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Ch 12 - Input Tax Credit when exempted as well as taxable supplies made | GST Saral by CA Dhruv Aggarwal PDF Download

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FAQs on Ch 12 - Input Tax Credit when exempted as well as taxable supplies made - GST Saral by CA Dhruv Aggarwal

1. What is an Input Tax Credit (ITC) in GST?
Ans. An Input Tax Credit (ITC) is a mechanism that allows businesses to offset the tax they have paid on inputs against the tax they have collected on outputs. It helps to avoid the cascading effect of taxes and ensures that businesses are only paying tax on the value they add.
2. Can I claim Input Tax Credit on exempted supplies in GST?
Ans. No, Input Tax Credit cannot be claimed on exempted supplies in GST. Exempted supplies are those on which no GST is charged, and as a result, businesses are not allowed to claim credit for the tax paid on inputs related to these supplies.
3. Can I claim Input Tax Credit on both taxable and exempted supplies made in GST?
Ans. Yes, businesses can claim Input Tax Credit on inputs that are used for both taxable and exempted supplies. However, they need to calculate the credit proportionately based on the value of inputs used for taxable and exempted supplies.
4. How to calculate Input Tax Credit when both taxable and exempted supplies are made in GST?
Ans. To calculate Input Tax Credit when both taxable and exempted supplies are made, businesses need to determine the proportion of inputs used for taxable supplies and exempted supplies. They can then claim credit on the tax paid on inputs used for taxable supplies only.
5. What happens if I wrongly claim Input Tax Credit on exempted supplies in GST?
Ans. If a business wrongly claims Input Tax Credit on exempted supplies in GST, it will be considered as a violation of the GST law. The business may be liable to pay back the wrongfully claimed credit along with interest and penalties imposed by the tax authorities. It is important for businesses to correctly identify and claim Input Tax Credit only on eligible supplies.

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