What is the GST credit?

Here are the complete details about

what is GST input credit.

It refers to the input tax credit mechanism under the GST system.

The GST credit system is designed to eliminate the cascading effect of taxes. It ensures that taxes are levied only on the value addition at each stage of the supply chain.

• When you purchase goods or services for your business, you pay GST on those purchases. This GST paid on inputs is known as Input Tax.

• You can claim credit for the GST paid on inputs against the GST you collect on your sales. This credit is known as Input Tax Credit (ITC).

• This creates a chain of transactions where the tax liability is calculated based on the value addition at each stage.

• Your GST returns should reflect the sales made, and the recipient's returns should show the corresponding ITC claims.

• The Input Tax Credit claimed by you is reflected in your electronic credit ledger.

This is all about

what is GST input credit.

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GST credit or Input tax credit, simply put is the tax reduced from output tax payable on account of sales. 

I will try to explain GST credit meaning with the help of an example,

If you are a manufacturer who has to pay Rs. 1000 on the final product, and you have already paid tax of Rs. 600 on purchases. You are eligible to claim Rs. 600, i.e. Input credit and deposit the remaining Rs. 400 in taxes.

The eligibility criteria to claim GST Credit or Income Tax Credit is as follows:

1.Person should be registered under GST

2.Person should have tax invoice

3.You must have received the claimed goods or services

4.You have filed for the return

5. Tax has been paid already to the Government supplier

To claim GST Credit, one needs to follow the given below procedure:

1.Ask the supplier to upload details of tax invoices issued in GST R1

2.The details will be reflected in GST R2

3.Accept the details filed by your supplier after verifying all the details

4.Upon confirmation, the tax on purchases will be credited to your ‘Electronic Credit Ledger’ and you can adjust it against future output tax liability and get refund accordingly.