Input Tax Credit

Input Tax Credit (ITC)

Input Tax Credit means claiming the credit of the GST paid on purchase of Goods and Services which are used for the furtherance of business. The Mechanism of Input Tax Credit is the backbone of GST and is one of the most important reasons for the introduction of GST.

As GST is a single tax levied across India (right from manufacture of goods/ services till it reaches the end customer), the chain does not get broken and everybody is able to take benefit of the same and there is seamless flow of credit.

Input Tax Credit of CGST/ SGST/ UTGST/ IGST

GST comprises of the following levies:-

► Central Goods and Services Tax (CGST) [also known as Central Tax] which is levied on inter-state or inter-union territory on supply of goods or services or both.

► State Goods and Services Tax (SGST) [also known as State Tax] which is levied on supply of goods or services or both within the same state.

► Union Territory Goods and Services Tax(UTGST) [also known as Union Territory Tax] which is levied on supply of goods or services within the same union territory.

► Integrated Goods & Services Tax (IGST) [also known as Integrated Tax) on inter-state supply of goods or services of both.

Conditions for Claiming Input Tax Credit under GST:

► He is in possession of Tax Invoice or any other specified tax paid document.

► He has received the goods or services. “Bill to ship” scenarios also included.

► Tax is actually paid by the supplier.

► He has furnished the GST Return.

► If the inputs are received in lots or installments, he would be eligible to avail the ITC only when the last lot or installment is received.

► The payment should be made within 180 days from the date of issue of invoice. In case the payment is not made within 180 days, failing which the amount of credit availed by the recipient would be added to his output tax liability along with interest. However, once the amount is paid, the recipient would be entitled to avail the credit again. In case part payment has been made, proportionate credit would be allowed.

Documents on the basis of which the ITC can be claimed:

► Invoice issued by supplier of goods or services or both.

► Invoice issued by Recipient along with proof of payment of Tax.

► A Debit note issued by the supplier.

► Bill of entry or similar document prescribed under the Customs Act.

► Revised Invoice.

► Document issued by the Input Service Distributer.