Albert Einstein once said that “the hardest thing in the world to understand is the income tax”. Do you feel the same? Well, it’s not that Einstein said it so the difficulty level of understanding the taxation system increased, but the fact that it is a little complicated to be appreciated by the people. We also agree that the changing epiphanies of the taxation system irritate people. And the worst happens when a person completely neglects to adopt such scheme.
Talking about the tax, GST, the new taxation regime in India is worth considering. Since the GST Act has been implemented and has completely flipped the face of taxation, the people’s search to an easier way to understand the process has become constant. You must be thinking that when we’ll get to the point and start telling you something mystical to skip GST. Unfortunately, no magic can make you do that.
You must at least know about the fact that the new taxation system is destination-based. And as per the GST bill details in India, everyone is supposed to register under the Goods and Services Tax Act. In the bill, there are so many things that are new, but something that might interest you is that if you are a taxable person, registered under the GST, you can easily claim the input tax credit. This particular claim is not possible under the old taxation regime. There are some basics about ITC to understand. So let’s start from the scratch.
Input Tax Credit
Input Tax Credit basically means the reduction of tax. You, as a liable taxpayer, gets the benefit of cutting the tax value to be paid to the government by claiming your input tax credit. If you make any supply of service or goods to a taxable person, then the tax charged on that particular supply is input tax. The icing on the sugar is that you can claim this tax as a reimbursement. This process is really critical for almost every business to maintain their taxpaying accountability.
The calculation
This part is easy. Consider your business attracts 18% of tax. And you are using input services in your business. Now, originally you are due to 18% of tax, but when you purchase or use something as an input service, the government receives an increased amount of tax paid by the distributor/customer.
- When a manufacturer spends some amount as an input to provide a service, he pays applicable tax to the government
- When the final product is ready, the manufacturer sells it with the increased amount, considering his profit, and the GST is then applicable accordingly.
- Now the distributor pays an increased amount of tax to the government because of the increased rate of the final product.
- Suppose, the manufacturer paid INR 100 and the distributer paid INR 150 for the same product, then the manufacturer can claim INR 100 by paying the difference that is of INR 50 to the government.
How to claim ITC?
You can claim for the input credit tax under the following conditions:
- You should be a registered and a taxable person
- If you received the goods or services for the purpose of the business only
- Can be claimed on supplies that are zero-rated and are taxable as well
- Must have the required documents such as debit note and the invoices of tax paid
- Must file all the GST return forms such as GST-1, 2, 2A, 6, 6A, 7 and 7A
Most of you will catch up all the above-mentioned details real quick, but some might still combat and wish to make it easier. For those who still think that the GST is a terrible thing to do, there is an availability of a prime option. You can use a Reliable GST credit calculator. These online calculators and software will precisely help you with all your GST-related queries. You can even take the assistance of this software in filing for your GST returns. Wouldn’t the technology taking care of all your taxes and shredding the weight off your shoulders be great? It would be, definitely.
Quick Tip
We know that something that makes the overall taxation easy can be luring. That’s why randomly jumping on any of the available options would be a foolish thing to do. In the software, check for the type of services provided and also cross-check the reviews and references. See that whether there is a full backed-up technology assuring the safety of your data. And while you are checking about all this, also look for the certification of the particular software you choose as a tax-assistant.
Always keep in mind, that some of these platforms can be nothing but a theft of your information and documents. So better double-ensure everything beforehand.
