What is Input Tax Credit?
With an input credit, you can deduct the tax you have already paid on inputs when paying output taxes. Assume you are a manufacturer. The final product (output) tax you must pay is Rs 450. There is Rs 300 in input tax (PURCHASES) paid. All you have to do is deposit Rs 150 in taxes, and you can claim an INPUT CREDIT of Rs 300.
Input Credit for GST
In case of Input credit mechanism, you are qualified to claim an input credit for the tax you have paid on your purchases if you are a registered GST operator, manufacturer, supplier, agent, aggregator, or any of the aforementioned individuals.
How can you submit a GST input credit claim?
To submit a GST input credit claim:
● It is necessary to obtain a tax invoice (of purchase) or debit note from a registered dealer.
● You were supposed to receive the goods or services.
Note: Upon receipt of the final lot or installment, credit will be granted against the tax invoice in cases where goods are received in lots or installments. Note: The said credit will be added to the recipient’s output tax liability along with interest if he has already accessed input credit based on the invoice and fails to pay the service’s value or tax within 180 days of the invoice’s issue.
● The supplier has deposited or paid the government tax that was assessed on your purchases, either in cash or by claiming input credit.
● The supplier has submitted GST returns.
● The invoice is visible in the recipient’s or buyer’s GSTR-2B after the supplier uploads it to their GSTR-1.
The fact that input credit is only permitted if your supplier has deposited the tax he has collected from you. Therefore, before you can claim any input credit, it must be matched and validated. Therefore, in order for you to be able to claim input credit on purchases, all of your suppliers must also be in GST compliance and paid the tax on output tax liability.