Input Tax Credit



Input Tax Credit

 

What is Input Tax Credit (ITC)?

Input Tax Credit refers to the tax already paid by a person at time of purchase of goods or services and which reduce the tax on outputs.

Amount

Amount

Tax on Output

500

Less:

Tax paid on Purchase of A

150

Tax paid on Purchase of B

200

Tax paid on Purchase of C

100

450

Tax Payable

50

 

SGST,  UTGST,  CGST and IGST – How ITC Can be set off

Amount of Input Tax Credit on IGST shall first be utilized for the payment of IGST then for payment of CGST and the balance, if any for the payment of SGST or UTGST.

Amount of Input Tax Credit on account of CGST shall first be utilized for the payment of CGST then for payment of IGST. Such amount cannot be used for payment of SGST or UTGST.

Amount of Input Tax Credit on account of SGST or UTGST shall first be utilized for the payment of SGST or UTGST then for payment of IGST. Such amount cannot be used for payment of CGST.

Input tax credit cannot be used for payment of interest, penalty, fees or any amount payable under the act.

Credit of CGST cannot be used for payment of SGST/ UTGST and credit of SGST / UTGST cannot be utilised for payment of CGST.

 

Persons who are NOT Allowed To Take Input Tax Credit

  • Ø Persons who are not registered in GST
  • Ø Persons who are registered under composition scheme
  • Ø Purchase of capital goods used for manufacturing exempted goods
  • Ø Blocked credits [Section 17(5)]

Time Limit For Taking ITC

ITC can only be claimed for tax invoices and debit notes which are less than a year old. In any other case, the last date to claim ITC is the earlier of the following:

Ø  Before filing valid GST returns for month of September following the end of the financial year applicable to that invoice. For example, for an invoice issued on June 26, 2020, ITC should be claimed by September 2021,

Ø  Before filing an annual return.

This article is part of a series on GST on Tax Grip Education. Check the link below to read the course from the beginning. 

Article 1: Types of GST

Having rich experience in various profiles related to Taxation, Audit, Accounting, etc., within India and Abroad.

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