Input Tax Credit in India
Enough has been said about what a significant reform GST
will be. But if there is one thing that completely stands out about this new tax, it is – the mechanism of input credit under GST. One of the basic features of GST
is that the seamless flow of input credit across the chain (from the manufacture of products until it's consumed) and across the country.
When you get a product/service from a registered dealer you pay taxes on purchase, whereas creating sales, tax is collected and sporadically identical is adjusted with the tax you already paid at time of purchase and balance liability of tax (tax on sales (minus) tax on purchase) is to be paid to the govt. This mechanism is termed use of input tax credit(tax on purchase adjustment against liabilities on output i.e. sales).
The law has arranged down conditions to avail GST input step-down on offer of products or services. All of the subsequent conditions got to be glad to avail GST Input credit:
- The dealer ought to be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a provider registered below GST Act.
- The aforementioned goods/services are received.
- Returns (GSTR-3) are filed.
- The tax charged has been paid to the govt by the provider.