Section 18-ITC 01-ITC 02-ITC-03

 

Form	Purpose	When filed
GST ITC-01	Claim ITC under 18 (1)(a)-(d)	Within 30 days of eligibility
GST ITC-02	Transfer ITC on sale/merger etc. (18 (3))	Any time before succession; auto-accept by transferee
GST ITC-03	Reverse/pay ITC on switching to composition or exemption (18 (4))	Within 60 days of occurrence
GSTR-3B / DRC-03	Pay amounts under 18 (4)/(6)	Same tax period

Conditions & documentation checklist

1. ITC-01 declaration – file within 30 days of becoming eligible (Commissioner may extend). Must be CA/CMA-certified if total credit > ₹2 lakh.

2. Stock statement date – always “day immediately preceding” the trigger date (liability, registration grant, etc.).

3. Capital-goods calculation – straight-line 5 % of tax per quarter or part thereof from invoice date (Rule 40 / 44).

4. 1-year invoice condition – invoices older than 12 months are dead for § 18 credit (sub-sec 2).

5. Transfer on business sale – file ITC-02; ensure both transferor & transferee file their GSTR-3B correctly that month.

6. Reversal when going composition / exempt – work sheet under Rule 44; pay via GSTR-3B and file ITC-03.

7. Capital-goods disposal entry – keep scrap/sale invoice, working under Rule 44(6), and payment challan (if higher ITC reversal chosen).

Sub-section	Trigger event	What you may take or must reverse/pay	Governing Rules / Forms
18 (1)(a)	You become liable to register and obtain registration (first-time registrant)	Claim ITC on inputs (raw materials, packing, consumables) + inputs in semi/finished goods held the day before liability	Rule 40 (1)(c)(i) · ITC-01 within 30 days (Tax Portal)
18 (1)(b)	You take voluntary registration (though turnover < threshold)	Same credit as above	Rule 40 (1)(c)(ii) · ITC-01
18 (1)(c)	You exit the composition scheme (§10) and shift to normal tax	Claim ITC on inputs, semi-finished/finished goods and capital goods (capital-goods credit reduced 5 % per quarter from invoice date)	Rule 40 (1)-proviso + Rule 40 (1)(a) · ITC-01 (Tax Portal)
18 (1)(d)	Your supplies, earlier exempt, become taxable	Same claim as in (c)	Rule 40 (1)(c)(iv) · ITC-01
18 (2)	Time cap to claim credit under 18 (1)	Invoice must be ≤ 1 year old on the eligibility date (Tax Portal)	–
18 (3)	Sale / merger / de-merger / lease / transfer of business	Unutilized credit may be transferred to the successor	Rule 41 · ITC-02
18 (4)	You start paying tax under §10 (composition) or your supplies become wholly exempt	Reverse / pay back ITC on inputs, semi-finished/finished goods and capital goods (5 % per quarter rule)	Rule 44 · ITC-03
18 (5)	Amount reversed under 18 (4)	Added to output-tax liability of the month of reversal	Rule 44(5)
18 (6)	Dispose / scrap / transfer capital goods (or plant & machinery) on which ITC was taken	Pay higher of – (a) ITC reduced @ 5 % per quarter or (b) GST on transaction value	Rule 44(6) (Tax Portal)