Changing Dimensions of Input Tax Credit under The GST Regime

With the advent of GST on 1st July 2017, the country saw the biggest indirect tax reforms since 1947. Passing of GST has resulted in unification of almost all indirect taxes. GST is reffered to be a destination-based tax that should replace the current Central taxes and duties such as Excise Duty, Service Tax, Counter Vailing Duty (CVD), Special Additional Customs Duty (SAD), VAT (Value Added Taxes) which includes central charges and cesses and local state taxes, Central Sales Tax (CST), Entry Tax, Purchase Tax, Luxury Tax, Taxes on lottery, betting and gambling, state cesses and surcharges and Entertainment tax (other than the tax levied by the local bodies). It will be a dual levy with State/Union territory GST and Central GST. Moreover, inter–state supplies would attract an Integrated GST, which might be the sum total of CGST and SGST/UTGST. Input Tax Credit or Input Credit means adjusting the input tax paid to the output tax collected. Taxes paid on input of goods, services and capital goods are allowed to be adjusted by way of Input Tax Credit. For example, taxes paid on goods for resale, taxes paid on purchasing services from professionals (like CAS, LLBs) or taxes paid on purchase of machinery to be used in production of goods or services, all can be claimed as Input Tax Credit subject to some conditions, exceptions and restrictions. In this paper we will be dealing with how Input Tax credit works under GST Regime. This paper covers background of GST, What is Input Tax Credit and what is the eligibility and conditions to claim Input Tax Credit under GST.