Input tax credit

This query is : Resolved

Kritika. Kataria (Querist)
Follow

05 January 2015 please explain the concept of input tax credit in general in simple words.. I have read about it in technical words but I'm not fully clear about it.. Please help by explaining in simple words.. Thankyou.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
Follow

06 January 2015 Input Tax credit means taking tax credit which are paid at the time of purchase and claimed at the time of selling of product or services.
For example. 10 kg of Raw material is purchased at Rs. 10,400/- in this amount Rs. 400/- is included as input tax (VAT). Further the same item is sold at Rs. 15,000/- after some processing. And as per state VAT laws VAT required to be charged at 10% (assume) then tax liability at the same sale will be Rs.1500/-(15000x10%) However if we are eligible for Input Vat Credit then in that case we need to pay only Rs. 1,100/- (1,500-400).

Hopes after this you will some basic understanding of Input Tax Credit

Rupesh Jain

Rupesh Jain (Expert)
Follow

14 January 2015 input mean: you are buyer and buy some goods for resale and you register under the act. like 100+4= 104
and selling price is 110 +4% = 114.40 and you have to pay only 4.4-4= 0.40 .

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now