Input Tax Credit (ITC) is a crucial mechanism under the Goods and Services Tax (GST) regime, allowing businesses to reduce their tax liability.
Meaning
**What it is:** Input Tax Credit (ITC) is the credit a business receives for the GST paid on purchases of goods or services used for making further taxable supplies. It’s essentially reducing the tax paid on inputs from the tax to be paid on outputs.**How it works:** When a business buys raw materials or services, it pays GST to its supplier. This GST paid can then be offset against the GST collected by the business from its customers when selling finished goods or services.**Benefits:** ITC helps avoid the cascading effect of taxes (tax on tax), making the final product cheaper and ensuring a seamless flow of credit in the supply chain.Author
