INPUT
TAX CREDIT - ECONOMY
News:
GST: The exasperating
business of getting input tax credit
What's
in the news?
●
When GST was introduced in 2017, there was
a promise of a seamless input tax credit across the entire supply chain.
Key
takeaways:
●
Unfortunately, the law was introduced when
it was still a work-in-progress.
●
This gave rise to a situation where there
was no system of checks and balances to avail input tax credit (taxpayers could
literally put any amount in their GSTR 3B and claim the credit).
●
The menace of fake invoices commenced
since taxpayers wanted to maximise savings on their cash flows since they were
well aware that this was too good to last.
Input
Tax Credit (ITC):
●
Input Tax Credit refers to the tax already paid by a person at time of
purchase of goods or services and which is available as deduction from tax
payable.
●
It means the central tax (CGST), State tax
(SGST), integrated tax (IGST) or Union territory tax (UTGST) charged on supply
of goods or services or both made to a registered person.
●
It also includes tax paid on reverse charge basis and integrated tax goods and
services tax charged on import of goods. It does not include tax paid under
composition levy.
Benefits:
●
A registered person is entitled to take
credit of input tax charged on supply of goods or services or both to him which
are used or intended to be used in the course or furtherance of business,
subject to other conditions and restrictions.
●
It removes
the cascading effect on taxation.
Conditions
necessary for obtaining ITC:
●
The supplier is in possession of tax
invoice or debit note or such other tax paying documents as may be prescribed.
●
The supplier has received the goods or
services or both.
●
The supplier has actually paid the tax
charged in respect of the supply to the government.
●
The supplier has furnished the return
under section 39.
Exceptions:
●
A business under Composition Scheme cannot avail of input tax credit.
●
ITC cannot
be claimed for personal use or for goods that are exempt.