Video Transcription

Today let us talk about Input Tax Credit Mechanism under GST 

Input Tax Credit is one of the key features of GST. Input Tax Credit will help in eliminating cascading effect of taxes which are prevalent under the current regime.

When you buy raw materials as inputs to manufacture and sell your product, you pay taxes on the materials or inputs used. Hence, when you are required to pay tax on the finished goods or output, you can reduce your tax liability by claiming the credit of tax that you have already paid while buying input materials.

To claim the credit of GST paid while buying inputs, you must satisfy the following conditions: 

  • You must have a tax invoice of purchase or a debit note issued by a registered dealer
  • You should have received the goods or services for which input taxes were paid
  • The tax charged on your purchases must have been deposited or paid to the government by the supplier in cash or by using input credit
  • Your supplier must have filed relevant GST returns
  • You can avail credit of input tax on both goods and services including capital goods
  • If you have used some goods and services for personal purposes, then you cannot claim the input tax credit for them.

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