ITC - Input Tax Credit

Input Tax Credit

·         What is Input Tax Credit ? 

Ans:  Input Tax Credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.

Example: A is a manufacturer.  Tax payable on the manufactured product is Rs. 200 /-.  However he already paid tax Rs. 75/- at the time of purchase of Raw materials.  So he can pay balance tax Rs. 125/- (i.e., Rs. 200 - Rs.75/-). duly availing the Input Tax Credit to the extent of Rs. 75/-.  Otherwise, he would be liable to pay the tax two times i.e., at the time of purchasing Raw Materials and Selling of manufactured product.

Event	Tax	Remarks
On manufacture of goods	Rs.200/-	Tax liability
On purchase of Raw materials	Rs. 75 /-	Already paid.
Balance Tax to be paid	Rs. 125/-	To be paid (duly availing Rs.75/- as ITC)

·         ITC is one of the fundamental features of GST

·         Seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country.

·         A person registered under composition scheme in GST cannot claim ITC.

ü  ITC can be claimed only for business purposes. ITC will not be available for goods or services exclusively used for: a. Personal use b. Exempt supplies c. Supplies for which ITC is specifically not available

ü   

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