How to Claim Input Tax Credit?

Author
By Sakshi Shah on February 18, 2019

Taxpayers registered under the regular scheme can claim the input tax credit on purchases and utilise them towards payment of output tax on sales. The Input Tax credit is deducted from the Output Tax Liability and the Net tax is paid to the government. The process of claiming and utilising tax credit comprises of filing the monthly GST Return i.e. GSTR-3B.

Steps to Claim Input Tax Credit

1. Prepare, Review and Submit GSTR-3B
GSTR-3B is the monthly return with a summary of sales and purchases made during the return period.
a. Prepare – Enter the data of sales, output GST, purchases and input GST
b. Review – Review the calculations of Output GST against Input GST
c. Submit – Submit the data on the GST Portal

How to file GSTR 3B online on GST Portal?

2. E-Credit Ledger updated
Once the return is submitted, the amount of input tax credit from the purchases of the current month gets populated in the E-Credit Ledger

How to view an E-Credit Ledger?

How to Utilise Input Tax Credit?

1. Calculate Output Tax and Input Tax
After submitting the return, the next step is to pay off the tax liability of the current month. The calculations are populated in the taxpayer’s account on the GST Portal.

  • Output Tax Liability – The output GST payable on sales i.e. IGST, CGST, SGST, UTGST or Cess is calculated based on the sales data entered
  • Input Tax Credit
    • E-Credit Ledger – The screen displays the balance of input IGST, CGST, SGST, UTGST or Cess. It includes the input tax credit of purchases from the current month and input tax credit brought forward from earlier tax periods
    • E-Cash Ledger – The screen displays the balance of cash deposited by payment of challan

2. Apply rules for utilisation of Input Tax Credit

  • IGST – Use ITC of IGST in the sequence of paying output IGST, output CGST and output SGST
  • CGST – Use ITC of CGST in the sequence of paying output CGST and output IGST
  • SGST – Use ITC of SGST in the sequence of paying output SGST and output IGST
  • The ITC of CGST and ITC of SGST cannot be cross-utilised
GST Input Tax Credit Calculator
Calculate tax liability after utilising input tax credit

3. File Return and Carry forward Input Tax Credit

After utilising the ITC, make payment of tax through a challan. The system would carry forward the remaining unutilised balance of ITC and use it for payment of taxes in returns of subsequent periods.