Input Tax Credit in GST

What is input credit?

Input credit means at the time of paying tax on output, you can reduce your tax by amount which you have already paid on inputs.

Say, you are a manufacturer –

tax payable on output (FINAL PRODUCT) is Rs 500

tax paid on input (Inputs) is Rs 200

You can claim INPUT CREDIT of Rs 200 and you only need to deposit Rs 300 in taxes with the government

Concept of Input Credit in GST

Input Credit Mechanism is available to you when you are covered under the GST Act.

Which means if you are a manufacturer, supplier, agent, e-commerce operator, aggregator or any of the persons  registered under GST, you are eligible to claim INPUT CREDIT for tax paid by you on your PURCHASES.

Conditions for claiming Input Tax Credit

  1. You must have a tax invoice(of purchase) or debit note issued by registered dealer
  2. You should have received the goods/services
  3. The tax charged on your purchases has been deposited/paid to the government by the supplier in cash or via claiming input credit
  4. Supplier has filed GST returns

Cases when ITC is not available under GST

1. Motor vehicle and other conveyance except when they are used for making the following taxable supplies , namely-

(a) Further supply of such vehicles or conveyances or

(b) Transportation of passenger or

(c) Imparting training on driving, flying, navigating such vehicles or conveyances

2. Motor vehicle and other conveyance except used for transportation of goods

3. Supply of goods and/or services such as –

  1. food and beverages, outdoor catering, beauty treatment, health services,  cosmetic and plastic surgery except where such supply of goods or services of  each category is used for making an outward taxable supply of the particular  category of goods or services or both or as an element of a taxable composite or  mixed supply
  2. membership of a club, health and fitness centre
  3. rent-a-cab, life insurance, health insurance except where it is notified by the  Government as obligatory for an employer to provide to its employees under any  law for the time being in force; or such inward supply of goods or services or both  of a particular category is used by a  registered person for making an outward  taxable supply of the same category of goods or services or both or as part of a  taxable composite or mixed supply; and
  4. travel benefits to employees on vacation i.e. leave or home travel concession.

 4. Works contract services when supplied for construction of immovable property, other than plant and machinery, except where it is for further supply of works contract service

5. Goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even though it is used in course or furtherance of business.

6. Goods or services or both on which the tax is paid under composition scheme.

7. Goods or services or both received by a non-resident taxable person except on goods imported by him.

8. Goods or services or both used for personal consumption.

9. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

10. Tax paid in terms of sections 74, 129 and 130

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