GST: Input Tax Credit Mechanism
The provisions of input tax credit have been prone to the process of taking legal action. The Model GST law provides an elaborate mechanism for availment and utilization of ITC and seeks to impart clarity so as to minimize disputes. The important provisions of the law are as follows:
- The tax payer is allowed to take credit of taxes paid on input tax credit, as self-assessed, in his return.
- Tax payers can take credit of taxes paid on all goods and services, other than a few in negative list, and utilize the same for payment of output tax.
- Credit of taxes paid on inputs shall be allowed where the inputs are used for business purposes or making taxable supplies.
- Full input tax credit shall be allowed on capital goods on its receipt as against current Central Government practice of staggering the credit in two equal installments.
- Utilized input tax credit can be carried forward.
- The facility of distribution of input tax credit amongst group companies has been provided for.