GST is set to revolutionise the Indian indirect taxation and Input Tax Credit is one of the key features, which will help in eliminating the cascading effect of taxes. This guide will help you in understanding everything you want to know about ITC under GST.
When you buy raw materials as inputs to create and sell your product, you pay tax on the material/ input. So when you are required to pay tax on the finished good/ output, you can reduce the tax that you already paid on the materials and just pay the remaining tax liability.
Under GST law, the term input denotes goods except capital goods used by a supplier during his/her business to make outward supplies.
This term denotes any service used by a supplier during his/her business to generate supplies outwards.
Input tax is a tax imposed on the person when he/she receives supply of goods & services which are used for his business.
It is like a passbook containing all the credits you have accumulated that is maintained on the common portal.
Similar to a passbook, which contains all the taxes you have paid on the supplies that is maintained at the common portal for each taxable person registered under GST.
You can be entitled for Input Tax Credit if you satisfy the below mentioned conditions:
A registered taxable person can get ITC in the prescribed time and manner. In the table given below, you can see different situations in which inputs can be claimed for stock or semi-finished goods, or finished goods.
|Day on which ITC can be claimed for stock, SFG or FG (held on immediately preceeding day)|
|1||If a person is liable to registration, or applied for registration, or is granted registration||The day from which he becomes liable to pay tax|
|2||If a person takes voluntary registration||The day of registration|
|3||A registered taxable person who stops paying tax under composition levy scheme||The day from which he becomes liable to tax normally (u/s 7)|
ITC mentioned for above situations can be claimed only within one year from the date of issue of tax invoice relating to supply.
In any other case, the last date to claim ITC is earlier of the two below:
Note: As per section 30, the last date for filing of annual return is 31st December following the end of the financial year.