GST is an indirect tax levied on goods and services based on the principle of value addition. Hence, the levy of tax is based on the value added at each stage of the supply chain till the product or service reaches the ultimate consumer. In such a tax system, to negate the cascading effect of the tax, there exists a means to set of taxes paid on procurement of raw materials, consumables, plant and machinery, equipment, services, etc., that are used for the manufacturing or supply of goods and services. This element used to offset the tax liability is called input tax credit.
1. Credit of CGST
Allowed 1st for payment of CGST and the balance can be utilised for the payment of IGST. Credit of CGST is not allowed for payment of SGST.
2. Credit of SGST/ UTGST
Allowed 1st for payment of SGST/UTGST and the balance can be utilised for the payment of IGST. Credit of SGST/ UTGST is not allowed for payment of CGST.
3. Credit of IGST
Allowed 1st for payment of IGST, then for payment of CGST and the balance for payment of SGST/ UTGST.
Under the GST Regime, ITC can be claimed by every registered taxable person on all inputs used or intended to be used (whether goods or services) in the course of or for the furtherance of business. (except in certain specified cases)
The Input Tax Credit of GST paid on all other goods and services which are used for the furtherance of business would be allowed.
Only a Registered Person would be able to claim the benefit of Input Tax Credit of GST. Moreover, a registered person would be eligible to claim input tax credit on fulfilment of the following conditions: