What is input tax credit?

  • Input tax credit is the term used to describe the amount of central tax (CGST), state tax (SGST), integrated tax (IGST), or cess that a person who is registered for GST has paid on the delivery of goods or services. The IGST imposed on imported goods and the tax paid on a reverse charge basis are both included in the GST input tax. Input tax, however, does not include tax paid under the composite taxation system.

  • To reduce the tax owed after a sale, a business can use the tax it pays on purchases as an input tax credit. Up until it reaches the consumer, value added at each stage of the supply chain forms the basis for the taxing charge.

  • In order to combat the cascading effect of the tax obligation that is paid while purchasing supplies such as plants, machinery, plants, and consumables, the Commodities and Service Tax Act levies a tax on both goods and services based on the concept of value addition. The tax liability is compensated for using the input tax