Input Tax Credit - ITC
INPUT TAX
CREDIT
When we purchase goods we pay Input GST to dealer and
when we sell the same then we collect output GST from customer. So when we pay
Taxes to Tax Authorities, we deduct the one we paid during purchase this is
called Input Tax credit . Means while paying tax we don't pay whole amount
collected from customer but the difference between output GST(GST collected
from customer while selling the goods) and Input GST (GST paid to dealer while
purchasing goods), this adjustment is called Input Tax Credit.
Let us understand the same with the help of
following illustrations
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| Input Tax Credit ITC |
Who
can claim ITC
ITC can be claimed by a person registered
under GST only if he meets ALL the conditions mentioned
below.
a. The dealer should have tax invoice
b. The said goods/services have been
received
c. Returns have been filed.
d. The tax collected has been paid to the
government by the supplier.
e. When goods received in installments, Input
Tax Credit can be claimed only after the last lot is received.
f. If depreciation has been claimed on tax
component of a capital good, No ITC will be allowed
Note:
Business registered under composition scheme in GST cannot claim ITC.
Input Tax Credit can be claimed only for business purpose Transactions.
ITC will not be available for goods or
services specifically used for:
a. Personal use
b. Exempt supplies
c. Supplies for which ITC is not available
How
to claim ITC
All regular taxpayers must file the amount
of input tax credit(ITC) in their monthly GST returns in the Form GSTR-3B. Table
below shows eligible ITC, Ineligible ITC and ITC reversed during the tax
period.
Reversal
of Input Tax Credit
ITC can be availed only on goods and
services for business purposes. Apart from these, there are certain other
situations where ITC will be reversed.
ITC will be reversed in the following
cases-
1) Non-payment of invoices in 180 days
2) Credit note issued to ISD by seller
3) Inputs partly for business purpose and
partly for exempted supplies or for personal 4) Capital goods partly for
business and partly for exempted supplies or for personal use
5) ITC reversed is less than required
Reconciliation
of ITC
ITC claimed by the person has to match with
the details specified by his supplier in his GST return. In case of any mismatch, the supplier and
recipient would be communicated regarding discrepancies after the filling of
GSTR-3B.
How
to utilize the Input tax credit
In
GST we have three types of taxes CGST, IGST, and SGST/UTGST.
IGST is applicable for the inter-state supply of goods/ services.
and for the intra-state supply of goods/services both CGST and SGST/UTGST are charged.
IGST is applicable for the inter-state supply of goods/ services.
and for the intra-state supply of goods/services both CGST and SGST/UTGST are charged.
While payments are made for these taxes,
input tax credit will be allowed in the following manner
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| ITC Utilization |
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