Railway Accounts Department Examinations

Tuesday, December 25, 2018

ITC - Input Tax Credit


Input Tax Credit
·         What is Input Tax Credit ? 

Ans:  Input Tax Credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.

Example: A is a manufacturer.  Tax payable on the manufactured product is Rs. 200 /-.  However he already paid tax Rs. 75/- at the time of purchase of Raw materials.  So he can pay balance tax Rs. 125/- (i.e., Rs. 200 - Rs.75/-). duly availing the Input Tax Credit to the extent of Rs. 75/-.  Otherwise, he would be liable to pay the tax two times i.e., at the time of purchasing Raw Materials and Selling of manufactured product.

Event
Tax
Remarks
On manufacture of goods
Rs.200/-
Tax liability
On purchase of Raw materials
Rs. 75 /-
Already paid.
Balance Tax to be paid
Rs. 125/-
To be paid (duly availing Rs.75/- as ITC)

·         ITC is one of the fundamental features of GST

·         Seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country.

·         A person registered under composition scheme in GST cannot claim ITC.


ü  ITC can be claimed only for business purposes. ITC will not be available for goods or services exclusively used for: a. Personal use b. Exempt supplies c. Supplies for which ITC is specifically not available
ü   
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