Input Tax Credit- NEXT IAS

INPUT TAX CREDIT

High usage of input tax credit (ITC) to set off tax liability by businesses has come under taxman’s scanner.

About
• Tax officials are likely to examine the high usage of input tax credit (ITC) to set off tax liability by businesses.
• Availing ITC ideally should not result in loss of revenue but there could be possibility of misuse of the provision by unscrupulous businesses by generating fake invoices just to claim tax credit.

Input Tax Credit
• Input tax credit is the credit a manufacturer/service provider receives for paying input taxes towards inputs used in the manufacture of products or providing output service.
• It helps to eliminate the cost cascading effect of the pre GST tax regime.
• ITC can be claimed by a manufacturer, supplier, agent, e-commerce operator, aggregators or any of the persons mentioned and registered under GST on the tax paid on purchases of inputs.
• Under the present dispensation, there is no provision for real time matching of ITC claims with the taxes already paid by suppliers of inputs.