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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