All about Input Tax Credit

All about Input Tax Credit
Goods and Services Tax has been the most significant reform in India. However,
one thing that was highlighted in the whole matter is the mechanism of input
credit under GST.
Input credit simply means that while paying tax on the sale, you can reduce the
tax you've already paid during purchase.
Let's talk about Input Tax Credit (ITC) in details.
What is Input Tax Credit?
In simple words, ITC means a deduction of taxes paid on inputs from taxes that
are to be paid on output. The GST charged at the time of supply of any goods or
services supplied to a taxable person, is known as Input Tax. A tax credit is
considered as the backbone of GST, and for a registered person, it is a significant
matter of concern.

The concept is nothing new from what already existed under the pre-GST indirect
tax regime. The only difference is that its scope has been widened under GST.
ITC cannot be applied to all types of input, as each state or a country has different
rules and regulations. It is also viable to a dealer who has purchased good for
resale.
How to claim Input Tax Credit?
Here are certain conditions that you need to meet so as to be entitled to ITC
under the GST scheme:
• You should be a registered taxable person.
• ITC can be claimed, only if the goods and services received are used for business
purpose.
• It can be claimed on zero-rated/exports supplies.
• If in case the constitution changes due to the transfer of business, or merger,
then unused Tax Credit can be transferred to the sold, merged, or transferred
business. This condition is applicable only for a registered taxable person.
• ITC can be credited to Electronic Credit Ledger in a provisional manner on a
common portal.
• To claim Input Tax Credit, supporting documents required are tax invoice,
supplementary invoice, and debit note.

Time Limit to avail GST ITC
A registered taxable person can avail ITC in a specific manner and within a set
time frame. The table below is showing the different situations to claim ITC.
Situation
If the person has already been granted
registration, or has applied for registration,
or liable for application.
If the person takes voluntary registration.
If the registered taxable person stops
paying taxes in composition levy scheme.
ITC claims day for semi-furnished
goods/stock/finished goods (held on
immediate preceding day)
From day s/he’s liable to pay taxes.
Registration day.
From the day s/he’s liable to pay tax
normally u/s 7.
ITC in the above-mentioned situations can be claimed, only if it doesn’t exceed
one year from the date of issue of tax invoice.