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Income tax credit

Varghese George (25 Points)

05 September 2020

What is Income Tax Credit ( ITC ) in GST

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Asha Kanta Sharma (Manager - Finance & Accounts) (10524 Points)
Replied 05 September 2020

It is Input Tax Credit which means you can set off the taxes already paid on purchase with your output tax liability

prasad Nilugal (3914 Points)
Replied 05 September 2020

You mean to say Input Tax credit .

Varghese George (25 Points)
Replied 05 September 2020

Please clarify me with the help of an example

Jamil Ahmed (615 Points)
Replied 05 September 2020

ITC in GST means Input Tax Credit, not Income Tax Credit. Be clear that it has nothing to do with Income Tax. As explained by Asha Kanta Sharma ji, you can set off the tax paid on your purchase of goods or services received for payment of tax on your outward supply (sale of goods or services).

For example, suppose you purchased a book for Rs.112/- which includes Rs.12/- as GST and then you sold it for Rs.168/- (including GST of Rs.18/-). Here, Rs.12/- paid on purchase of the book can be taken as ITC and can be used to pay output tax liability meaning you will be required to pay only Rs.6/- in cash. Hope , I could explain.

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