1. Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.

 

2. The concept is not entirely new as it already existed under the pre-GST indirect taxes regime (service tax, VAT and excise duty). Now its scope has been widened under GST.

 

3. Earlier, it was not possible to claim input tax credit for Central Sales Tax, Entry Tax, Luxury Tax and other taxes. In addition, manufacturers and service providers could not claim the Central Excise duty.

 

4. During the pre-GST era, cross-credit of VAT against service tax/excise or vice versa was not allowed. But under GST, since these taxes will be subsumed into one tax, there will not be the restriction of setting of this input tax credit.

 

5. The conditions to claim Input Tax Credit under GST is a very critical activity for every business to settle the tax liability.

 

6. Input Tax Credit can’t be applied to all type of inputs, each state or a country can have different rules and regulations.

 

7. Tax Credit is the backbone of GST and for registered persons is a major matter of concern. This is majorly in line with the pre-GST regime. These rules are quite stringent and particular in their approach.

 

How to Claim Input Tax Credit (ITC)?

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.

 

What are the Documents and Forms Required to Claim Input Tax Credit?

Each applicant will require the following documents to claim Input Tax Credit under GST:

1. Supplier issued invoice for supplying the services and goods or both according to GST law.

 

2. A debit note issued by the supplier to the recipient in case of tax payable or taxable value as specified in the invoice is less than the tax payable or taxable value on such supplies.

 

3. A credit note or invoice which is to be issued by the ISD (Input Service Distributor) according to the GST invoice rules.

 

4. An invoice issued like the bill of supply under certain situations instead of the tax invoice. If the amount is lesser than INR 200 or in conditions where the reverse charges are applicable according to the GST law.

 

5. A supplier issued a bill of supply for goods and services or both as per the GST invoice rules.

 

Important Points Regarding ITC

 

1. For advance payment, the supplier is required to pay tax on such advance receipt but in case of the recipient, he can avail the ITC only when tax invoice is issued and goods/services are received.

 

2. ITC cannot be availed on the basis of a photocopy of the valid document.

 

3. SGST paid in one state cannot be utilized as credit for payment of SGST of another state.

 

 

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