All about Input Tax Credit under GST & claiming ITC under GST

All about Input Tax Credit under GST

Input Tax Credit

The tax already paid by a person at the time of purchase of goods or services and which can be deducted from the tax payable is referred to as Input Tax Credit. Input credit refers to the ability to deduct the tax you have already paid on input while paying tax on output.

For example- If the manufacture pays tax on the final product is INR 500, and when there is a purchase for the product at that time the tax paid on the purchase is INR 350, then the manufacture can claim for input credit for the amount of INR 350 and in return manufacture only needs to pay INR 150 in taxes. in simple terms when manufacture pays tax for the final product and when make purchases the difference in the amount can be claimed by the manufacturer of the product. 

What is Input Tax Credit in GST?

Manufacturer, E-commerce operator,supplier, agent, and any other legal entity who is involved in the input credit mechanism, will eligible for claiming input credit for the tax paid by  the payer on a purchase. in simple terms input credit in GST means the tax payer can claim for Input Tax Credit for the amount they paid at the time of purchase.

ITC rules under GST

• Suppliers can only claim for the input credit based on last lot, in case of inputs are received in lots.
• Suppliers need to provide documents related to the bill of entry or any similar documents for availing Input Tax Credit.
• Must pay the supplier the value of the products or services, plus tax, within 3 months of the invoice’s date of issue, or the sum would be forfeited. The amount of credit available to the recipient would be added to it.

Point to be kept in mind before claiming Input Tax Credit under GST

• Suppliers has filed GST returns
• A debit note or a tax invoice on a purchase generated by a registered dealer
• Claim can be done after goods and services are revived by the claimer
• The tax which is imposed on the purchase must be paid or deposited to the government by a supplier in the form of input credit or through cash.

Tax payer cannot claim for Input Tax Credit under GST in below conditions 

• If a supplier has not deposited the taxable amount to the government then in that case, input credit cannot be claimed by the purchaser
• Goods and services which are purchased for personal use would not allow Input Tax Credit
• Purchase invoices which are older than 1 year would not be claimed for Input Tax Credit. one year period is calculated based on the date invoice being generated.

The procedure for claiming of Input Tax Credit under GST

Step 1 –  Login to the portal and Enter necessary details

Step 2-  Click on ITC Forms

Step 3-  Click on prepare online option & select appropriate section for claim

Step 4 –  Enter GSTIN, Invoice Number detail & Invoice Date

Step 5-  Select type of goods, Description of all Input details

Step 6 – Enter Input Tax Credit amount, and Click on Add button

Step 7- Click on save, Click on preview button & Click on submit

Step 8- Click on proceed, and Refresh the page

FAQs about Input Tax Credit under GST

Q.1 Is it possible to treat GST paid on a reverse charge basis as input tax?

Answer: Yes. The tax payable under the reverse-charge is included in the definition of input tax.

Q.2 Which form will be needed for Input Tax Credit under GST?

Answer: Input Tax Credit is claimed using GST Form ITC-01, which is a declaration form. An Input Tax Credit allows a taxpayer to claim the amount of GST already paid when making a GST payment to the government that was received from customers.

Q.3 Is there any time limit for availing of Input Tax Credit?

Answer: After one year from the date of issuing of the tax invoice relating to such supply, the concerned person cannot claim ITC in cases of shift from transition from exempt to taxable supplies, new registration, or change from composition to normal scheme.

Q.5 Can we claim Input credit under GST for electricity bills?

Answer: No, tax payer can only claim for the services and goods for the aim of production of output, it cannot be claimed for the input services or goods.

Q.6 Can we claim for Input Tax Credit refund?

Answer: Yes, one can claim for the Input Tax Credit refund of unutilised ITC on a monthly basis.

Q.7 Can we  claim ITC for the bank expenses or charges?

Answer: Yes, it can be claimed by the tax payer if the expenses are paid for business purposes.