Input Tax Credit under GST

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Input Tax Credit under GST

Category : Tax Issues


GST Input Tax Credit: One of the most important feature of GST is  input tax credit.The term itself suggests that credit will be given for the tax paid on inputs or purchases.Input credit will be given seamlessly across the supply chain i.e. from manufacturer to ultimate consumer.

Fundamentals: When you buy any product or service from a registered dealer you have to pay taxes on purchase or service taken and while making any sales or providing any service,tax is collected and deposited periodically after adjusting the taxes paid on input goods or services.Therefore, the theory is like Tax on sales minus Tax on purchases and the balance collected tax is to be paid to the Govt.Thus, we can say that Tax on output or sales is to be adjusted for tax on inputs or purchases.

Conditions to avail GST Input tax credit: However, the GST law has laid down some conditions which have to be satisfied to avail the benefits of input tax credit.

  • The dealer has been registered under GST Act;
  • The dealer must have a Tax Invoice / Debit or Credit note/Supplementary invoice issued by a registered dealer under GST Act;
  • The said services / goods have actually been received;
  • GSTR-3 returns have been filed by the dealer;
  • The tax paid on the inputs(Output tax for supplier) has been paid to the Govt. by the  supplier;

Thus, the GST law has made it very clear that to avail the benefit of input credit a dealer has to be GST compliant.

Other Features: 

  • A registered dealer is allowed to carry forward input credit or claim refund.If Input Tax is greater than Output Tax= Carry forward input credit or claim refund and if Output Tax is greater than Input Tax= Pay the balance tax;
  • Input tax credit is not allowed on invoices which are more than one year old and the period is to be determined from the date of invoice;
  • Input tax credit is permitted on Capital Goods as well;
  • No input tax credit is allowed after GST return has been filed for the concerned period in September.



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