• Divya Dhomne

How to Avail Input Tax Benefits with GST ?

Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on output. Therefore, if you buy from us for business purpose, i.e. either for using the goods as an input or selling the goods to end consumers, the effective cost of buying the goods is reduced due to the input tax you can claim on the goods bought. Input tax claims help businesses manage their tax burden.

GST brings a smooth flow of input credit across the supply chain from the manufacturer to the ultimate consumer. By the employment of GST Input Tax Credit on the supply of goods and services, the amount of tax payable can be decreased significantly leading to the procurement of profit.

What is Input Tax Credit?

When the GST is charged to a tax payable person the tax is known as Input Tax. It means when you have to pay a tax on any output, you can reduce the tax as you have already paid tax on its input.

How to Reduce tax under GST?

The tax can only be reduced under a single condition. The consumer must be aware of his rights, meaning one should know how to get the input and during procurement what amount should be paid on each input so it becomes easy to find the reduction in tax when calculating the output. Input tax has led to the reduction of all other taxes.

How to avail Input tax?

The following conditions have to be met to be entitled to Input Tax Credit under the GST scheme:

  1. One must be a registered taxable person.

  2. One can claim Input Tax Credit only if the goods and services received is used for business purposes.

  3. Input Tax Credit can be claimed on exports/zero-rated supplies and are taxable.

  4. For a registered taxable person, if the constitution changes due to merger, sale or transfer of business, then the Input Tax Credit which is unused shall be transferred to the merged, sold or transferred business.

  5. One can credit the Input Tax Credit in his Electronic Credit Ledger in a provisional manner on the common portal as prescribed in model GST law.

  6. Supporting documents – debit note, tax invoice, supplementary invoice, are needed to claim the Input Tax Credit.

  7. If there is an actual receipt of goods and services, an Input Tax Credit can be claimed.

  8. The Input Tax should be paid through Electronic Credit/Cash ledger.

  9. All GST returns such as GST-1, 2,3, 6, and 7 needs to be filed

What can be claimed under ITC?

  • Integrated Service Tax can be claimed when everything is regarding the business purpose.

  • For personal purposes, exempt supplies or any other purposes it cannot be claimed.

When to avail Input Tax Credit?

  • If you have paid tax in GST, only then you can avail it.

  • If you have already paid the tax for input and also have to pay taxes on the final output, then it becomes a boon to avail of this input tax and procures a heavy exemption.

Process for the Reversal of Input Tax Credit (ITC)?

  • If the invoice is not paid within 180 days when an issue is raised, then the tax is reversed.

  • If a credit note is issued to an ISD dealer then reversal takes place.

  • If business and personal use segregations are not proper, then also reversal is done.

To know more you can view Input tax credit mechanism.

For more details: click

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