How can Input Tax Credit be claimed under GST?


Input Tax Credit or ITC is the tax paid by the purchaser on Inward Supplies (purchase) on goods or services or both. Such tax which is paid at the time of purchase of goods or services or both is reduced from liability payable on his/her outward supplies (sale) which is known as an ITC. In other words, the input tax credit is the tax reduced from output tax payable on functions of accounting of sales.

For instance, you as a trader purchased goods of Rs. 100 and paid a tax of Rs 10 on it. Now the same goods are sold by you at Rs. 150 and a tax of Rs. 15 is collected from the buyer. Now you have to pay Rs.15 to the government for that good but you had already paid Rs.10, so this Rs. 10 is your ITC and it will be allowed as a deduction from tax payable and you have to pay net Rs. 5 as tax. This is available as a deduction from tax payable and you have to report the same while going for online GST return filing.

Documents required for claiming ITC

The registered taxpayer should possess at least one document from the list below:

-  Invoice issued by a supplier of goods or services or both

-  Invoice issued by the recipient along with proof of payment of tax

-  A debit note issued by a supplier

-  Bill of entry or similar document in case of imports

-  Revised invoice

-  Document issued by Input Service Distributor (ISD)

How to claim ITC?

The amount of ITC should be reported by all regular taxpayers in their monthly online GST return filing form GSTR-3B. Table 4 requires the summary figure of eligible ITC, Ineligible ITC and ITC reversed during the tax period.

A taxpayer can claim ITC on a provisional basis in online GST return filing form GSTR-3B to an extent of 20% of the eligible ITC reported by suppliers in the auto-generated form GSTR-2A. Hence, a taxpayer should double-check the GSTR-2A figure before proceeding to file GSTR-3B. Earlier, A taxpayer could have claimed any amount of provisional ITC but, now a taxpayer can only claim not more than 20% of the eligible ITC available in the GSTR-2A as provisional ITC. This means that the amount of ITC reported in form GSTR-3B will be the total of the actual ITC in GSTR-2A and the provisional ITC being 20% of the actual eligible ITC in the GSTR-2A. Hence, matching the purchase register or expense ledger with the GSTR-2A becomes very important.

Time limits for claiming ITC under GST

ITC can only be claimed for tax invoices and debit notes which are less than a year old. In any other case, the last date to claim ITC is the earlier of the following:

➤ Before filing valid GST returns for the month of September following the end of the financial year applicable to that invoice. For example, for an invoice issued on June 26, 2018, ITC should be claimed by September 2019.

➤ Before filing a relevant annual return.

Final Thoughts

The taxation structure of GST allows businesses across India to claim input credit (ITC) for the tax they paid while purchasing goods or hiring any service for their company.

Claiming ITC helps you reduce the tax you have already paid on inputs and pay the remaining balance amount. For availing of this benefit, there is a proper set of guidelines. It ensures the accountability of the suppliers to pay the required tax and also prevents the overall increase in the price.


SuperCa

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