For security reasons, your session has been timed out. To continue, Please login.
Goods and Services Tax (GST) is considered the biggest reforms in India. However, one thing that has become the talking point is the mechanism of input credit under GST.
In simple words, Input Credit means at the time of paying tax on sales, you can reduce the tax you have already paid on purchases.
Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.
The concept is not entirely new as it already existed under the pre-GST indirect taxes regime (service tax, VAT and excise duty). Now its scope has been widened under GST. Earlier, it was not possible to claim input tax credit for Central Sales Tax, Entry Tax, Luxury Tax and other taxes. In addition, manufacturers and service providers could not claim the Central Excise duty.
Input Tax Credit can’t be applied to all type of inputs, each state or a country can have different rules and regulations. Input Tax Credit is also viable to a dealer who has purchased good to resale. Tax Credit is the backbone of GST and for registered persons is a major matter of concern. This is majorly in line with the pre-GST regime. These rules are quite stringent and particular in their approach.
A registered dealer can claim input tax credit on the basis of following documents:
GST comprises of the following levies:-
ITC can be claimed by a person registered under GST only if he fulfills ALL the conditions as prescribed.
a. The dealer should be in possession of tax invoice
b. The said goods/services have been received
c. Returns have been filed.
d. The tax charged has been paid to the government by the supplier.
e. When goods are received in installments ITC can be claimed only when the last lot is received.
f. No ITC will be allowed if depreciation has been claimed on tax component of a capital good
The following conditions have to be met to be entitled to Input Tax Credit under the GST scheme:
Suppose Mr. A is a seller. He sells goods to Mr. B. The buyer Mr. B is now eligible to claim the purchase credit using his purchase invoices.
This is how it works
In GST we have three types of taxes CGST, IGST, and SGST/UTGST.
For the inter-state supply of goods/ services, IGST is charged. And for the intra-state supply of goods/services CGST and SGST/UTGST are charged.
While making payment for the above taxes, input tax credit will be allowed in the following manner-
|Credit||1st to be utilized for payment of||Balance if any|
|IGST||IGST||CGST and then SGST/UTGST|