Text
The text below is the section as served by the CBIC tax information portal on 17 September 2026, with the portal's own amendment footnote markers (shown as small numerals before a bracket) and its footnotes.[1] The Act as published in the Gazette of India is the legal source.
Section 18, verbatim (show)
* Section 18. Availability of credit in special circumstances.-
(1) Subject to such conditions and restrictions as may be prescribed-
(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;
(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;
(c) where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9:
Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed;
(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable:
Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.
(2) A registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.
(3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.
(4) Where any registered person who has availed of input tax credit opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption:
Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.
(5) The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed.
(6) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.
*Enforced w.e.f. 1st July, 2017.
Sub-section (1)
18(1)Conditions and restrictions
Subject to such conditions and restrictions as may be prescribedSection 18(1)
A person taking special credit must meet the prescribed conditions and restrictions. Each following clause identifies the event, eligible stock and relevant date.
18(1)(a)Registration on becoming liable
a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input taxSection 18(1)(a)
The person must apply within thirty days of becoming liable to registration and obtain registration. Credit concerns inputs in stock and inputs in semi-finished or finished goods held the day before liability to pay tax begins.
Questions to answer on the file6 questions
18(1)(b)Registration under section 25
a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input taxSection 18(1)(b)
The stock date is the day before registration is granted. Credit concerns inputs in stock and inputs contained in semi-finished or finished goods held on that day.
Questions to answer on the file4 questions
18(1)(c) and provisoLeaving composition
Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribedSection 18(1)(c) and proviso
On ceasing to pay tax under section 10, a registered person may take credit on inputs in stock, inputs in semi-finished or finished goods and capital goods. The stock date is the day before liability under section 9 begins. Capital-goods credit must undergo the prescribed reduction.
Questions to answer on the file6 questions
18(1)(d) and provisoExempt supply becomes taxable
such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supplySection 18(1)(d) and proviso
Inputs must relate to the formerly exempt supply, and capital goods must have been used exclusively for that supply. The relevant holding date is the day before the supply becomes taxable. Capital-goods credit is reduced by the prescribed percentage points.
Questions to answer on the file6 questions
18(2)Invoice age limit
A registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.Section 18(2)
The invoice date starts the one-year period for taking credit under sub-section (1). The limit applies across the special circumstances in that sub-section.
Questions to answer on the file3 questions
18(3)Transfer on business reorganisation
the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledgerSection 18(3)
The listed changes are sale, merger, demerger, amalgamation, lease or business transfer, with transfer of the unutilised balance in the prescribed manner. The law does not settle whether the specific transfer-of-liabilities qualification governs every listed change or only business transfer.
Questions to answer on the file5 questions
18(4) and provisoEntering composition or exemption
after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapseSection 18(4) and proviso
A registered person who availed credit and opts for section 10, or whose supplies become wholly exempt, must pay the specified amount through the credit or cash ledger. The calculation uses inputs in stock, inputs in semi-finished or finished goods and capital goods on the preceding day, with the prescribed reduction. Any remaining credit balance lapses after that payment.
Questions to answer on the file8 questions
18(5)Calculation method
The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed.Section 18(5)
The prescribed method governs the amount of special credit. It also governs payment on entering composition or becoming wholly exempt.
Questions to answer on the file1 question
18(6) and provisoSupply of capital goods
the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higherSection 18(6) and proviso
The person must compare reduced credit with tax on transaction value under section 15 for capital goods or plant and machinery on which credit was taken. The higher amount governs. Refractory bricks, moulds and dies, jigs and fixtures supplied as scrap may instead use transaction-value tax under the proviso.
Questions to answer on the file6 questions
Other questions to answer on the file
Questions a reviewer answers from the engagement file, grouped by the part of the section they come from. They describe what the section asks; they do not decide it.
Scope the section as a whole
Questions to answer on the file3 questions
Frequently asked questions
Do the registration clauses use the same stock date?
Clause (a) uses the day before liability to pay tax begins; clause (b) uses the day before registration is granted. Both concern inputs in stock and inputs in semi-finished or finished goods.
Section 18(1)(a) and (b)
Which capital goods qualify when an exempt supply becomes taxable?
Clause (d) requires capital goods to have been used exclusively for the exempt supply. They must be held on the day before the supply becomes taxable, and credit is reduced as prescribed.
Section 18(1)(d)
Does every reorganisation require specific transfer of liabilities?
The law does not settle whether that qualification covers every listed mode or only the immediately preceding business transfer. The transfer entitlement concerns credit remaining unutilised in the electronic credit ledger.
Section 18(3)
What happens to remaining credit after entering composition?
The remaining electronic credit ledger balance lapses after the payment required by sub-section (4). That payment uses the specified stock and capital-goods amounts at the preceding day.
Section 18(4)
Relationship with other provisions
| Provision | Connection | Words that tie them |
|---|---|---|
| Rule 40 of the CGST Rules, 2017 | 18(1) prescribed by rule 40 of the CGST Rules 2017 | 18(1) "Subject to such conditions and restrictions as may be prescribed" |
| Section 25 | 18(1)(b) requires Section 25 | 18(1)(b) "a person who takes registration under sub-section (3) of section 25" |
| Section 10 | 18(1)(c) branches on Section 10 | 18(1)(c) "where any registered person ceases to pay tax under section 10" |
| Section 9 | 18(1)(c) requires Section 9 | 18(1)(c) "the date from which he becomes liable to pay tax under section 9" |
| Rule 41 of the CGST Rules, 2017 | 18(3) prescribed by rule 41 of the CGST Rules 2017 | 18(3) "shall be allowed to transfer the input tax credit which remains unutilised... in such manner as may be prescribed" |
| Rule 44 of the CGST Rules, 2017 | 18(4) prescribed by rule 44 of the CGST Rules 2017 | 18(4) "reduced by such percentage points as may be prescribed" |
| Section 15 | 18(6) requires Section 15 | 18(6) "the tax on the transaction value of such capital goods or plant and machinery determined under section 15" |
Circulars and notifications
Circulars and notifications in the CBIC repository that cite this section, newest first, by number, date and subject. A listing here does not say what an instrument decides; read the instrument.
Circulars (5)
| Number | Date | Subject |
|---|---|---|
| Circular No. 231/25/2024-GST | 11 September 2024 | Clarification on availability of input tax credit in respect of demo vehicles. |
| Circular No. 183/15/2022-GST | 27 December 2022 | Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19 |
| Circular No. 133/03/2020-GST | 23 March 2020 | Seeks to clarify issues in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18 (3) of CGST Act read with rule 41(1) of CGST Rules |
| Circular No. 96/15/2019-GST | 28 March 2019 | Seeks to clarify issues in respect of transfer of input tax credit in case of death of sole proprietor. |
| Circular No. 77/51/2018-GST | 31 December 2018 | Denial of composition option by tax authorities and effective date thereof |
Notifications (8)
| Number | Date | Subject |
|---|---|---|
| Notification No. 16/2020-Central Tax | 23 March 2020 | Seeks to make third amendment (2020) to CGST Rules. |
| Notification No. 09/2019-Central Tax (Rate) | 29 March 2019 | Seeks to amend notification No. 02/2019- Central Tax (Rate) so as to provide for application of Composition rules to persons opting to pay tax under notification no. 2/2019- Central Tax (Rate). |
| Notification No. 02/2019-Central Tax | 29 January 2019 | Seeks to bring into force the CGST (Amendment) Act, 2018. |
| Notification No. 67/2017-Central Tax | 21 December 2017 | Seeks to extend the time limit for filing FORM GST ITC-01 |
| Notification No. 44/2017-Central Tax | 13 October 2017 | Seeks to extend the time limit for submission of FORM GST ITC-01 superseded by a later instrument |
| Notification No. 22/2017-Central Tax | 17 August 2017 | Seeks to amend the CGST Rules, 2017 |
| Notification No. 17/2017-Central Tax | 27 July 2017 | Seeks to amend the CGST Rules, 2017. |
| Notification No. 10/2017-Central Tax | 28 June 2017 | Seeks to amend CGST Rules notification no 3/2017-Central Tax dt 19.06.2017 amended by a later instrument |
Unsettled questions
The words of section 18 do not answer this question. Where one decides a matter on the file, the answer depends on the position taken on it.
- Does "with the specific provisions for transfer of liabilities" qualify every mode of change in sub-section (3), or only the transfer of the business that immediately precedes it? The sub-section lists six modes and attaches the phrase once, at the end, without saying which of them it governs.
See also
- Section 25 of the CGST Act, 2017: procedure for registration
- Section 10 of the CGST Act, 2017: composition levy
- Section 15 of the CGST Act, 2017: value of Taxable Supply
- Rule 40 of the CGST Rules, 2017: manner of claiming credit in special circumstances
- Rule 41 of the CGST Rules, 2017: transfer of credit on sale, merger, amalgamation, lease or transfer of a business
- Rule 44 of the CGST Rules, 2017: manner of reversal of credit under special circumstances
References
- Central Board of Indirect Taxes and Customs. "Section 18. Availability of credit in special circumstances". Central Goods and Services Tax Act, 2017, CBIC tax information portal. Retrieved 17 September 2026.
External links
- CGST Act, 2017, Section 18 on the CBIC tax information portal