Input Tax Credit(ITC)

Input decrease under GST:


ITC is the abbreviation for Input Tax Credit under GST. ITC may be a mechanism for preventing tax cascading. In layman’s terms, tax cascading is “tax on tax.” Under the present system of taxation, the credit of taxes levied by the Central Government can’t be used to offset State Government taxes, and the other way around . one of the most significant aspects of the GST system is that the entire supply chain would be subject to GST applied concurrently by the Central and State governments. because the tax levied by the Central or State Governments would fall under the same tax regime, a credit of tax paid at each stage would be available as a set-off against the payment of tax at each successive stage.

Subject to such conditions and restrictions as could also be prescribed and in the manner specified in section 49, every registered person shall be entitled to require credit of input tax charged on any supply of goods or services to the person which is utilized or supposed to be used in the course or furtherance of his business, and therefore the given amount shall be added to the electronic credit ledger of such person.

Only tax paid on supplies that are or would be utilized in the course or furtherance of the registered person’s business is eligible for a tax credit. In section 2(17) of the Act of CGSTof 2017, the term “business” is defined. At each stage, a credit for the tax paid at an earlier stage is granted. for instance , A provides goods to B, which then provides goods to C. B will receive the input decrease for A’s tax payment, C will receive the credit for B’s tax payment, and so on.

Repeal of Central and State Acts after the Implementation of GST:

The indirect taxes imposed by the federal and state governments on the sale of products , services, or both would be consolidated into one tax. the main taxes and levies that will be combined or subsumed under the GST regime are as follows:

Central TaxesState Taxes
Central Excise dutyState VAT / Sales Tax
Additional duties of exciseCentral Sales Tax
Excise duty levied under Medicinal & Toilets Preparation ActPurchase Tax
Additional duties of customs (CVD & SAD)Entertainment Tax (other than those levied by local bodies)
Service TaxLuxury Tax
Surcharges & CessesEntry Tax (All forms)
 Taxes on lottery, betting & gambling
 Surcharges & Cesses

Types of GST & Input Tax Credit Availability:

The following are four types of GSTs in India and how input tax credit is utilized:


Central Goods and Services Tax (CGST) on intra-state or intra-union territory without legislative supply of products or services or both. Also referred to as Central Tax.


State Goods and Services Tax (SGST), also referred to as State Tax, levied on intrastate sales of products or services.


The Union Territory Goods and Services Tax on intra-union territory supply of products or services.


Integrated Goods and Services Tax, also mentioned as Integrated Tax, on the interstate supply of products or services or both. Integrated tax will take place of the present Countervailing Duty (CVD) and Special Additional Duty (SAD) levied on imports of goods.

Utilization of Input Tax Credit:

The utilization of the input tax credit is depicted in the following table:

Credit ofTo be utilised first for payment ofMay be utilised further for payment of

Aspects techniques of Input Tax Credit:

The credit of CGST can’t be used to pay SGST/UTGST, and therefore the credit of SGST/UTGST cannot be used to pay CGST. Any registered person may claim a credit for tax paid on the inward supply of products , services, or both used or intended to be used for business purposes. a number of the technical facets and prerequisites of the Input Tax Credit scheme are as follows:

Aspects techniques of Input Tax Credit:

Restrictions on Input decrease The objective of the Goods and Services Tax is to ensure a continuous flow of credit throughout the supply chain. However, the subsequent situations, as outlined in Section 17 of the 2017 Central GST Act, don’t qualify for input tax credit:

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