{"id":7263,"date":"2022-02-24T17:36:13","date_gmt":"2022-02-24T12:06:13","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=7263"},"modified":"2022-05-24T10:24:48","modified_gmt":"2022-05-24T04:54:48","slug":"input-tax-credit-gst","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/","title":{"rendered":"Input Tax Credit (ITC) in GST &#8211; Meaning, How To Claim It and Examples"},"content":{"rendered":"\n<p>One of the characteristic features of <a href=\"https:\/\/www.tickertape.in\/blog\/gst-return-filing\/?utm_source=blog&amp;utm_medium=article\">GST<\/a> is the steady and coherent flow of input tax credit. The implementation of <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-gst\/\">GST<\/a> on 01 July 2017 brought the mechanism of input tax credit (ITC) to taxpayers\u2019 attention. ITC in GST has been observed to be a suitable mechanism to avoid tax cascading across the supply chain, from manufacture to final consumption.&nbsp;<\/p>\n\n\n\n<p>The earlier system did not allow credit of centrally-levied taxes to be set off for payment of state taxes or vice versa. However, the GST system brings both Central and State taxes under the same regime. Read on to know about ITC in GST and how to claim it.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#What-is-input-tax-credit\" title=\"What is input tax credit?\">What is input tax credit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#How-does-input-tax-credit-under-GST-work\" title=\"How does input tax credit under GST work?\">How does input tax credit under GST work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#Who-can-claim-an-input-tax-credit-under-GST\" title=\"Who can claim an input tax credit under GST?\">Who can claim an input tax credit under GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#When-is-input-tax-credit-unclaimable\" title=\"When is input tax credit unclaimable?\">When is input tax credit unclaimable?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#How-to-claim-an-input-tax-credit-under-GST\" title=\"How to claim an input tax credit under GST?\">How to claim an input tax credit under GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#Documentation-required-to-claim-input-tax-credit-under-GST\" title=\"Documentation required to claim input tax credit under GST\">Documentation required to claim input tax credit under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/input-tax-credit-gst\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-input-tax-credit\"><\/span><strong>What is input tax credit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-gst\/?utm_source=blog&amp;utm_medium=article\">GST<\/a> regime allows businesses throughout India to claim input credit for the tax they pay while buying capital goods. Therefore, input tax credit means that you can lessen the tax you already paid on the input when you pay output tax. Hence, you pay only the balance amount.&nbsp;<\/p>\n\n\n\n<p>Here\u2019s a more elaborate explanation:<\/p>\n\n\n\n<p>You pay taxes on the purchase of goods\/services from a registered dealer. When you sell the same, you collect a certain amount of tax. But, you adjust the taxes paid during purchase with the tax on sales (output tax). The tax on sales minus the tax on purchase is your tax liability to the government.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how\"><span class=\"ez-toc-section\" id=\"How-does-input-tax-credit-under-GST-work\"><\/span><strong>How does input tax credit under GST work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now, let\u2019s understand how the input tax credit works with an example. Say you have a company that sells high-quality plastic and steel spoons. You buy plastic and steel worth Rs. 5,000 from a supplier at a <a href=\"https:\/\/www.tickertape.in\/blog\/gst-registration-fees-and-process\/?utm_source=blog&amp;utm_medium=article\">GST<\/a> rate of 12.5%. Therefore, you pay an input tax of Rs. 625 (12.5% of Rs. 5,000).<\/p>\n\n\n\n<p>Now you sell the spoons for Rs. 10,000 and pay an output tax of 12.5%. Thus, your total selling price is Rs. 11,250 (Rs. 10,000 + 12.5% of Rs. 10,000). So now, your input tax credit is<\/p>\n\n\n\n<p>= Rs. 1,250 &#8211; Rs. 625 = Rs. 625<\/p>\n\n\n\n<p>Therefore, your tax liability to the government is Rs. 625 (output tax minus input tax credit).&nbsp;<\/p>\n\n\n\n<p>Take a look at another example. Assume you are the manufacturer of a good \u2018A\u2019. Tax payable on your final product is say Rs. 600. Taxes that you paid on input\/purchases account for Rs. 400. Now, you can claim this Rs. 400, namely input tax credit, and will have to deposit only Rs. 200 in taxes.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"who\"><span class=\"ez-toc-section\" id=\"Who-can-claim-an-input-tax-credit-under-GST\"><\/span><strong>Who can claim an input tax credit under GST?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You can claim an input tax credit solely for business purposes. As a buyer, you can claim an input tax credit if registered under GST. However, it is mandatory that you also fulfil the following criteria:<\/p>\n\n\n\n<ul><li>You should have the tax invoice(s) of purchase issued by the registered dealer\/vendor\/supplier<\/li><li>You should have received the said goods and services<\/li><li>The dealer\/vendor\/supplier has filed <a href=\"https:\/\/www.tickertape.in\/blog\/types-of-gst\/\">GST returns<\/a><\/li><li>The dealer\/vendor\/supplier has paid the tax liable on your purchases to the government in cash or by claiming input credit<\/li><li>The dealer\/vendor\/supplier has filed GSTR-1, and it reflects in GSTR-2B<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"when\"><span class=\"ez-toc-section\" id=\"When-is-input-tax-credit-unclaimable\"><\/span><strong>When is input tax credit unclaimable?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An input tax credit is not claimable in the following scenarios:<\/p>\n\n\n\n<ul><li>If you have registered under the <a href=\"https:\/\/www.tickertape.in\/blog\/tax-collected-at-source\/?utm_source=blog&amp;utm_medium=article\">GST<\/a> composition scheme.<\/li><li>Goods and services used exclusively for:<br>1. Exempt supplies<br>2. Personal use<br>3. Supplies for which input tax credit is specifically unavailable<\/li><\/ul>\n\n\n\n<ul><li>Besides, the input tax credit is subject to reversal in the following cases:<\/li><\/ul>\n\n\n\n<ul><li>Non-payment of invoices within 180 days of issue.<\/li><li>Businesses using input for both business and personal purposes.<\/li><li>Capital goods used partly for business purposes and partly for personal use\/exempted supplies.<\/li><li>Seller issuing a credit note to ISD.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"tax\"><span class=\"ez-toc-section\" id=\"How-to-claim-an-input-tax-credit-under-GST\"><\/span><strong>How to claim an input tax credit under GST?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Suppose \u2018A\u2019 is a seller who sells certain goods to you, the buyer. Then, based on the tax invoice, you can claim the credit on your purchases. If you\u2019re thinking about how you claim an input tax credit, the following pointers provide a quick run-through:<\/p>\n\n\n\n<ul><li>The seller will file GSTR-1 (containing supply details) and upload all tax invoice details issued in the same.<\/li><li>Sales details will auto-populate\/reflect in GSTR-2A or GSTR-2B.<\/li><li>Now, you will file GSTR-2 (containing details of inward supply), pulling sales data from GSTR-2A or GSTR-2B.<\/li><li>Once you accept the purchase details, the tax on purchase gets credited to your electronic credit register.&nbsp;<\/li><li>Now, you can adjust the credit against future output tax liability and claim the refund.<\/li><\/ul>\n\n\n\n<p>You must report the input tax credit amount in your monthly GST returns if you\u2019re a regular taxpayer. However, you can claim an input tax credit on a provisional basis in form GSTR-3B. As per CBIC (Central Board of Indirect Taxes and Customs), you can provisionally claim up to 20% of the eligible input tax credit during monthly GST return filing. So, you must check the GSTR-2A figures carefully before filing form GSTR-3B.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"claim\"><span class=\"ez-toc-section\" id=\"Documentation-required-to-claim-input-tax-credit-under-GST\"><\/span><strong>Documentation required to claim input tax credit under GST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Most importantly, you must have the following documents to claim an input tax credit under GST:<\/p>\n\n\n\n<ul><li>The invoice issued by the supplier<\/li><li>The invoice supplied by the recipient in addition to proof of payment of tax<\/li><li>A debit note that the supplier issues to the recipient<\/li><li>Bill of entry<\/li><li>Revised invoice<\/li><li>Credit note\/invoice issued by ISD as per GST invoice rules<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The input tax credit mechanism is a fundamental feature of GST, offering a seamless channel for the flow of input credit. From manufacturing goods\/services to final consumption, everybody in the chain benefits from uninterrupted credit movement. Under the earlier tax regime, it was impossible to claim one tax\u2019s input tax credit against another. However, the input tax credit system does away with that limitation. It brings the entire supply chain under GST to be levied side-by-side by the Central and State Governments and evades tax cascading. Reach out to your CA for professional guidance on how to claim the input tax credit.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wondering what does input tax credit mean? Click here for complete information on ITC mechanism, find out your eligibility and know how you can claim ITC in 2022!<\/p>\n","protected":false},"author":54,"featured_media":7287,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8,1741],"tags":[716,1383],"acf":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/02\/TT-23-Feb-22-Input-Tax-Credit-BB.jpg?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7263"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/54"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=7263"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7263\/revisions"}],"predecessor-version":[{"id":8496,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7263\/revisions\/8496"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/7287"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=7263"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=7263"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=7263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}