ITC Rules

GST ITC Rules | Meaning of ITC 2020-21

Input Tax Credit is the output of goods that you have already paid to the government. You can claim for the ITC after the business you have made. If you are a supplier, manufacturer, business owner, or any type of businessman, you can claim ITC paid tax by you on your purchases.

GST Input Tax Credit 2020-21

GST taxation structure allows a business person or owner to claim their input for the tax they already paid, which purchases goods for their business.

Check Here:- GSTR-1 |3B

How does it Implement

It will implement at each stage of the supply chain, the business person gets a credit of an input tax paid to the government and they can use it for an emergency. GST needs to paid to the centre or state governments. To understand this scenario, we are taking an example to clear this topic.

Let’s assume a shopkeeper purchase goods for their shop.

  • They purchase a wheat bag worth Rs. 2000 from a wholesaler at a GST rate of 12.5%. Thus, the input tax which they are paying is Rs. 250.
  • The Shopkeeper now sells the wheat bag for Rs. 4000, plus an output tax of 12.5%, making the total selling price Rs. 4500 (Rs. 4000 + Rs. 500).

Thus, the tax that shopkeeper owes to the Government = Output Tax – Input Tax credit = Rs. 500 – Rs. 250 = Rs. 250

Input Tax Credit Rules 2020-21

ITC that are not valid in the following cases:

  • Purchase of capital goods that are using for non-business purposes.
  • Composition dealers
  • Blocked credits
  • For Motor Vehicles
  • Sales of Membership in clubs
  • Food, beverages, and other

Document Required 

The documents required to apply for ITC are:

  • Invoice issued by the distributor
  • A debit note issued by the distributor or supplier
  • Bill of Entry or similar documents which are issued by the Customs Department
  • Bill of supply issued by the distributor of goods.
  • ISD invoice or ISD credit note or any type of similar document issued by ISD.

Taxes under GST to claim for ITC

There are four types of taxes that you are claimed for ITC

  • Integrated GST (IGST)
  • Central GST (CGST)
  • State GST(SGST)/ Union Territory GST (UTGST)
  • GST Composition Cess

For More Details Click Here

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