The ITC Full Form is Input Tax Credit. It is a feature in GST that helps businesses pay less tax. When a business buys things for work, like materials or services, it pays GST on those purchases. Later, when the business sells products or services and collects GST, it can subtract the tax it already paid.
Definition of ITC
The definition of ITC is the tax credit that businesses get for the GST they pay on goods or services used for their work. This credit is subtracted from the GST they need to pay on their sales.
Meaning of ITC
The meaning of ITC is simple: it allows businesses to save money by reducing the GST they need to pay to the government. For example, if a business pays ₹1,000 GST when buying materials and collects ₹3,000 GST on selling finished goods, it only has to pay ₹2,000 (₹3,000 – ₹1,000) to the government.
Why is ITC Important?
ITC helps businesses by:
- Reducing their tax burden.
- Making sure they don’t pay GST twice on the same items.
- Improving cash flow so they can invest in their work.
Key Points to Remember
- ITC can only be claimed for business-related purchases.
- The supplier must file their GST returns for the buyer to claim ITC.
ITC is like a discount on the taxes businesses pay, making GST fairer and easier to manage.
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