Input Tax Credit

Input Tax Credit (ITC) is a provision in the tax system that allows businesses to claim back the tax they paid on purchases used for their products or services. For example, if a company pays sales tax on raw materials, it can deduct that tax from the sales tax it collects from customers. This mechanism reduces the overall tax burden for businesses, promotes efficiency, and prevents double taxation. Essentially, ITC ensures that businesses only pay tax on the value they add, encouraging fair pricing for consumers and supporting economic growth.