What is an Input Tax Credit under GST (ITC)?

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What is an Input Tax Credit

Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs.

If you are a manufacturer/Supplier/Services Provider/ – tax payable on output (FINAL PRODUCT), Rs 1000 tax paid on input (PURCHASES) is Rs 750 You can claim INPUT CREDIT of Rs 750 and you only need to deposit Rs 250 in taxes.

Understanding ITC

What is an Input Tax Credit

Input Credit Mechanism is available If you are covered under the GST Act. If you are a manufacturer, supplier, agent, e-commerce operator, aggregator, or any of the persons registered under GST, you are eligible to claim INPUT CREDIT for tax paid by you on your PURCHASES.

Read This:- GST क्या है? What is GST? Full Explain

Allowed ITC

  • You must have a tax invoice(of purchase) or debit note issued by the registered dealer
  • You should have received the goods/services
  • The supplier has filed GST returns
  • The tax charged on your purchases has been deposited/paid to the government by the supplier in cash or via claiming input credit
  • It is possible to have unclaimed input credit. Due to tax on purchases being higher than a tax on the sale. In such a case, your ITC is carry forward or claim a refund.
  • An input tax credit allows on capital goods.

Disallowed ITC

  • An input tax credit cannot take on purchase invoices that are more than one year old. The period calculates from the date of the tax invoice.
  • No ITC is available for goods and services for personal use/non-resident.
  • No ITC is available for GST for the construction of an immovable property on his own account.
  • Input tax not allow for composition taxpayer/lost/stolen/damaged goods.
  • ITC does not allow purchases from composition taxpayers.
  • Input tax is not allowed for restaurants/food/beverages or club membership.
  • ITC does not allow for servicing/general insurance/repair/maintenance.
  • Input tax does not allow for employees ‘ travel/life insurance/conveyance/health.

Read This:- CBIC notified Guidelines on Cancellation of GST Registration

Types of Taxes Under GST

There are 3 types of taxes under GST 

SGST – State GST CGST – Centre GST IGST – Integrated GST

What is an Input Tax Credit

How to Avail Input Tax Credit

What is an Input Tax Credit

Remember:-

  • CGST:- CGST ITC availed against CGST but cannot use to pay SGST liability.
  • SGST:- SGST ITC availed against SGST but cannot use to pay CGST liability.
  • CGST & SGST ITC cannot use to pay each other.
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