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Ch 11 - Illustrations of Utilization of Input Tax Credit | GST Saral by CA Dhruv Aggarwal PDF Download

Q: 5. What are the benefits of input tax credit under GST?

Ans. The benefits of input tax credit under GST include:- Elimination of cascading effect: Input tax credit helps in eliminating the cascading effect of taxes by allowing businesses to claim credit for taxes paid on their purchases. This reduces the overall tax burden on businesses and promotes a more efficient and transparent tax system.- Cost reduction: Input tax credit reduces the cost of inputs for businesses as they can claim credit for taxes paid on their purchases. This helps in reducing the overall cost of production and improves competitiveness in the market.- Simplified compliance: Input tax credit simplifies the compliance process for businesses as they can easily reconcile their inward and outward supplies and claim credit for the taxes paid. It promotes transparency and reduces the chances of tax evasion.- Boost to the economy: Input tax credit promotes seamless flow of credit throughout the supply chain, which helps in boosting the economy by encouraging more business transactions and investments.

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Page 1

CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

CHAPTER 11 - Illustrations of util i zation of input tax credi t

CHAPTER 11

Illustrations of utilization of input tax credit

11.1 Simple illustrations to understand GST principle

Some simple i lustrations are given below to understand basic concept of GST.

Note that Input Tax Credit (ITC) of GST Compensation Cess will be available only for payment of GST
Compensation Cess.
11.2 Both receipt and supply of goods and services in same State

When both receipt and supply of goods and services is in the same State, the mechanism of input tax will work
as fo lows.
Illustration 2.1 - Value of supply of goods and services - Rs 1,200. SGST and CGST rate on supply of
goods and services is10% each. Value of receipt of goods and services - Rs 1,000. SGST and CGST rate on
receipts is 10% each.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger 20 20
Illustration 2.2 - Value of supply of goods and services - Rs 1,200. SGST and CGST rate on supply of
goods and services is 6% each. Value of receipt of goods and services - Rs 1,000. SGST and CGST rate on
receipts is 10% each.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 72 72

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Excess credit 28 28
Excess credit due to di fference in GST rates is termed as di fference due to 'i nverted duty structure'. In some
cases, provision may be made for refund of such excess credit.
If there is no such provision and if the excess credit of Rs 28 each of SGST and CGST cannot be utilized in
any normal course of business in any near future, due to rate di fference between GST rate on inputs and GST
rate of outputs, the excess credit should be written off to profit and loss account. If it is not so written off, the
Page 2

CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

CHAPTER 11 - Illustrations of util i zation of input tax credi t

CHAPTER 11

Illustrations of utilization of input tax credit

11.1 Simple illustrations to understand GST principle

Some simple i lustrations are given below to understand basic concept of GST.

Note that Input Tax Credit (ITC) of GST Compensation Cess will be available only for payment of GST
Compensation Cess.
11.2 Both receipt and supply of goods and services in same State

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 72 72

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

profit will be over-stated to that extent.

The excess credit of Rs 28 can be carried forward in Electronic Credit Ledger.

Illustration 2.3 - Value of supply of goods and services (50% sold out of goods purchased) - Rs 600.
SGST and CGST rate on supply of goods and services is 10% each. Balance 50% is in stock. Value of
receipt of goods and services - Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Excess credit 40 40
One to one relation is not required in GST provisions. Thus, entire input tax credit is available even if only 50%
of the goods are sold. The excess credit of Rs 40 each of SGST and CGST can be carried forward in
Electronic Credit Ledger and utilized in subsequent period.
Illustration 2.4 - Supply of goods and services within India- Rs.800. Exports of goods and services Rs 400.
SGST and CGST rate on supply of goods and services is 10% each. Value of receipt of goods and services -
Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 80 80

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Excess credit 20 20
The excess credit of Rs 20 each of SGST and CGST can be carried forward in Electronic Credit Ledger and
utilized in subsequent period. If it is not possible to utilize the excess credit in near future in normal course of
business, refund claim can be f iled as per provisions of SGST and CGST Act.
11.3 Input goods and services used for taxable and exempted goods and services

Illustration 3.1 A manufacturer procures input goods and services within State - Rs 1,000. SGST and
CGST rate on receipts is 10% each. He manufactured two products out of inputs. One product of value of Rs
800 was subject to SGST and CGST @ 10% each. Other product of value of Rs 800 was exempt from
SGST and CGST.

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 96 96

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger [only 50% input tax credit available]

50 50

Net tax payable by cash by the dealer in Electronic Cash Ledger 46 46

Unutilisable input tax credit 50 50
Page 3

CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

CHAPTER 11 - Illustrations of util i zation of input tax credi t

CHAPTER 11

Illustrations of utilization of input tax credit

11.1 Simple illustrations to understand GST principle

Some simple i lustrations are given below to understand basic concept of GST.

Note that Input Tax Credit (ITC) of GST Compensation Cess will be available only for payment of GST
Compensation Cess.
11.2 Both receipt and supply of goods and services in same State

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 72 72

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

profit will be over-stated to that extent.

The excess credit of Rs 28 can be carried forward in Electronic Credit Ledger.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 80 80

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 96 96

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger [only 50% input tax credit available]

50 50

Net tax payable by cash by the dealer in Electronic Cash Ledger 46 46

Unutilisable input tax credit 50 50
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

Since 50% of supply of goods and services are exempt, assessee can avail only 50% of input tax credit.

The unutilisable input tax credit is required to be reversed in Electronic Credit Ledger, as it pertains to
exempted goods.
11.4 Receipt of goods and services within State but supply of goods and services outside the State

Illustration 4.1 - Value of supply of goods and services in inter-state- Rs 1,200. IGST rate on supply of
goods and services is 20%. Value of receipt of goods and services within State - Rs 1,000. SGST and CGST
rate on receipts is 10% each.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 1,200 Nil Nil 240

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger 40
The entire input tax credit of SGST and CGST can be utilized for payment of IGST on supply of goods and
services.
SGST credit can be uti lized for payment of IGST but not for payment of CGST.

Since the consumption of goods/services is outside the State, the State is not entitled to get any tax out of this
transaction. Hence, the SGST utilized for payment of IGST will be debited by Central Clearing Agency to that
State (the reason is that entire IGST quantum should be received by Centre).
Illustration 4.2 - Value of supply of goods and services in inter-state- Rs 100. Value of supply of goods and
services within State - Rs 1,100. IGST rate on supply of goods and services is 20%. Value of receipt of
goods and services within State - Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 100 20

Tax payable on intra-state supply of goods and services of Rs 1,100 110 110

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger 10 10 20
Illustration 4.3 - Value of supply of goods and services in inter-state - Rs 600. Value of supply of goods
and services within State - Rs 600. IGST rate on supply of goods and services is 20% Value of receipt of
goods and services within State - Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 600 120

Tax payable on intra-state supply of goods and services of Rs 600 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil 40
The excess credit of SGST and CGST can be utilized for payment of IGST.
Page 4

CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

CHAPTER 11 - Illustrations of util i zation of input tax credi t

CHAPTER 11

Illustrations of utilization of input tax credit

11.1 Simple illustrations to understand GST principle

Some simple i lustrations are given below to understand basic concept of GST.

Note that Input Tax Credit (ITC) of GST Compensation Cess will be available only for payment of GST
Compensation Cess.
11.2 Both receipt and supply of goods and services in same State

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 72 72

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

profit will be over-stated to that extent.

The excess credit of Rs 28 can be carried forward in Electronic Credit Ledger.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 80 80

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 96 96

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger [only 50% input tax credit available]

50 50

Net tax payable by cash by the dealer in Electronic Cash Ledger 46 46

Unutilisable input tax credit 50 50
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

Since 50% of supply of goods and services are exempt, assessee can avail only 50% of input tax credit.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 1,200 Nil Nil 240

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 100 20

Tax payable on intra-state supply of goods and services of Rs 1,100 110 110

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 600 120

Tax payable on intra-state supply of goods and services of Rs 600 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil 40
The excess credit of SGST and CGST can be utilized for payment of IGST.
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

Illustration 4.4 - Value of supply of goods and services in inter-state- Rs 1,100. Value of supply of goods
and services within State - Rs 100. IGST rate on supply of goods and services is 20%. Value of receipt of
goods and services within State - Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 1,100 220

Tax payable on intra-state supply of goods and services of Rs 100 10 10

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil 40
The excess credit of SGST and CGST can be utilized for payment of IGST.

However, if SGST credit is utilized for payment of IGST, that amount will be debited by Central Clearing
Agency to that State, as that State is not supposed to get any tax from this transaction.

Illustration 4.5 - Value of supply of goods and services in inter-state- Rs 600. Value of supply of goods and
services exported - Rs 600. IGST rate on supply of goods and services is 20%. Value of receipt of goods and
services within State- Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 600 120

Tax payable on exports of Rs 600

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer Nil Nil Nil
The credit of SGST of Rs 20 and CGST of Rs 100 can be utilized for payment of IGST. This is because
credit of IGST, CGST and SGST is required to be used in that sequence.
Thus, there will be excess credit of SGST of Rs 80 in Electronic Credit Ledger, which can be carried forward.
If it cannot be utilized, refund can be obtained.
Central Clearing Agency will debit Rs 20 to the State.

11.5 Receipt of goods and services inter-State but supply of goods and services within the State

Illustration 5.1 - Value of supply of goods and services within state- Rs 1,200. SGST and IGST rate on
supply of goods and services is 10% each. Value of receipt of goods and services inter-State- Rs 1,000.
IGST rate on receipts is 20%.

Details SGST CGST IGST

Tax payable on intra-state supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

200

Net tax payable by cash by the dealer 40 Nil Nil
IGST credit should be utilized in sequence of IGST, CGST and SGST.

Since IGST credit of Rs 80 was utilized for payment of SGST by assessee, amount of Rs 80 will be credited
Page 5

CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

CHAPTER 11 - Illustrations of util i zation of input tax credi t

CHAPTER 11

Illustrations of utilization of input tax credit

11.1 Simple illustrations to understand GST principle

Some simple i lustrations are given below to understand basic concept of GST.

Note that Input Tax Credit (ITC) of GST Compensation Cess will be available only for payment of GST
Compensation Cess.
11.2 Both receipt and supply of goods and services in same State

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 72 72

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

profit will be over-stated to that extent.

The excess credit of Rs 28 can be carried forward in Electronic Credit Ledger.

Details SGST CGST

Tax payable on supply of goods and services of Rs 1,200 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 80 80

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil

Details SGST CGST

Tax payable on supply of goods and services of Rs 800 96 96

Input tax credit of taxes paid on input goods and services of Rs 1,000 available in
Electronic Credit Ledger [only 50% input tax credit available]

50 50

Net tax payable by cash by the dealer in Electronic Cash Ledger 46 46

Unutilisable input tax credit 50 50
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

Since 50% of supply of goods and services are exempt, assessee can avail only 50% of input tax credit.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 1,200 Nil Nil 240

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 100 20

Tax payable on intra-state supply of goods and services of Rs 1,100 110 110

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 600 120

Tax payable on intra-state supply of goods and services of Rs 600 60 60

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 1,100 220

Tax payable on intra-state supply of goods and services of Rs 100 10 10

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil 40
The excess credit of SGST and CGST can be utilized for payment of IGST.

However, if SGST credit is utilized for payment of IGST, that amount will be debited by Central Clearing
Agency to that State, as that State is not supposed to get any tax from this transaction.

Details SGST CGST IGST

Tax payable on inter-state supply of goods and services of Rs 600 120

Tax payable on exports of Rs 600

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

100 100

11.5 Receipt of goods and services inter-State but supply of goods and services within the State

Details SGST CGST IGST

Tax payable on intra-state supply of goods and services of Rs 1,200 120 120

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

200

Net tax payable by cash by the dealer 40 Nil Nil
IGST credit should be utilized in sequence of IGST, CGST and SGST.

Since IGST credit of Rs 80 was utilized for payment of SGST by assessee, amount of Rs 80 will be credited
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association

by the Central Clearing Agency to that State, to ensure that the State gets entire tax of Rs 120 from that
transaction.
Illustration 5.2 - Value of supply of goods and services within state- Rs 100. SGST and IGST rate on
supply of goods and services is 10% each. Value of supply of goods inter-state - Rs 1,100. Value of receipt
of goods and services inter-State- Rs 1,000. IGST rate on receipts is 20%.

Details SGST CGST IGST

Tax payable on intra-state supply of goods and services of Rs 100 10 10

Tax payable on inter-state supply of goods and services of Rs 1,100 220

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

200

Net tax payable by cash by the dealer in Electronic Cash Ledger 10 10 20
IGST credit should be utilized in sequence of IGST, CGST and SGST.

Illustration 5.3 - Value of supply of goods and services within state- Rs 1,100. SGST and IGST rate on
supply of goods and services is 10% each. Value of supply of goods inter-state - Rs 100. Value of receipt of
goods and services inter-State- Rs 1,000. IGST rate on receipts and supply is 20%.

Details SGST CGST IGST

Tax payable on intra-state supply of goods and services of Rs 1,100 110 110

Tax payable on inter-state supply of goods and services of Rs 100 20

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

200

Net tax payable by cash by the dealer in Electronic Cash Ledger 40 Nil Nil
IGST credit should be utilized in sequence of IGST, CGST and SGST.

IGST credit of Rs 70 was used by dealer for payment of SGST. Hence Rs 70 will be credited by Central
Clearing Agency to that State to ensure that the State gets entire Rs 110 from this transaction.

Illustration 5.4 - Value of supply of goods and services within state- Rs 600. SGST and IGST rate on
supply of goods and services is 10% each. Value of supply of goods inter-state - Rs 600. Value of receipt of
goods and services inter-State- Rs 1,000. IGST rate on receipts and supply is 20%.

Details SGST CGST IGST

Tax payable on intra-state supply of goods and services of Rs 600 60 60

Tax payable on inter-state supply of goods and services of Rs 600 120

Input tax credit of taxes paid on input goods and services of Rs 1,000
available in Electronic Credit Ledger

200

Net tax payable by cash by the dealer in Electronic Cash Ledger 40 Nil Nil
IGST credit should be utilized in sequence of IGST, CGST and SGST.

IGST credit of Rs 20 was utilized by dealer for payment of SGST. Hence Rs 20 will be credited by Central
Clearing Agency to the account of State

Illustration 5.5 - Value of supply of goods and services within state- Rs 600. SGST and IGST rate on

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FAQs on Ch 11 - Illustrations of Utilization of Input Tax Credit - GST Saral by CA Dhruv Aggarwal

1. What is input tax credit under GST?

Ans. Input tax credit under GST is the mechanism that allows businesses to claim a credit for the taxes paid on their purchases, which can be offset against the taxes they collect on their sales. It helps in eliminating the cascading effect of taxes and promotes seamless flow of credit throughout the supply chain.

2. How can input tax credit be utilized under GST?

Ans. Input tax credit can be utilized by businesses to reduce their tax liability. It can be used to offset the taxes payable on outward supplies, including both goods and services. The input tax credit can be claimed and utilized in the subsequent tax period, subject to certain conditions and restrictions as per the GST laws.

3. Are there any restrictions on the utilization of input tax credit under GST?

Ans. Yes, there are certain restrictions on the utilization of input tax credit under GST. Some of the key restrictions include: - Input tax credit can only be utilized for payment of output tax liability. It cannot be used for payment of other dues such as interest, penalty, or fees. - Input tax credit on certain goods and services, such as motor vehicles, works contract services for construction of immovable property, etc., is restricted and can be utilized only for specific purposes. - Input tax credit cannot be utilized if the supplier has not paid the tax to the government. - Input tax credit cannot be utilized if the recipient has not received the goods or services.

4. Can input tax credit be carried forward to subsequent tax periods?

Ans. Yes, input tax credit can be carried forward to subsequent tax periods if it remains unutilized in the current period. Businesses can claim and carry forward the input tax credit in their GST returns and utilize it in the future for payment of their tax liabilities.

5. What are the benefits of input tax credit under GST?

Ans. The benefits of input tax credit under GST include: - Elimination of cascading effect: Input tax credit helps in eliminating the cascading effect of taxes by allowing businesses to claim credit for taxes paid on their purchases. This reduces the overall tax burden on businesses and promotes a more efficient and transparent tax system. - Cost reduction: Input tax credit reduces the cost of inputs for businesses as they can claim credit for taxes paid on their purchases. This helps in reducing the overall cost of production and improves competitiveness in the market. - Simplified compliance: Input tax credit simplifies the compliance process for businesses as they can easily reconcile their inward and outward supplies and claim credit for the taxes paid. It promotes transparency and reduces the chances of tax evasion. - Boost to the economy: Input tax credit promotes seamless flow of credit throughout the supply chain, which helps in boosting the economy by encouraging more business transactions and investments.

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Ch 11 - Illustrations of Utilization of Input Tax Credit Notes

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Ch 11 - Illustrations of Utilization of Input Tax Credit GST Questions

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