Input Tax Credit (ITC) is an important feature of the GST system that helps businesses reduce their tax burden. When a company purchases goods or services, it pays GST to the supplier. Later, while selling its own products or services, the company collects GST from customers. ITC allows the business to subtract the GST already paid on purchases from the GST it needs to pay on sales. This ensures that tax is applied only on the value added at each stage, preventing double taxation.
To claim ITC, certain conditions must be met:
The supplier must be a registered GST taxpayer.
The business must have a valid tax invoice or debit note.
The purchase must appear in the GSTR-2B statement.
The goods or services must be actually received.
The supplier should have filed their GST returns and paid the tax to the government.
Proper use of ITC helps companies reduce their overall tax liability, improve cash flow, maintain accurate records, and stay compliant with GST regulations. Effective ITC management also minimizes errors during audits and reduces the chances of tax disputes.