Railway Accounts Department Examinations

Showing posts with label Input Tax Credit. Show all posts
Showing posts with label Input Tax Credit. Show all posts

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.

On manufacture of goods
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