Input means the goods which are purchased by the dealer during the time when his/her business was operational. As per Section 2(57) of the Model GST law and Section (1) (d) of the IGST Act, Input Tax Credit is the deduction an individual can avail on the payment of output tax if the tax on input has already been paid for.
For example; Tax on output is Rs. 450 and three inputs used for producing the output are namely A, B, and C. Tax paid on the purchase of input A is Rs. 100, input B is Rs. 120 and for Input C is Rs. 60. The tax that will be paid by the manufacturer will be Rs. 170
Tax = 450- (100+120+60).
This mechanism is available when the taxpayer is registered under GST. All dealers can claim Input Credit for the taxes paid by them on the purchases.
As per the GST law, return filed under the previous law for the period prior to July 1, 2017, can claim income tax credit. The amount claimed will be transferred to the Electronic Credit Ledger.
Following conditions must be satisfied by the existing dealers for claiming CENVAT Credit for the input held in stock, semi-finished or finished goods
Input tax credit can only be claimed by manufacturers or dealers on those goods on which tax has been already paid under the previous tax law. Credits are only allowed if the document for taxes paid are recorded in the accounts of the taxpayer within 30 days of the appointed day. The 30-day extension may only be allowed by the competent authority if there is sufficient reason for the cause of the delay.
There are few conditions which are needed to be satisfied to avail input-output tax credit. Such conditions are
Input credit is allowed only when the supplier has deposited the tax collected from the taxpayers to the government. Every input credit claimed must match and validate. Hence, to claim input credit on purchases, the supplier must be GST compliance as well.
Input credit can also be left unclaimed but it will be a loss for the taxpayer. In case, tax on purchase is higher than the tax on sale then the taxpayer can carry forward the amount or claim refund against it. In short, if the tax on inputs is greater than the tax on output, then input tax is carried forward or refund can be claimed. But if the tax on output is greater than the tax on input, the balance is payable. No interest tax is payable on the balance of Input Tax by the government.
Some of the items included in the negative list are Motor Vehicles, except when they are supplied in the usual course of business or are being used for providing following taxable services:
The following goods purchased are eligible to claim the benefits of Input Tax Credit:
The Input Tax Credit (ITC) can be availed within one year from the date mentioned on the invoice or debit note. It should be claimed before filing the GST return for the month of September, following the financial year in which the invoice is issued or before filing the relevant annual return, whichever is earlier.
Input Tax Credit is available to manufacturers and traders who trade in capital goods. The overall Input Tax Credit is spread over 36 equal monthly installments.
Any claim pending for a refund on the due amount of CENVAT credit, tax or any interest paid before the appointed day shall be disposed away according to the previous laws.