A Complete Guide On Input Tax Credit (ITC) | Flipkart Seller Hub

Understanding Input Tax Credit (ITC): A Comprehensive Guide

19 July 2023 5 mins read

In the process of registering your company, you are sure to learn about GST. In fact, even people who do not run a business are made aware when making payments on items that incur tax. However, there are not many who know about input tax credit (ITC).

The GST system eliminates the gradual increase of tax at every stage of a product’s life cycle. For this to happen, input tax credit plays an important part in the process. This framework benefits not only the consumer but also the business. If you wish to learn more about input tax credit and how it works, keep reading.

What is Input Tax Credit (ITC)?: Explained with an Example

ITC in GST means while paying the tax on output (selling), you can reduce the cost by the same amount you paid on purchase. This can be integrated at every stage of the supply chain. Simply put, in each step, the tax imposed on the purchase of goods and services is subtracted from the tax paid while selling.

To understand ITC better, let us discuss it with an example. If you pay Rs. 300 GST on a certain product, that amount becomes your input tax credit. Now, when you sell this item, you will be taxed again. Let’s say you are liable to pay Rs. 250 at this stage. Since you have already paid a tax in the buying phase, you would only have to pay Rs. 50 during the sale. Every entity in the product life cycle benefits from input tax credit from the manufacturer to the consumer.

Who is Eligible to Claim Input Tax Credit Under GST?

Eligibility for input tax credit is based on aspects like composition scheme, registration application, taxable goods becoming exempt, and more. ITC is allowed on inputs, semi-finished and capital goods. However, unclaimed input tax credit can be transferred under specific circumstances.

While learning how to register for GST, you must understand that applying for ITC within 30 days is necessary. If you fail to do so, you become ineligible. Exceeding time limits and delayed payment can result in the same. Even motor vehicles, excluding certain criteria, are not eligible. Not adhering to the regulations impacts tax efficiency and influences how businesses manage their credits in the GST regime.
What Documents are Required for Claiming ITC under GST?
    Invoice issued by the supplier
    Bill of Entry or similar document
    Bill of Supply
    Debit note from the supplier
    Document issued by the ISD (Input Service Distributor)

Avail the Benefits of Input Tax Credit while Selling Online

If you are looking to sell your goods or services online with ease, choose Flipkart Seller Hub. Not only do we offer you a platform to launch and manage your online business, but also introduce you to the vast marketplace of India.

By partnering with us, you also have the opportunity to avail the benefits of the Input Tax Credit (ITC). We help you ensure efficient and hassle-free tax management, streamlining your transactions and financial operations.

Beyond this, Flipkart Seller Hub promises swift and transparent payments, along with top-notch catalogue and account management services. Dive into the world of e-commerce with us and expand your reach across India!

Disclaimer: The views shared in this blog by Flipkart Seller Hub are for informational purposes only. Readers are urged to make informed decisions and understand that we do not assume any responsibility for the outcomes of their choices based on the content provided.

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