Input Tax Credit Under GST

 Under the Goods and Services Tax (GST) regime, businesses can claim an input tax credit under GST to offset the taxes paid on inputs against the taxes they are liable to pay on output supplies. Claiming ITC is a significant benefit for businesses, as it helps reduce the overall tax liability and promotes the smooth flow of credits in the supply chain. However, it is crucial to understand and follow certain guidelines to ensure the proper claim of ITC. This article provides essential factors that businesses should keep in mind before claiming ITC under GST.

Time Limit For Claiming ITC

Businesses must claim ITC within a specified time frame to ensure its validity. As per GST regulations, the last date for claiming Input Tax Credit under GST is the earlier of the following:

    • 30 September of the next financial year.
    • The date of filing the annual returns in form GSTR-9 relating to that financial year.

Reversal Of ITC

Certain situations may require the reversal of ITC. Some common scenarios include:

  • If the recipient fails to make payment to the supplier within 180 days from the date of the invoice, the ITC claimed on that invoice must be reversed.
  • When the goods or services are used for personal purposes or exempt supplies, the proportionate ITC related to such usage must be reversed.
  • If the supplier reduces the tax liability by issuing a credit note, the corresponding ITC claimed by the recipient must be reversed.

Types Of Credit

Points to be kept in mind before claiming an Input Tax Credit under GST

  • A tax invoice or debit note on a purchase created by a registered dealer can be made after the claimant has received the goods and services.
  • The provider must pay or deposit the tax that is levied on the purchase with the government in the form of input credit or cash.

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