Know All About Input Tax Credit That Shall Reduce Final Product Cost Post GST Roll-Out

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Input tax credit applies to manufacturers and dealers who for their taxation incidence on the output can reduce their tax outgo by claiming for the taxes paid on the input items.
This could be more easily understood as the tax credit that manufacturers receive in respect of input taxes paid for the input material used in the final production of the goods.

Know All About Input Tax Credit That Shall Reduce Final Product Cost Post GST

Say if you are a manufacturer who has already paid his tax liability on input items say Rs. 1000 and the net tax on output product totals to Rs. 1500, then you shall be credited with the input tax credit of Rs. 1000 paid in lieu of tax on input items.

The input tax credit does not applies to all inputs and the criteria for it is decided by the State and accordingly it is put in place. For all the dealers, there applies a tax on taxable sales which is to an extent set-off by this input tax credit.

Calculation of Input tax credit
For consumers, also as GST has put majority of the goods under 18% slab rate, the final cost can be reduced by the input tax credit. Also, remember with GST, the new tax regime shall rule out the age-old cascading effect and taxation shall now be applied only for every value addition.

Say, if you are manufacturing a product which has been kept under the 18% slab rate and for its manufacturing you have procured some inputs in the form of some raw material then you can offset your tax outgo on the product by claiming the input tax credit on input material.

So, for a product with GST @ 18% after adding for all the margins of the manufacturer, the net he can charge the consumer is calculated basis the value of the product after application of GST minus input tax credit paid for the product raw materials.

Members Registered Under GST Act can benefit from Input tax credit

Manufacturers, dealers, vendors, e-commerce companies, agents, aggregators and others as per specifications under the new GST law can apply for input tax credits for your tax payments on purchases.

GoodReturns.in

Read more about: tax, indirect tax, manufacturer, gst
Story first published: Monday, June 5, 2017, 13:20 [IST]
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