What is ITC?
GST is an integrated tax in which total purchase of a business must be equal to the sale of another business. So that flow of credit in supply chain a seamless process. To avoid challenges of tax on tax , ITC mechanism is inserted in GST system.
In general words ITC is reduction from the tax to be payable on output up to the amount paid as tax on its input.
Conditions for obtaining ITC
For availing ITC business must have to fulfill the following conditions:
- It must have GST compliant invoice.
- Its supplier must have uploaded the invoices on GSTN.
- Supplier must have paid the tax o government.
- Return of the business must be filled.
- Composition scheme should not be opted by the business.
Documents required for claiming ITC
A registered person can avail ITC on the basis of the following documents:
- Invoice issued by supplier.
- Invoice issued by the person as recipient of goods and services supplied by an unregistered supplier.
- A debit note issued by supplier.
- Any bill of entry or any other document required for integrated tax on imports.
- Any invoice or credit note issued by input tax distributer.
- Bill of supply issued by a supplier who had opted for composition scheme or exporter or supplier of exempted goods.
Reversal of ITC
ITC can be reverted in certain cases some are discussed below:
- In case of failure to pay the bill amount to supplier within 180 days from the issue of invoice by supplier.
- Using goods or services for personal use.
- Utilizing goods or services for producing exempt supplies.
- Capital goods used for personal use.
- Switch from normal GST to composition levy.