The tax on the purchase of goods or services which is reduced from the tax payable on outward supplies is known as an input tax credit in the GST code. In other words, the tax deducted from the output tax payable on the supply of goods and services is known as an input tax credit which is ITC full form in GST as well.
ITC meaning in GST is that the integrated tax(IGST), central tax(CGST), union territory tax(UTGST) or state tax(SGST) charged on supply of goods or services or both. Tax paid on a reverse charge basis and integrated tax charged on import of goods are also included under Input tax in GST search. GST input tax credit does not include tax paid under composition levy
Input tax credit under GST means that at the time of paying output tax liability on supply of goods and services you can deduct the tax you have already paid on purchases and the remaining amount must be paid as tax to the Government. For example: When you purchase a product or service you pay the tax on purchases and on selling you collect the tax. Now the tax you paid on purchases has to be deducted from the amount of output tax i.e. tax collected on sales and the remaining tax has to be paid to the government this process is known as utilization of Input tax credit in GST in eway bill. Now let’s understand what is input tax credit practical questions in GST entry with an example: Suppose Mr Amit purchased goods worth Rs. 25000 on which GST is 18% i.e. Rs. 4500 and, MR. Amit sold goods worth Rs.30,000 on which GST payable is 18% i.e. Rs.5,400. Let us understand the Net GST payable and input tax credit under GST:
|Outward GST Payable||5,400|
|Less: GST paid on purchase||4,500|
|Net GST Payable||900|
From the above ITC example, it is clear that input tax credit is the reduced amount of Rs.4,500 which was paid during the purchase of goods by Mr Amit.
Every registered individual is qualified to take credit of input GST calculator charged on any delivery of goods or services purchased by him that are used or supposed to be used in course of his business based on any of the following documents:
Things to keep in mind while claiming Input Tax Credit under GST:
In case all the above-mentioned conditions are met but the supplier is not able to furnish the invoice in his GSTR-1, then provisional input tax credit can be taken upto 5% of the credits that are eligible and furnished by the supplier in his GSTR-1.
Input tax credit problems and solutions:-
The answer is NO. A person can not claim the input tax credit if he is not registered at the time of receiving goods and services even though he obtains registration later on. There is an exception to the above rule under the law wherein a person makes an application for registration within 30 days from the date such person is liable for the same. In these situations, the date of registration would be the date from which he is liable to obtain the registration and hence the supplier could revise the invoices issued within 30 days from the date of issuance of such registration certificate therefore, the newly registered person can avail input tax credit.
Now, according to section 16(1) of the CGST Act, it grants power to prescribe the conditions and restrictions according to which input tax credit can be availed. Therefore, we can conclude that power granted to prescribe restrictions on how to avail ITC does not include the power to restrict the utilization of validly availed input tax credit. Hence this rule (rule 86) violates section 16(1). Also, section 49(4) of the CGST Act states that the amount available in the electronic credit ledger can be used to make payments towards output tax in such manner and conditions and within a specified time as prescribed. Hence, section 49(4) only provides the conditions based on which we can utilize the balance in the electronic credit ledger. Therefore, on this ground also it can be concluded that rule 86A is violating the provisions of this Act.
“Input Tax Credit” means the credit of GST Taxes such as Central tax – CGST, State tax- SGST, Integrated tax- IGST, or Union Territory tax – UTGST available to the registered person on the inward supply of goods or services or both in the course or furtherance of his business excluding the tax paid under composition levy. It further includes the tax paid on supply of goods or services or both on which the recipient is liable to pay on reverse charge basis.
Example: Mr. A sells goods worth Rs 1,00,000 to Mr. B. on 01.08.2021 on credit. GST, @ 5 % has been assumed which comes to Rs 5,000. The invoice value, thus, is Rs. 1,05,000. Mr. B decides to pay the invoice amount to Mr. A. Now, while filing the GST returns for August 2021, Mr. B can claim the input tax credit of Rs 5000.00.
“Input Tax Credit” means the credit of GST Taxes such as Central tax – CGST, State tax- SGST, Integrated tax- IGST, or Union Territory tax – UTGST available to the registered person on the inward supply of goods or services or both in the course or furtherance of his business excluding the tax paid under composition levy.
In case all the above conditions are met except for the fact that the supplier has not uploaded the invoice in his GSTR-1, provisional ITC can be taken up to 5% of the credits that are eligible and uploaded by the supplier in his GSTR-1. The provisional ITC cannot exceed the amount of ITC not uploaded by the supplier in his Form GSTR-1.
In simple words, Input tax credit (ITC) is the tax paid by the purchaser on Inward Supplies (purchase) on goods or services or both. Such tax which is paid at the time of purchase of goods or services or both is reduced from liability payable on his/her outward supplies (sale) which is known as an ITC. In other words, the input tax credit is the tax reduced from output tax payable on functions of accounting of sales.
The registered person who has paid GST on inward supplies of goods or services or both which are used or intended to be used in the course or in the furtherance of his business can claim Input Tax Credit. He must be in possession of a tax invoice/ debit note / tax-paying document issued by a supplier registered under this Act. He must have uploaded the relevant invoice on the GSTN (online GST portal) also the supplier has paid the said amount of tax (as charged in the invoice) to the appropriate Government in cash or by way of the utilization of ITC, as admissible.