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INPUT TAX CREDIT MECHANISM

Goods and Services Tax - GST Law and Procedure - 09 - Uninterrupted and seamless chain of input tax credit (hereinafter referred to as, ITC ) is one of the key features of Goods and Services Tax. ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is tax on tax . Under the present system of taxation, credit of taxes being levied by Central Government is not available as set-off for payment of taxes levied by State Governments, and vice versa. One of the most i .....

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f final product can be availed as credit for payment of central excise duty on the final product. For example, to manufacture a pen, the manufacturer requires, plastic granules, refill tube, metal clip, etc. All these inputs are chargeable to central excise duty. Once a pen is manufactured by using these inputs, the pen is also chargeable to central excise duty. Let us assume that the cost of all the above mentioned inputs is say, ₹ 10/- on which central excise duty @10% is paid, means Re. .....

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ver, when the pen is sold by the manufacturer to a trader, he is required to levy VAT on such sale. But under the present system, the manufacturer cannot use the credit of central excise duty paid on the pen for payment of VAT, as the two levies are being levied by Central and State government respectively with no statutory linkage between the two. Hence, he is required to pay VAT on the entire value of the pen, i.e. ₹ 22/-, which actually includes the central excise duty to the tune of &# .....

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as under: CENTRE TAXES Central Excise duty Additional duties of excise Excise duty levied under Medicinal & Toilets Preparation Act Additional duties of customs (CVD & SAD) Service Tax Surcharges & Cesses STATE TAXES State VAT/Sales Tax Central Sales Tax Purchase Tax Entertainment Tax (other than those levied by local bodies) Luxury Tax Entry Tax (All forms) Taxes on lottery, betting & gambling Surcharges & Cesses GST comprises of the following levies: a. Central Goods and Se .....

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pply of goods or services or both. In case of import of goods also, the present levy of Countervailing Duty (CVD) and Special Additional Duty (SAD) would be replaced by integrated tax. The protocol to avail and utilise the credit of these taxes is as follows: Credit of To be utilised first for payment of May be utilised further for payment of CGST CGST IGST SGST/UTGST SGST/UTGST IGST IGST IGST CGST, then SGST/UTGST Credit of CGST cannot be used for payment of SGST/UTGST and credit of SGST/UTGST .....

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o ship scenarios also included. c. Tax is actually paid by the supplier. d. He has furnished the return. e. If the inputs are received in lots, he will be eligible to avail the credit only when the last lot of the inputs is received. f. He should pay the supplier, the value of the goods or services along with the tax within 180 days from the date of issue of invoice, failing which the amount of credit availed by the recipient would be added to his output tax liability, with interest [rule 2(1) & .....

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. 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 .....

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alth insurance except where it is obligatory for an employer under any law; iv. Travel benefits extended to employees on vacation such as leave or home travel concession; c. Works contract services when supplied for construction of immovable property, other than plant & machinery, except where it is an input service for further supply of works contract; d. Goods or services received by a taxable person for construction of immovable property on his own account, other than plant & machiner .....

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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 .....

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