TMI BlogOverview -Input Tax Credit Mechanism in GSTX X X X Extracts X X X X X X X X Extracts X X X X ..... currently. As the tax charged by the Central or the State Governments would be part of the same tax regime, credit of tax paid at every stage would be available as set-off for payment of tax at every subsequent stage. Let us understand how cascading of taxes used to take place in the earlier tax regime. Central excise duty charged on inputs used for manufacture of final product could be availed as credit for payment of Central Excise Duty on the final product. Example , Manufacture a pen, the manufacturer requires, plastic granules, refill tube, metal clip, etc. All these inputs were chargeable to central excise duty. Once a pen was manufactured using these inputs, the pen was also chargeable to central excise duty. Let us a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods or services or both are subsumed under a single levy. The major taxes/levies which are clubbed together or subsumed in the GST regime are as under: Central Tax State Tax Central Excise duty VAT / Sales Tax Additional Duties of Excise (Goods of Special Importance) Central Sales Tax The Excise duty levied under Medicinal Toilet Preparation (Excise Duties) Act, 1995 Purchase Tax Additional duties of Customs (commonly known as CVD ) Entertainment and Amusement Tax (other than those levied by local bodies) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SGST/UTGST IGST IGST IGST CGST, then SGST/UTGST What is the Input Tax Credit. Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount. Here s how: When you buy a product/service from a registered dealer you pay taxes on the purchase. On selling, you collect the tax. You adjust the taxes paid at the time of purchase with the amount of output tax (tax on sales) and balance liability of tax (tax on sales minus tax on purchase) has to be paid to the government. This mechanism is called utilization of input tax credit. For example- you are a manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both b) Invoice issued by recipient alongwith proof of payment of tax c) A debit note issued by supplier d) Bill of entry or similar document prescribed under Customs Act e) Revised invoice f) Document issued by Input Service Distributor D) No ITC beyond September of the following FY to which invoice pertains or date of filing of annual return, whichever is earlier. E) The Input Service Distributor (ISD) may distribute the credit available for distribution in the same month in which it is availed. The credit of CGST, SGST, UTGST and IGST shall be distributed as per the provisions of Rule 4(1)(d) of ITC Rules. ISD shall issue invoice in accordance with the provisions made under Rule 9(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which ITC is available: a) A person who has applied for registration within 30 days of becoming liable for registration is entitled to ITC of input tax in respect of goods held in stock (inputs as such and inputs contained in semi-finished or finished goods) on the day immediately preceding the date from which he becomes liable to pay tax. b) A person who has taken voluntary registration under section 23(3) of the CGST Act, 2017 is entitled to ITC of input tax in respect of goods held in stock(inputs as such and inputs contained in semi-finished or finished goods) on the day immediately preceding the date of registration. c) A person switching over to normal scheme from composition scheme under section10 is entitled to I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In case the tax on transaction value of the supply is more, the same would have to be paid. H) Where goods and/or services are used partly for business purposes and partly for other purposes: Input Tax Credit is eligible on the goods or services or both, which are used or intended to be used in the course of furtherance of business by the registered person. However, some times, the registered person may utilize the goods or services or both, partly for the purposes of business and partly for other purposes or partly for taxable supplies and partly for exempt/ non-taxable supplies. In such cases, the input tax credit cannot be allowed in full and has to be restricted to so much of the input tax that is attributable to the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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