Insight into Input Tax Credit

input tax credit

When we talk about GST or Goods and Services Tax, then we can’t resist and make a mention of Input Tax Credit or ITC. Input Tax Credit is a major part of Goods and Services Tax. Here we will tell you all about Input Tax Credit and how you can claim it.

What does Input Tax Credit mean?

Input Tax Credit is nothing but, claiming the credit for the GST paid on the purchase of Goods and Services, that is used to carry on the business. As we already told you Input Tax Credit is of utmost importance to GST. One can rather say that, it is one of the major reasons behind the introduction of GST in India. Since, GST is applicable across the country, there is a seamless flow of credit and everyone can benefit from it.

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Who is eligible to claim Input Tax Credit?

A person who is registered under GST can claim ITP under following conditions: –

  • ITC can be claimed only for business purposes.
  • The dealer should possess the tax invoice.
  • The goods/ services mentioned in the tax invoice should have been received.
  • GST Returns have been filed
  • The supplier must have paid taxes to the Government.
  • If the goods are received in instalments, then ITC can only be claimed once the last instalment is received.
  • You cannot claim Input Tax Credit if depreciation has been claimed on tax component of a capital good.

Who is not eligible to claim ITC?

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The following are not eligible to claim Input Tax Credit: –

  • It is not available for goods and services purchased for personal use.
  • Supplies for which ITC is not specifically available.

What are the required documents to claim ITC?

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Here is the list of the documents that are required to claim ITR: –

  • The invoice that is issued by the supplier of the Goods/ Service.
  • Bill of Entry
  • An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs. 200 or in situations where the reverse charge is applicable as per GST law.
  • An invoice or credit note issued by the Input Service Distributor (ISD) as per the invoice rules under GST.
  • A bill of supply issued by the supplier of goods and services or both.
  • All these documents are to be furnished at the time of filing GSTR-2 Form.

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