What is Input Tax Credit (ITC) under GST?

Input Tax Credit under GST means the credit of input tax paid on purchases, which the taxpayer can use it towards payment of output tax charged on sales. ITC comprises of credit in form of IGST, CGST, SGST / UTGST or Cess paid on the purchase of input goods, capital goods and input services that are used for business purpose.

Calculate Input Tax Credit online: ITC calculator
Input Tax Credit under GST means the credit of input tax paid on purchases. ITC can be used to set of against the CGST, SGST and IGST outward tax liabiliy.
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Calculate Input Tax Credit online: ITC calculator
Input Tax Credit under GST means the credit of input tax paid on purchases. ITC can be used to set of against the CGST, SGST and IGST outward tax liabiliy.
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If the tax paid on purchases is more than the tax paid on sales, the taxpayer can carry forward the Input Tax Credit. He can use it for payment of tax in future or claim the refund.

Example

Mr.X is a manufacturer of garments. He buys cloth as input and pays GST of Rs.400. GST payable on sale of garments is Rs.1000. When he files his GST Return, he can utilise the input tax credit of Rs.400 and needs to pay a tax of Rs.600 only.

Under GST, the taxpayer can claim ITC of goods to pay GST on services and vice-versa. This was not possible under VAT or Service Tax. Further, the ITC mechanism removes the cascading effect i.e. tax on tax. The taxpayer can use the credit of tax paid at one stage of a supply chain to pay tax at a subsequent stage. Eg: IGST paid on manufacture of a product can be used for paying IGST or CGST and SGST on the sale of the same or any other product also.

How to View Input Tax Credit balance?

The taxpayer can view the balance of accumulated ITC in his account on the GST Portal. Follow the below given steps to view the balance of ITC:

  1. Visit GST Portal

    Login using your valid credentials on GST Portal

  2. Navigate to Services

    Click on Ledgers > Electronic Credit Ledger

  3. The screen displays the balance of Input Tax Credit as on Current Date

     (Note: You can view the E-Credit Ledger for a maximum period of 6 months only)

The E-Credit Ledger or Input Tax Credit Ledger reflects the self-assessed Input Tax Credit from the monthly returns. It has four categories i.e. IGST, CGST, SGST/UTGST and Cess. The taxpayer can use this balance for paying tax dues only. They cannot use it for paying dues of interest, fee or penalty.

FAQs

What is the time limit for taking ITC in GST?

ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of an annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next FY.

Can I claim ITC for previous month?

A taxpayer who has not availed the eligible ITC of any previous months may avail such ITC in any of the subsequent months, but anytime-either before the filing of the annual return or filing of the GST Returns for September belonging to subsequent financial year, whichever is earlier.

Whether input tax credit is allowed on inputs, which become waste and is sold as scrap?

Section 17(4) (g) states that input tax credit shall not be available in case of goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples. Therefore, input tax paid on taxable goods which becomes waste and is sold as scrap is not eligible.

Got Questions? Ask Away!

  1. Hey @HarshitShah

    Input Tax Credit is the credit of GST paid on the purchase of goods or services. It is utilized to pay GST on the sale of goods or services. In order to be eligible to claim Input Tax Credit one must be registered under GST.

    To understand the conditions under which you can claim Input Tax Credit, please refer to this article.