Input Tax Credit Mechanism

Input Tax Credit (ITC) allows businesses to reclaim the Goods and Services Tax (GST) paid on inputs like raw materials or services used to produce goods or provide services. Essentially, it prevents double taxation by offsetting the GST paid on purchases against the GST collected on sales. If the input GST exceeds output GST, the business can claim a refund. ITC ensures that tax is only paid on the value added at each stage of the supply chain, promoting transparency and reducing the overall tax burden on businesses.