Sumit Upadhyay
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Why is input tax credit important?

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Why is input tax credit important?
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  1. ITC is important because it adjusts your tax liability at the time of paying tax on output, based on your payment of input tax. At the time of paying tax on output, you can reduce or adjust it with the tax that you may have already paid while paying for the input supplies and therefore, you can pay the balance amount. This mechanism is maintained in terms of Input Tax Credit. Hence it is very important to have the ITC so that excess or credit payments are adjusted and accounted for. For instance, a tax payable on output or the final product is Rs 500 whereas the tax paid on input supplies or purchases is Rs 400. Here, You can claim an input credit of Rs 400 and you only need to deposit Rs 100 for taxes.

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