Input tax credit can be defined as the credit claimed by business owners on raw materials purchased for further production of output (service/product). Through this scheme businesses will be able to reduce tax already paid on purchases.
Input tax credit is introduced by GST council and this can be termed as the backbone of GST. It’s a beneficial scheme for small businesses. Input tax credit can be claimed both on products and services.
How to claim ITC?
Below mentioned conditions need to be fulfilled in order to claim input tax credit:
- A person or business must be registered under GST
- Supplying of goods or services must be done only for business purposes
- Invoice should be GST compliant
- GST filing by supplier
- Return filing should be done in time