 | A date yet to be notified |
| 5 | “or section 43A” omitted from clause (c) | s.100, Finance Act, 2022 | 1 October 2022 (Notification No. 18/2022-CT) |
| 6 | “thirtieth day of November” substituted in sub-section (4) for “due date of furnishing of the return under section 39 for the month of September” | s.100, Finance Act, 2022 | 1 October 2022 (Notification No. 18/2022-CT) |
| 7 | “invoice relating to such” omitted from sub-section (4) | s.120, Finance Act, 2020 | 1 January 2021 (Notification No. 92/2020-C.T., 22 December 2020) |
| 8 | Proviso to sub-section (4) inserted, for invoices of 2017-18 | Order No. 02/2018-Central Tax, 31 December 2018 | No separate date beyond the Order’s own date |
| 9 | Second proviso: “paid by him along with interest payable under section 50” substituted for “added to his output tax liability, along with interest thereon” | s.138, Finance Act, 2023 | 1 October 2023 (Notification No. 28/2023-C.T., 31 July 2023) |
| 10 | “to the supplier” inserted in the third proviso | s.138, Finance Act, 2023 | 1 October 2023 (Notification No. 28/2023-C.T.) |
| 11 | Sub-sections (5) and (6) inserted | s.118, Finance (No. 2) Act, 2024, dated 16 August 2024 | No commencement date given beyond the Act’s date |
- Footnote 4 is not in force. The CBIC text marks the words “section 41” in clause (c) as a substitution made by the CGST (Amendment) Act, 2018 “with effect from a date yet to be notified”. The record is built on clause (c) as the source serves it, “subject to the provisions of section 41”, and carries the pending change as an open point; when it is notified, the record will be replaced by a new version with the dates split.
- Sub-section (5) reaches back. It was inserted by the Finance (No. 2) Act, 2024 in August 2024, yet it speaks to invoices and debit notes of the financial years 2017-18 to 2020-21 and to returns filed up to 30 November 2021, all of which had closed before the Act was passed. It is retrospective in substance, although the footnote states no commencement date. Sub-section (6), inserted by the same section, is not limited to those years by its words.
- The record speaks for the current wording. A credit for a period before these amendments took effect, for example a claim tested against the outer date before 1 October 2022, also needs the wording in force at that time.
How Section 16 connects to other provisions
Section 16 is rarely enough on its own. Sub-section (2) opens “Notwithstanding anything contained in this section”, so its conditions govern the rest of the section, and other provisions in turn override or complete Section 16.
| Provision | How it connects | Words that tie them |
|---|---|---|
| Section 17(5) | Overrides sub-section (1): blocked credits stay blocked even where every Section 16 condition is satisfied | “Notwithstanding anything contained in sub-section (1) of section 16” |
| Section 10(4) | A composition taxpayer is not entitled to input tax credit | “nor shall he be entitled to any credit of input tax” |
| Section 37 | Clause (aa): the supplier’s statement of outward supplies and the communication of details to the recipient | “in the manner specified under section 37” |
| Section 38 | Clause (ba): credit communicated to the recipient must not have been restricted | “communicated to such registered person under section 38 has not been restricted” |
| Section 39 | Clause (d), the proviso to (4), and sub-sections (5) and (6): the return in which credit is taken | “he has furnished the return under section 39” |
| Section 41 | Clause (c) is subject to it | “subject to the provisions of section 41” |
| Section 49 | Sub-section (1): the manner of taking credit | “in the manner specified in section 49” |
| Section 50 | Second proviso: interest on the amount payable after 180 days | “along with interest payable under section 50” |
| Sections 29 and 30 | Sub-section (6): cancellation of registration and its revocation | “cancelled under section 29” · “revoked by any order, either under section 30” |
| Rule 36, CGST Rules | Documentary requirements and conditions for claiming credit | “subject to such conditions and restrictions as may be prescribed” · “such other tax paying documents as may be prescribed” |
| Rule 37, CGST Rules | The manner of reversal where the supplier is not paid within 180 days | “in such manner as may be prescribed” |
The 15 question groups
The 80 questions fall into 15 groups. Group 0 decides whether the record applies at all and what document the credit is claimed on. Each of the other 14 follows one clause, proviso or sub-section. Every group starts with a question that decides whether it is in play for this credit, then asks for the facts, then states the condition in the Act’s own words.
| Group | Clause | What it tests | Questions |
|---|---|---|---|
| 0. Scope | Section as a whole | Whether a registered person’s credit on an inward supply is in question, and what document it is claimed on | 4 |
| 1. Entitlement | 16(1) | Input tax charged; business use; manner under section 49; prescribed conditions; credit to the electronic credit ledger | 6 |
| 2. Tax paying document | 16(2)(a) | Possession of a tax invoice, debit note or other prescribed document issued by a registered supplier | 5 |
| 3. Supplier reporting | 16(2)(aa) | Details furnished by the supplier in the statement of outward supplies and communicated under section 37 (from 1 January 2022) | 5 |
| 4. Receipt | 16(2)(b) and Explanation | Goods or services received, in fact or by the deeming for delivery or services on the recipient’s direction | 7 |
| 5. No restriction | 16(2)(ba) | Credit communicated under section 38 has not been restricted (from 1 October 2022) | 4 |
| 6. Tax actually paid | 16(2)(c) | Tax charged actually paid to the Government; no reversal under section 41 | 5 |
| 7. Return furnished | 16(2)(d) | Return under section 39 furnished for the period | 3 |
| 8. Lots or instalments | First proviso | Credit only on receipt of the last lot or instalment | 3 |
| 9. 180-day non-payment | Second proviso | Supplier not paid value and tax within 180 days of the invoice; an amount equal to the credit payable with interest | 7 |
| 10. Credit again on payment | Third proviso | Credit availed again once the supplier is paid | 5 |
| 11. Depreciation | 16(3) | Depreciation claimed under the Income-tax Act on the tax component of capital goods | 4 |
| 12. Outer date | 16(4) and proviso | Credit taken after the outer date or the annual return, whichever is earlier; relief for 2017-18 | 9 |
| 13. Window to 30 November 2021 | 16(5) | Credit for 2017-18 to 2020-21 in a return filed up to 30 November 2021 | 3 |
| 14. After revocation | 16(6) | Credit after a cancellation under section 29 is revoked; the later of two windows | 10 |
Worked group: the 180-day rule (second proviso)
Group 9 tests the bar most often missed in practice: a recipient who does not pay the supplier within 180 days of the invoice. It does not reach reverse charge supplies, it counts from the date the supplier issued the invoice, and it measures the amount by the credit availed, not by the unpaid balance.
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be paid by him along with interest payable under section 50, in such manner as may be prescribed:
| # | Question | Answer | Words in the Act |
|---|---|---|---|
| 1 | Is the tax on the supply payable by the supplier rather than by the recipient on reverse charge? | Yes / no | “other than the supplies on which tax is payable on reverse charge basis” |
| 2 | What is the date of issue of the invoice by the supplier? | Date | “from the date of issue of invoice by the supplier” |
| 3 | Has the recipient paid the supplier the full amount towards the value of the supply together with the tax payable on it? | Yes / no | “fails to pay to the supplier … the amount towards the value of supply along with tax payable thereon” |
| 4 | On what date was that payment made to the supplier? | Date | “within a period of one hundred and eighty days from the date of issue of invoice by the supplier” |
| 5 | Did the one hundred and eighty days from the date of issue of the invoice expire before that payment was made? | Yes / no | “within a period of one hundred and eighty days” |
| 6 | What amount of input tax credit was availed on the invoice? | Amount | “an amount equal to the input tax credit availed by the recipient” |
| 7 | Must an amount equal to the credit availed be paid by the recipient along with interest under section 50? | Yes / no | “shall be paid by him along with interest payable under section 50” |
- Where the file does not show whether or when the supplier was paid, the group stays open. It is never guessed either way.
- The third proviso (Group 10) lets the recipient avail the credit again “on payment made by him to the supplier”. The two groups are reported side by side and never netted against each other.
Worked group: the outer date (sub-section (4))
Group 12 tests the time limit. Since 1 October 2022 the outer date is 30 November following the end of the financial year to which the invoice or debit note pertains, or the furnishing of the annual return, whichever is earlier. Before that date the first limb read “due date of furnishing of the return under section 39 for the month of September”, which is why the record asks which outer date applies before comparing dates.
A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
| # | Question | Answer | Words in the Act |
|---|---|---|---|
| 1 | Is the credit claimed on an invoice or a debit note, to which the outer date in sub-section (4) applies? | Yes / no | “in respect of any invoice or debit note” |
| 2 | To which financial year does the invoice or debit note pertain? | Financial year | “following the end of financial year to which such invoice or debit note pertains” |
| 3 | On what date was the return under section 39 in which the credit was taken filed? | Date | “shall not be entitled to take input tax credit … after the thirtieth day of November” |
| 4 | On what date was the annual return for that financial year furnished? | Date | “or furnishing of the relevant annual return, whichever is earlier” |
| 5 | Which outer date applies to this invoice or debit note: 30 November following the financial year, or the due date of the September return following it? | Choice | Footnote 6: substitution with effect from 1 October 2022 |
| 6 | Was the credit taken after the earlier of that outer date and the furnishing of the annual return? | Yes / no | “whichever is earlier” |
| 7 | For an invoice of 2017-18: were its details uploaded by the supplier under section 37(1) by the due date for March 2019? | Yes / no | Proviso: “uploaded by the supplier under sub-section (1) of section 37 till the due date … for the month of March, 2019” |
| 8 | For an invoice of 2017-18: was the credit taken in a return under section 39 for a month up to March 2019? | Yes / no | Proviso: “till the due date of furnishing of the return under the said section for the month of March, 2019” |
| 9 | Is the credit out of time under sub-section (4)? | Yes / no | Sub-section (4) with its proviso |
- Sub-section (5) opens “Notwithstanding anything contained in sub-section (4)”: for invoices and debit notes of 2017-18 to 2020-21, credit taken in a return filed up to 30 November 2021 is not barred by the outer date. Group 13 tests this.
- Sub-section (6) gives a separate window after a cancelled registration is revoked. Group 14 tests it, including the 30 days from the order of revocation.
Worked example 1: an invoice the supplier never reported
A manufacturer holds a tax invoice dated 12 August 2025 from a registered supplier for machine components: value ₹10,00,000, central tax ₹1,80,000. The components reached the factory on 20 August 2025 and the goods receipt note is on file. The supplier’s statement of outward supplies for August 2025 does not carry the invoice, and nothing about it was communicated to the manufacturer. The manufacturer furnished its return for August 2025 on 20 September 2025 and took the credit in it. The file says nothing on whether the supplier paid the tax to the Government or when the manufacturer paid the supplier.
| Condition | Result | Why |
|---|---|---|
| 16(1) entitlement | Met | Input tax charged on components used in the business |
| 16(2)(a) document | Met | Tax invoice from a registered supplier, in possession |
| 16(2)(aa) supplier reporting | Not met | The supplier did not furnish the invoice in its statement of outward supplies; nothing was communicated |
| 16(2)(b) receipt | Met | Received on 20 August 2025, goods receipt note on file |
| 16(2)(ba) no restriction | Open | Nothing was communicated under section 38; silence is not read as “not restricted” |
| 16(2)(c) tax actually paid | Open | The file is silent; this also raises a question the law leaves open (below) |
| 16(2)(d) return | Met | August 2025 return furnished on 20 September 2025 |
| Second proviso (180 days) | Open | Not reverse charge, so in play; the date of payment to the supplier is not on file |
| Third proviso | Open | Follows the second proviso, which is open |
| 16(4) outer date | Not blocked | 30 November 2026 had not passed when the example was set, and the 2025-26 annual return was not furnished |
| Lots, 16(3), 16(5), 16(6) | Not in play | Single delivery; not capital goods; not 2017-18 to 2020-21; no cancellation |
Worked example 2: supplier paid after 180 days, credit availed again
A services firm holds a tax invoice dated 5 April 2025 for an annual software licence: value ₹5,00,000, central tax ₹90,000, payable by the supplier and not on reverse charge. The firm took the whole ₹90,000 as credit in its April 2025 return. It paid the supplier nothing until 20 December 2025, when it paid ₹5,90,000 in full into the supplier’s own bank account. It paid ₹90,000 with interest under section 50 in its October 2025 return and availed the credit again in its December 2025 return.
The date arithmetic: counting from 5 April 2025, 25 days run to 30 April, 31 to 31 May, 30 to 30 June, 31 to 31 July, 31 to 31 August and 30 to 30 September, which is day 178. Day 180 is therefore 2 October 2025. Payment on 20 December 2025 came 79 days after that.
| Condition | Result | Why |
|---|---|---|
| Second proviso (180 days) | Blocked | Not reverse charge; 180 days ran out on 2 October 2025; the supplier was paid on 20 December 2025; the amount the proviso measures is the credit availed, ₹90,000 |
| Third proviso (credit again) | Met | ₹5,90,000 (value and tax) paid to the supplier itself; credit availed again in the December 2025 return |
| Lots, 16(3), 16(5), 16(6) | Not in play | Each group’s first question answered no |
- The two provisos are shown side by side. The record does not say what the firm owes, what interest runs or what credit it may keep; whether the firm’s own interest computation is right is a separate check.
Worked example 3: depreciation on the tax component, and a late credit
A company holds a tax invoice dated 14 February 2024 for a moulding machine: value ₹40,00,000, central tax ₹7,20,000. It capitalised ₹47,20,000 and claimed depreciation under the Income-tax Act, 1961 on the whole ₹47,20,000. It took the ₹7,20,000 credit in its March 2025 return, filed on 20 April 2025. Its annual return for 2023-24 was furnished on 20 December 2024.
The arithmetic: the tax component on which depreciation was claimed is ₹47,20,000 − ₹40,00,000 = ₹7,20,000. The outer date is the earlier of 30 November 2024 and 20 December 2024, which is 30 November 2024. The credit was taken on 20 April 2025, 141 days after it.
| Condition | Result | Why |
|---|---|---|
| 16(3) depreciation | Blocked | Depreciation claimed on the tax component of ₹7,20,000 |
| 16(4) outer date | Blocked | Credit taken on 20 April 2025, after the outer date of 30 November 2024 |
| 16(5) window to 30 November 2021 | Not in play | 2023-24 is not one of the four years sub-section (5) names |
| Second and third provisos | Open | Nothing on file says whether or when the supplier was paid |
| Lots, 16(6) | Not in play | Single delivery; no cancellation |
- Two independent bars apply, and each is named with the facts behind it. Neither cancels the other, and the record does not say what credit the company may keep.
Questions the law leaves open
Three questions in the record cannot be answered from the words of Section 16. They are recorded as points on which a firm needs a considered position, and where they decide a condition the condition is reported as needing that position rather than as met.
- Business use: what makes goods or services “used or intended to be used in the course or furtherance of his business” where the connection to the business is indirect?
- Paying the supplier: does a settlement by book adjustment or set-off count as paying “the amount towards the value of supply along with tax payable thereon”, and what follows where only part of the amount is paid?
- Tax actually paid: how is a recipient to establish that the tax “has been actually paid to the Government”, when the Act gives the recipient no means of seeing the supplier’s payment?
How results are reported
Each group reports one result, and the clauses of sub-section (2) are reported one by one, never collapsed into a single word.
| Result | Meaning |
|---|---|
| Met / not met | For a condition (for example clause (aa) or the third proviso): the condition the group states is or is not satisfied on the evidence, with the clause named |
| Blocked / not blocked | For a bar (the 180-day rule, depreciation, the outer date): the bar does or does not apply |
| Not in play | The group’s first question answered no, for example the goods did not arrive in lots |
| Open | A fact the group needs is not on file. A missing fact is never read as met or as not in play |
- The record never states “credit allowed” and never computes a figure of credit. Whether the credit stands is the auditor’s conclusion, recorded in the engagement file.
- A credit that satisfies every Section 16 group may still be blocked under section 17, which overrides sub-section (1), so section 17 has to be checked as well.
- Rules 36 and 37 of the CGST Rules supply the prescribed conditions and the manner of reversal. The record points to them; they are not part of these 80 questions.
Frequently asked questions
What happens when the supplier never reports the invoice?
Since 1 January 2022, clause (aa) requires that the invoice or debit note details “has been furnished by the supplier in the statement of outward supplies” and communicated to the recipient under section 37. If they were not, that condition is not met, even where the invoice is held, the goods were received and the return was filed.
Does the 180-day rule apply to reverse charge supplies?
No. The second proviso applies to a failure to pay the supplier “other than the supplies on which tax is payable on reverse charge basis”.
Can ITC be taken after 30 November?
Under sub-section (4), not after 30 November following the end of the financial year to which the invoice or debit note pertains, or the furnishing of the relevant annual return, whichever is earlier. The 30 November wording applies from 1 October 2022; before that the limit was the due date of the September return. The section’s own exceptions are the proviso for 2017-18, sub-section (5) for 2017-18 to 2020-21 (returns filed up to 30 November 2021), and sub-section (6) after a cancelled registration is revoked.
Once the supplier is paid after 180 days, can the credit be taken again?
Yes. The third proviso entitles the recipient to avail the credit “on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon”. The words “to the supplier” were inserted with effect from 1 October 2023.
Related pages
- Section 10, CGST Act
- Section 16, CGST Act
- Section 17, CGST Act
- Section 29, CGST Act
- Section 30, CGST Act
- Section 37, CGST Act
- Section 38, CGST Act
- Section 39, CGST Act
- Section 41, CGST Act
- Section 43A, CGST Act
- Section 49, CGST Act
- Section 50, CGST Act
- Rule 36, CGST Rules
- Rule 37, CGST Rules
- GST 2B vs books reconciliation for statutory audit
- Audit module